<PAGE>
As filed with the Securities and Exchange Commission on October 31, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
GENESIS HEALTH VENTURES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 8050,5912,8099 06-1132947
- ------------------------------- ---------------------------- -------------------
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) dentification no.)
148 WEST STATE STREET
Kennett Square, PA 19348
(610) 444-6350
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------------
Michael R. Walker
Chief Executive Officer
GENESIS HEALTH VENTURES, INC.
148 West State Street
Kennett Square, PA 19348
(610) 444-6350
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copy to:
Richard J. McMahon, Esquire
Blank Rome Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
(215) 569-5500
--------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. o
<TABLE>
<CAPTION>
Proposed Proposed
Title of each Amount maximum maximum Amount of
class of securities to be offering price aggregate offering registration
to be registered registered per unit price fee
===================================================================================================================================
<C> <C> <C> <C> <C>
9-1/4% Senior Subordinated Notes due $125,000,000 $1,000 $125,000,000 $37,879
2006
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</TABLE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 31, 1996
PROSPECTUS
GENESIS HEALTH VENTURES, INC.
Offer to Exchange its 9 1/4% Senior Subordinated Notes due 2006,
which have been registered under the Securities Act
of 1933, as amended, for any and all of its outstanding
9 1/4% Senior Subordinated Notes due 2006
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1996, unless extended.
-------------------------------
Genesis Health Ventures, Inc., a Pennsylvania corporation ("Genesis" or the
"Company"), hereby offers (the "Exchange Offer"), upon the terms and conditions
set forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its 9 1/4% Senior Subordinated Notes due 2006 (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for each $1,000 principal amount of its outstanding 9 1/4% Senior
Subordinated Notes due 2006 (the "Existing Notes"), of which $125,000,000
principal amount is outstanding. The form and terms of the Exchange Notes are
the same as the form and terms of the Existing Notes (which they replace),
except that as of the date hereof the Exchange Notes have been registered under
the Securities Act and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions included in the terms of the
Existing Notes relating to an increase in the interest rate in certain
circumstances relating to the timing of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Existing Notes (which they replace) and will
be issued under and be entitled to the benefits of the Indenture, dated as of
October 7, 1996 (the "Indenture"), between the Company and First Union National
Bank, as trustee (the "Trustee"), which also governs the Existing Notes. The
Exchange Notes and the Existing Notes are sometimes referred to herein
collectively as the "Notes." See " Exchange Offer" and "Description of Exchange
Notes."
The Company will accept for exchange any and all Existing Notes duly tendered
and not validly withdrawn prior to 5:00 p.m., New York City time, on ,
1996, unless extended by the Company in its sole discretion (the "Expiration
Date"). Tenders of Existing Notes may be withdrawn at any time prior to 5:00
p.m. New York City time on the Expiration Date. The Exchange Offer is subject to
certain customary conditions. The Existing Notes were sold by the Company on
October 7, 1996 to the Initial Purchasers (as defined herein) in transactions
not registered under the Securities Act in reliance upon an exemption from
registration under the Securities Act (the "Offering"). The Initial Purchasers
subsequently resold the Existing Notes to qualified institutional buyers in
reliance upon Rule 144A under the Securities Act and to a limited number of
institutional accredited investors that agreed to comply with certain transfer
restrictions and other conditions. Accordingly, the Existing Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange Notes
are being offered hereunder in order to satisfy the obligations of the Company
under the Registration Rights Agreement (as defined herein) entered into by the
Company in connection with the Offering. See "Exchange Offer."
Under existing interpretations of the staff of the Securities and Exchange
Commission (the "Commission") contained in several no-action letters to third
parties, the Exchange Notes will in general be freely tradeable after the
Exchange Offer without further registration under the Securities Act. However,
any purchaser of Existing Notes who is an "affiliate" of the Company or who
intends to participate in the Exchange Offer for the purpose of distributing the
Exchange Notes (i) will not be able to rely on such interpretations of the staff
of the Commission, (ii) will not be able to tender its Existing Notes in the
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Existing Notes, unless such sale or transfer is made pursuant to
an exemption from such requirements. See "Exchange Offer" and "--Resale of the
Exchange Notes." Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Existing Notes where such Existing Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities.
Holders of Existing Notes not tendered and accepted in the Exchange Offer
will continue to hold such Existing Notes and will be entitled to all the rights
and benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. Holders of
Existing Notes not tendered in the Exchange Offer will not retain any rights
under the Registration Rights Agreement, except in limited circumstances. The
Company will pay all the expenses incurred by it incident to the Exchange Offer.
See "Exchange Offer."
There has not previously been any public market for the Exchange Notes. The
Company does not intend to list the Exchange Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Exchange Notes will develop.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation, Alex. Brown & Sons
Incorporated, BT Securities Corporation, and Montgomery Securities (the "Initial
Purchasers") have informed the Company that they currently intend to make a
market in the Exchange Notes, but are not obligated to do so and any such market
making may be discontinued at any time without notice. The Initial Purchasers
may act as principal or as agent in such transactions. If a market for the
Exchange Notes should develop, the Exchange Notes could trade at a discount from
their principal amount. See "Risk Factors -- Absence of Public Market."
Moreover, to the extent that Existing Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Existing Notes could be adversely affected.
------------------------------
See "Risk Factors" on page 13 herein for a description of certain risks to
be considered by holders who tender their Existing Notes in the Exchange Offer.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSIONER OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUMMARY
The following summary information is qualified in its entirety by reference
to, and should be read in conjunction with, the more detailed information and
Consolidated Financial Statements, including the notes thereto, appearing
elsewhere in this Prospectus or incorporated by reference herein. Unless
otherwise indicated, all information in the Prospectus reflects a three for two
stock dividend on the Common Stock effective March 29, 1996. As used herein,
unless the context otherwise requires, "Genesis" or the "Company" refers to
Genesis Health Ventures, Inc. and its subsidiaries.
The Company
Genesis is a leading provider of healthcare and support services to the
elderly. The Company has developed the Genesis ElderCare(sm) delivery model of
integrated healthcare networks to provide cost-effective, outcome-oriented
services to the elderly. Through these integrated healthcare networks, Genesis
provides basic healthcare and specialty medical services to more than 75,000
customers in five regional markets in the Eastern United States in which over
3,000,000 people over the age of 65 reside. The networks include 153 eldercare
centers with approximately 20,120 beds; 18 primary care physician clinics;
approximately 70 physicians, physician assistants and nurse practitioners; 12
institutional pharmacies and six medical supply distribution centers serving
over 52,000 beds; certified rehabilitation agencies providing services through
over 290 contracts; and seven home healthcare agencies. Genesis has concentrated
its eldercare networks in five geographic regions in order to achieve operating
efficiencies, economies of scale and significant market share. The five
geographic markets that Genesis principally serves are:
Massachusetts/Connecticut/New Hampshire; Eastern Pennsylvania/Delaware Valley;
Southern Delaware/Eastern Shore of Maryland; Baltimore, Maryland/Washington,
D.C.; and Central Florida.
Genesis eldercare services focus on the central medical and physical issues
facing the more medically demanding elderly. By integrating the talents of
physicians with case management, comprehensive discharge planning and, where
necessary, home support services, the Company provides cost-effective care
management to achieve superior outcomes and return customers to the community.
The Company believes that its orientation toward achieving improved customer
outcomes through its eldercare networks has resulted in increased utilization of
specialty medical services, high occupancy of available beds, enhanced quality
payor mix and a broader base of repeat customers. Specialty medical services
revenues have increased at a compound annual rate of 37% from the fiscal year
ended September 30, 1990 to the fiscal year ended September 30, 1995 and
comprise 42% of the Company's revenues for the nine month period ended June 30,
1996. Specialty medical services typically generate higher profit margins than
basic healthcare services and are less capital intensive.
The Company's growth strategy is to enhance its existing eldercare networks,
establish new eldercare networks in markets it deems attractive and broaden its
array of high margin specialty medical services through internal development and
selected acquisitions. Consistent with its strategy, the Company has made
selected acquisitions of eldercare centers and rehabilitation, pharmacy,
physician services and home healthcare companies.
The Company's long-term strategy is to provide comprehensive eldercare
services, in collaboration with other providers, on a prepaid basis in a managed
care environment. The Company has undertaken several initiatives to position
itself to compete in a managed care environment. These initiatives include: (i)
establishing a managed care division to pursue and administer contracts with
managed care organizations, develop clinical care protocols and monitor the
delivery and utilization of medical care; (ii) developing a clinical
administration and healthcare management information system to monitor and
measure clinical and
<PAGE>
patient-outcome data; (iii) establishing the Genesis ElderCare(sm) brand name to
increase awareness of the Company's eldercare services in the healthcare market;
(iv) seeking strategic alliances with other healthcare providers to broaden the
Company's continuum of care; and (v) creating an independent eldercare advisory
board to formulate new and innovative approaches in the delivery of care.
Recent Developments
GMC Transaction
In October 1996, the Company and Geriatric & Medical Companies, Inc. ("GMC")
consummated the merger of GMC with a wholly-owned subsidiary of Genesis (the
"GMC Transaction"). The merger added 26 eldercare centers with approximately
3,240 beds to Genesis. GMC also operates businesses which provide a number of
ancillary healthcare services including ambulance services; respiratory therapy,
infusion therapy and enteral therapy; distribution of durable medical equipment
and home medical supplies; pharmacy services; contract management services;
diagnostic and rehabilitative management services; and information management
services. Under the terms of the merger agreement, GMC shareholders received
$5.75 per share in cash for each share of GMC stock. The purchase price of GMC
stock was approximately $93,900,000. Prior to the Merger, GMC had outstanding
approximately $133,100,000 of indebtedness which included approximately
$87,600,000 which the Company loaned to GMC immediately prior to the Merger to
prepay indebtedness. The Company funded the cash portion of the transaction and
paid a portion of the assumed debt through the proceeds of the Offering and its
Credit Facility (as defined herein). See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
National Health Transaction
In July 1996, the Company acquired the outstanding stock of National Health
Care Affiliates, Inc. and certain related entities (collectively, "National
Health"). Prior to the closing of the stock acquisitions, an affiliate of a
financial institution purchased nine of the National Health eldercare centers
for $67,700,000 and subsequently leased the centers to a subsidiary of Genesis.
The balance of the total consideration paid to National Health was funded with
available cash of $51,800,000 and assumed debt of $7,900,000. The acquisition of
the stock of National Health and lease of the eldercare centers from the
financial institutional affiliate are referred to hereafter collectively as the
National Health Transaction. The National Health Transaction added 16 eldercare
centers in Florida, Virginia and Connecticut with approximately 2,200 beds to
the Company. National Health also provided enteral nutrition and rehabilitation
therapy services to the eldercare centers which it owns and leases. In addition,
National Health manages four eldercare centers in Colorado with 382 beds
pursuant to an agreement which expires in October 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NeighborCare Transaction
In June 1996, the Company acquired the pharmacy healthcare services
businesses of NeighborCare Pharmacies, Inc. and certain related entities
(collectively, "NeighborCare") for total consideration of approximately
$57,250,000, comprised of approximately $47,250,000 in cash and 312,744 shares
of Genesis Common Stock (the "NeighborCare Transaction"). Based in Baltimore,
Maryland, NeighborCare operates institutional and retail pharmacy and infusion
therapy businesses. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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<PAGE>
McKerley Transaction
In November 1995, the Company acquired McKerley Health Care Centers, Inc. and
certain related entities (collectively, "McKerley") for total consideration of
approximately $68,700,000, including approximately $9,100,000 of assumed debt
(the "McKerley Transaction"). McKerley owns or leases 15 eldercare centers in
New Hampshire and Vermont with a total of 1,535 beds and operates a home
healthcare business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Offering
Notes............... The Existing Notes were sold by the Company on October 7,
1996 to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, CS First Boston Corporation, Donaldson,
Lufkin & Jenrette Securities Corporation, Alex. Brown &
Sons Incorporated, BT Securities Corporation, and
Montgomery Securities (the "Initial Purchasers") pursuant
to a Purchase Agreement, dated as of October 1, 1996 (the
"Purchase Agreement"). The Initial Purchasers subsequently
resold the Existing Notes to qualified institutional
buyers pursuant to Rule 144A under the Securities Act and
to a limited number of institutional accredited investors
that agreed to comply with certain transfer restrictions
and other conditions.
Registration Rights
Agreement......... Pursuant to the Purchase Agreement, the Company and the
Initial Purchasers entered into a Registration Rights
Agreement, dated October 7, 1996 (the "Registration Rights
Agreement"), which grants the holders of the Existing
Notes certain exchange and registration rights. The
Exchange Offer is being made pursuant to the Registration
Rights Agreement and such exchange rights terminate upon
the consummation of the Exchange Offer.
The Exchange Offer
Securities Offered.. $125,000,000 aggregate principal amount of 9 1/4% Senior
Notes due 2006.
The Exchange Offer.. $1,000 principal amount of the Exchange Notes in exchange
for each $1,000 principal amount of Existing Notes. As of
the date hereof, $125,000,000 aggregate principal amount
of Existing Notes are outstanding. The Company will issue
the Exchange Notes on or promptly after the Expiration
Date.
Under existing interpretations of the staff of the
Commission contained in several no-action letters to third
parties, the Exchange Notes will in general be freely
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<PAGE>
tradeable after the Exchange Offer without further
registration under the Securities Act. However, any
purchaser of Existing Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange
Offer for the purpose of distributing the Exchange Notes
(i) will not be able to rely on such interpretations of
the staff of the Commission, (ii) will not be able to
tender its Existing Notes in the Exchange Offer and (iii)
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any
sale or transfer of the Existing Notes, unless such sale
or transfer is made pursuant to an exemption from such
requirements.
Each Participating Broker-Dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection
with resales of Exchange Notes received in exchange for
Existing Notes where such Existing Notes were acquired by
such Participating Broker-Dealer as a result of
market-making activities or other trading activities.
Any holder who tenders in the Exchange Offer with the
intention to participate or for the purpose of
participating in a distribution of the Exchange Notes
cannot rely on the position of the staff of the Commission
enunciated in no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Failure to comply
with such requirements in such instance may result in such
holder incurring liability under the Securities Act for
which the holder is not indemnified by the Company.
Expiration Date..... 5:00 p.m., New York City time, on , 1996, unless
the Exchange Offer is extended by the Company in its sole
discretion, in which case the term "Expiration Date" means
that latest date and time to which the Exchange Offer is
extended.
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<PAGE>
Accrued Interest on
the Exchange Notes
and Existing Notes. Interest on each Exchange Note will accrue from the latest
date on which interest was paid on the Existing Notes
surrendered in exchange therefor or, if no interest has
been paid on the Existing Notes, from the date of original
issuance of such Note. No interest will be paid on the
Existing Notes accepted for exchange, and holders of
Existing Notes whose Existing Notes are accepted for
exchange will be deemed to have waived the right to
receive any payment in respect of interest on the Existing
Notes accrued up to the date of the issuance of the
Exchange Notes. Holders of Existing Notes that are not
exchanged will receive the accrued interest payable on
April 1, 1997 in accordance with the Indenture. See
"Exchange Offer -- Interest on the Exchange Notes."
Conditions to the
Exchange Offer..... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"Exchange Offer-- Conditions."
Procedures for
Tendering Existing
Notes.............. Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile thereof, together
with the Existing Notes to be exchanged and any other
required documentation to the Exchange Agent (as defined
herein) at the address set forth herein or effect a tender
of such Existing Notes pursuant to the procedures for
book- entry transfer as provided herein. By executing the
Letter of Transmittal, each holder will represent to the
Company that, among other things, the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving
such Exchange Notes, whether or not such person is the
holder, that neither the holder nor any such other person
has any arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and
that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities
Act, of the Company. See "Exchange Offer-- Purpose and
Effect of the Exchange Offer" and "--Procedures for
Tending." Each broker-dealer that receives Exchange Notes
for its own account in exchange for Existing Notes, where
such Existing Notes were acquired by such broker- dealer
as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a
-5-
<PAGE>
prospectus in connection with any resale of such Exchange
Notes. See "Exchange Offer-- Procedures for Tendering" and
"Plan of Distribution."
Untendered Notes.... Following the consummation of the Exchange Offer, holders
of Existing Notes eligible to participate but who do not
tender their Existing Notes will not have any further
registration rights and such Existing Notes will continue
to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Existing
Notes could be adversely affected.
Consequences of
Failure to
Exchange........... The Existing Notes that are not exchanged pursuant to the
Exchange Offer will remain outstanding and continue to
accrue interest and will also remain restricted
securities. Accordingly, such Existing Notes may be resold
only (i) to the Company, (ii) pursuant to Rule 144A or
Rule 144 under the Securities Act or pursuant to some
other exemption from registration under the Securities
Act, (iii) outside the United States to a foreign person
pursuant to the requirements of Regulation S under the
Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act. See
"Exchange Offer-- Consequences of Failure to Exchange."
Shelf Registration
Statement.......... In the event that any changes in law or the applicable
interpretations of the Securities Act by the staff of the
Commission do not permit the Company to effect the
Exchange Offer, or if for any other reason the Exchange
Offer is not consummated within 120 days following the
date of the original issue of the Existing Notes, or if
any holder of the Existing Notes (other than the Initial
Purchasers) is not eligible to participate in the Exchange
Offer, or upon the request of any Initial Purchaser under
certain circumstances, the Company will use its best
efforts to cause to become effective by the 120th day
after the original issue of the Existing Notes a shelf
registration statement pursuant to the Securities Act with
respect to the resale of the Notes (the "Shelf
Registration Statement") and to keep the Shelf
Registration Statement effective until three years after
the effective date thereof (or until one year after such
effective date if such Shelf Registration Statement is
filed at the request of the Initial Purchasers under
certain circumstances) or until such shorter period when
all the Notes covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration
Statement or are eligible for resale pursuant to Rule 144
under the Securities Act without volume limitations.
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<PAGE>
Special Procedures
for Beneficial
Owners............. Any beneficial owner whose Existing Notes are registered
in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and delivering its
Existing Notes, either make appropriate arrangements to
register ownership of the Existing Notes in such owner's
name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time.
Guaranteed Delivery
Procedures......... Holders of Existing Notes who wish to tender their
Existing Notes and whose Existing Notes are not
immediately available or who cannot deliver their Existing
Notes, the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Exchange
Agent (or comply with the procedures for book-entry
transfer) prior to the Expiration Date must tender their
Existing Notes according to the guaranteed delivered
procedures set forth in "Exchange Offer-- Guaranteed
Delivery Procedures."
Withdrawal Rights... Tenders may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
Acceptance of Notes
and Delivery of
Exchange Notes..... The Company will accept for exchange any and all Existing
Notes which are duly tendered in the Exchange Offer and
not validly withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered promptly
following the Expiration Date. See "Exchange Offer--Terms
of the Exchange Offer."
Certain Tax
Consequences....... The exchange pursuant to the Exchange Offer should not be
a taxable event for Federal income tax purposes. See "Tax
Considerations."
Use of Proceeds..... There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer. See "Use of
Proceeds."
Exchange Agent...... First Union National Bank.
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<PAGE>
The Exchange Notes
General............. The form and terms of the Exchange Notes are the same as
the form and terms of the Existing Notes (which they
replace) except that (i) the Exchange Notes have been
registered under the Securities Act and, therefore, will
not bear legends restricting the transfer thereof, (ii)
the Exchange Notes do not include provisions providing for
an increase in the interest rate in certain circumstances
relating to the timing of the Exchange Offer and (iii) the
holders of Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement, which
rights will terminate when the Exchange Offer is
consummated. The Exchange Notes will evidence the same
debt as the Existing Notes and will be entitled to the
benefits of the Indenture. See "Description of Notes."
Securities Offered.. $125,000,000 principal amount of 9 1/4% Senior
Subordinated Notes due 2006.
Maturity Date....... October 1, 2006.
Interest Payment
Dates.............. April 1 and October 1 of each year, commencing April 1,
1997.
Optional Redemption. The Exchange Notes are redeemable at the option of the
Company, in whole or in part, in cash, at any time on or
after October 1, 2001 at the redemption prices set forth
herein, together with accrued and unpaid interest, if any,
to the date of redemption.
Change of Control... Upon the occurrence of a Change of Control (as defined
herein), each holder of the Exchange Notes may require the
Company to repurchase all or a portion of such holder's
Exchange Notes at a purchase price in cash equal to 101%
of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase. The
occurrence of certain events that would constitute a
Change in Control would also constitute a default under
the company's existing $300,000,000 revolving credit
facility and $150,000,000 lease financing facility
(collectively, the "Credit Facility"), which ranks senior
in right of payment to the Notes, and would also require
the Company to offer to redeem the $25,000,000 principal
amount of the company's 9 1/4% First Mortgage Bonds Series
A, which rank senior in right of payment to the Notes, and
$43,904,000 principal amount of the Company's 6%
Convertible Senior Subordinated Debentures due 2003 (the
"Convertible Debentures") and
-8-
<PAGE>
$120,000,000 of the company's 9 3/4% Senior Subordinated
Notes due 2005 (the "9 3/4% Notes"), which rank pari passu
in right of payment to the Notes. the Company's ability to
repurchase the Notes upon a Change in Control would also
be limited by the terms of the Indenture and the Credit
Facility. As a result of such limitation, a holder of a
Note may not be able to require the Company to repurchase
the Notes unless the Company is able to refinance the
Credit Facility. In addition, there can be no assurance
that the Company will have sufficient funds to repurchase
the Notes if they were tendered upon a Change in Control.
See "Description of the Notes -- Change in Control."
Ranking............. The Exchange Notes will be unsecured senior subordinated
obligations of the Company and, as such, will be
subordinated to all existing and future Senior
Indebtedness (as defined herein) of the Company. The
Exchange Notes will also be effectively subordinated in
right of payment to all existing and future liabilities of
the Company's subsidiaries. As of June 30, 1996, on a pro
forma basis after giving effect to the National Health
Transaction and GMC Transaction and the sale of the Notes
and the use of the net proceeds therefrom, the aggregate
amount of Senior Indebtedness would have been
approximately $402,123,000 (which includes approximately
$9,980,000 of indebtedness and approximately $61,000,000
of lease obligations of subsidiaries and approximately
$6,000,000 of indebtedness of other persons, all of which
are guaranteed by the Company, and approximately
$15,900,000 of letters of credit issued under the
Company's Credit Facility primarily related to the
Company's self-insurance programs) and, as of such date,
the aggregate amount of liabilities of the subsidiaries of
the Company, which consist primarily of trade payables and
accrued compensation, that will effectively rank senior to
the Exchange Notes was approximately $64,163,000. As of
June 30, 1996, there were also outstanding $43,904,000
principal amount of the Convertible Debentures and
$120,000,000 principal amount of the 9 3/4% Notes which
will rank pari passu in right of payment to the Exchange
Notes. The Exchange Notes will rank senior to all other
subordinated indebtedness of the Company. The Credit
Facility is secured by the stock and partnership interests
of the Company's subsidiaries and substantially all of the
Company's subsidiaries are co-obligors of the Credit
Facility. See "Description of the Notes -- Subordination."
-9-
<PAGE>
Restrictive
Covenants.......... The Indenture contains certain covenants, including, but
not limited to, covenants with respect to the following
matters: (i) limitation on indebtedness; (ii) limitation
on restricted payments; (iii) limitation on preferred
stock of subsidiaries and subsidiary distributions; (iv)
limitation on transactions with affiliates; (v) limitation
on disposition of proceeds of asset sales; (vi) limitation
on liens securing subordinated indebtedness; (vii)
limitation on other senior subordinated indebtedness;
(viii) limitation on issuance of guarantees of
subordinated indebtedness; (ix) limitation on dividends
and other payment restrictions affecting subsidiaries; and
(x) limitation on merger and sale of assets. See
"Description of the Notes-- Certain Covenants."
Absence of a Public
Market for the
Notes.............. The Exchange Notes will be new securities for which there
currently is no market. Although the Initial Purchasers
have informed the Company that they currently intend to
make a market in the Exchange Notes, they are not
obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly,
there can be no assurance as to the development of
liquidity of any market for the Exchange Notes. The
Company does not intend to apply for listing of the
Exchange Notes on any securities exchange or for quotation
through the National Association of Securities Dealers
Automated Quotation System.
Risk Factors
See "Risk Factors" beginning on page 13 for a discussion of certain
factors which should be considered by prospective investors in evaluating an
investment in the Notes.
-10-
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share and operating data)
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------------------
1991 1992 1993 1994 1995
-------- --------- -------- -------- -----------------------
Pro Forma, As
Actual Adjusted(1)
-------- -------------
<S> <C> <C> <C> <C> <C> <C>
Summary of Operations Data
Net revenues.............................. $171,449 $196,253 $219,809 $388,616 $486,392 $874,594
Income from operations before depreciation,
amortization, lease expense, interest and
debenture conversion expense (EBITDAR) (2) 30,587 35,597 38,129 69,373 93,253 155,605
Depreciation and amortization............. 6,258 7,239 7,157 14,982 18,793 38,175
Lease expense............................. 7,460 7,207 7,026 11,376 13,798 23,205
Interest expense, net..................... 11,072 8,708 5,042 15,305 20,366 37,592
--------- ------- --------- ------- -------- --------
Debenture conversion expense.............. -- -- -- -- -- --
Earnings before extraordinary items and
cumulative effect of change in
accounting principle................... 3,595 7,710 11,909 17,691 25,531 35,825
Net income................................ 3,283 7,433 11,909 17,673 23,608 33,902
Other Financial Data
EBITDAR (3)............................... $ 23,128 $ 28,390 $ 31,103 $ 57,997 $79,455 $132,400
Ratio of EBITDAR to interest expense plus
rent expense........................... 1.65x 2.24x 3.16 2.60x 2.73x 2.56x
Ratio of EBITDA to interest expense....... 2.09x 3.26x 6.17 3.79x 3.90x 3.52x
Ratio of earnings to fixed charges (4).... 1.27x 1.78x 2.60 2.02x 2.15x 1.94x
Capital expenditures...................... $ 3,843 $ 7,288 $ 23,151 $ 18,784 $ 24,718
Operating Data
ElderCare Networks:
Average eldercare center beds in service
Wholly-owned and leased............. 4,432 4,719 4,534 7,530 8,268
Jointly-owned and managed........... 444 769 1,208 4,532 5,158
--------- ------- -------- -------- --------
Total............................... 4,876 5,488 5,742 12,062 13,426
======== ======== ======== ======== ========
Occupancy percentage in wholly-owned
and leased eldercare centers....... 96% 96% 95% 92% 92%
Physicians, physician assistants and
nurse practitioners................. 12 12 18 22 41
Rehabilitation contracts............... 54 100 106 152 232
Institutional pharmacies/medical
supplies beds served................ 9,000 19,038 21,838 27,964 31,344
Payor mix
Private and other...................... 43% 41% 42% 41% 38%
Medicare............................... 9% 12% 14% 16% 21%
Medicaid............................... 48% 47% 44% 43% 41%
Revenue mix
Basic healthcare services.............. 71% 69% 61% 62% 57%
Specialty medical services............. 26% 26% 34% 32% 37%
Management services and other.......... 3% 5% 5% 6% 6%
</TABLE>
<PAGE>
[RESTUBBED FROM TABLE BEFORE]
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
June 30,
-----------------------------------
1995 1996
------- -----------------------
Pro Forma, As
Actual Actual Adjusted (1)
------- ------ -------------
<S> <C> <C> <C>
Summary of Operations Data
Net revenues.............................. $354,465 $460,354 $723,109
Income from operations before depreciation,
amortization, lease expense, interest and
Debenture conversion expense (EBITDAR) (2) 66,345 87,313 131,400
Depreciation and amortization............. 13,987 17,883 30,756
Lease expense............................. 10,388 11,948 19,064
Interest expense, net..................... 14,369 19,104 29,380
------- ------- -------
Debenture conversion expense.............. -- 1,245 1,245
Earnings before extraordinary items and
cumulative effect of change in
accounting principle................... 17,508 23,759 32,466
Net income................................ 15,585 23,759 32,466
Other Financial Data
EBITDAR (3)............................... $ 55,957 $ 75,365 $112,336
Ratio of EBITDAR to interest expense plus
rent expense........................... 2.68x 2.81x 2.71x
Ratio of EBITDA to interest expense....... 3.89x 3.94x 3.82x
Ratio of earnings to fixed charges (4).... 2.10x 2.14x 2.03x
Capital expenditures...................... $ 19,681 $26,151
Operating Data
ElderCare Networks:
Average eldercare center beds in service
Wholly-owned and leased............. 8,268 9,062
Jointly-owned and managed........... 5,158 5,195
------- ------
Total............................... 13,426 14,257
======= ======
Occupancy percentage in wholly-owned
and leased eldercare centers....... 92% 92%
Physicians, physician assistants and
nurse practitioners................. 41 68
Rehabilitation contracts............... 232 297
Institutional pharmacies/medical
supplies beds served................ 31,145 46,139
Payor mix
Private and other...................... 38% 39%
Medicare............................... 21% 23%
Medicaid............................... 41% 38%
Revenue mix
Basic healthcare services.............. 58% 52%
Specialty medical services............. 36% 42%
Management services and other.......... 6% 6%
</TABLE>
<TABLE>
<CAPTION>
(Unaudited)
June 30, 1996
----------------------------------------
Pro Forma,
Actual As Adjusted (5)
-------------------- ---------------
<S> <C> <C>
Balance Sheet Data
Working capital........................................ $227,599 $267,167
Total assets........................................... 878,348 1,272,993
Long-term debt......................................... 295,897 595,365
Shareholders' equity.................................. 500,238 500,238
</TABLE>
-11-
<PAGE>
- ----------------
(1) Gives effect to the McKerley Transaction, NeighborCare Transaction,
National Health Transaction, GMC Transaction and the sale by the
Company of 6,500,000 shares of Common Stock in May 1996 (the "1996
Equity Offering"), as adjusted to reflect the Offering and the
application of the estimated net proceeds therefrom as described under
"Use of Proceeds." See "Pro Forma Condensed Consolidated Financial
Information."
(2) EBITDAR represents earnings before interest expense, income taxes,
depreciation and amortization, extraordinary items, rental expense and
debenture conversion expense. EBITDAR should not be considered an
alternative measure of the Company's net income, operating
performances, cash flow or liquidity. It is included herein to provide
additional information related to the Company's ability to service
debt.
(3) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization, extraordinary items and debenture
conversion expense. EBITDA should not be considered an alternative
measure of the Company's net income, operating performance, cash flow
or liquidity. It is included herein to provide additional information
related to the Company's ability to service debt. The Indenture
governing the Notes contains certain covenants that utilize a
Consolidated Fixed Charge Coverage Ratio calculation that is based upon
EBITDA. See "Description of the Notes" for a description of such
covenants.
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of the sum of earnings before income taxes and
extraordinary items plus fixed charges. Fixed charges consist of
interest on all indebtedness, amortization of debt discount and
expenses, and that portion of rental expense that the Company believes
to be representative of the interest factor. Fixed charges related to
approximately $6,000,000 of debt guaranteed by the Company have not
been included in the computation of the ratio. The definition of fixed
charges used in this calculation differs from that used in the Fixed
Charge Coverage Ratio covenants contained in the Indenture.
(5) Gives effect to the National Health Transaction and the GMC
Transaction, as adjusted to reflect the Sale of the Notes and the use
of the proceeds therefrom as described under "Use of Proceeds."
-12-
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" such as statements concerning
Medicare and Medicaid programs and the Company's ability to meet its liquidity
needs and control costs; certain statements contained in "Business" such as
statements concerning strategy, government regulation, Medicare and Medicaid
programs and legal proceedings; certain statements in the Pro Forma Condensed
Consolidated Financial Information, such as certain of the Pro Forma
Adjustments; and other statements contained herein regarding matters that are
not historical facts are forward looking statements (as such term is defined in
the Securities Act) and because such statements involve risks and uncertainties,
actual results may differ materially from those expressed or implied by such
forward looking statements. Factors that could cause actual results to differ
materially include, but are not limited to, those discussed herein under "Risk
Factors."
RISK FACTORS
In addition to the other information contained in the Prospectus,
prospective investors should carefully consider the following risk factors
before purchasing the Notes offered hereby.
Certain Financial Considerations. The Company has substantial
indebtedness and, as a result, significant debt service obligations. As of June
30, 1996, after giving pro forma effect to the National Health Transaction and
GMC Transaction and the Offering and the use of proceeds therefrom, the Company
would have had approximately $595,365,000 of long-term indebtedness which would
have represented 54% of its total capitalization. See "Capitalization." The
degree to which the Company is leveraged could have important consequences to
holders of the Notes, including the following: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations may be dedicated
to the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for its operations; (iii) all of the
indebtedness incurred under the Credit Facility is scheduled to become due, and
the indebtedness under the 9 3/4 % Notes is due, prior to the time any principal
payments are required on the Notes; (iv) certain of the Company's borrowings are
and will continue to be at variable rates of interest, which causes the Company
to be vulnerable to increases in interest rates; and (v) certain of the
Company's indebtedness contains financial and other restrictive covenants,
including those restricting the incurrence of additional indebtedness, the
creation of liens, the payment of dividends, sales of assets and minimum net
worth requirements. Failure by the Company to comply with such covenants may
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company.
The Company's ability to make scheduled payments or to refinance its
obligations with respect to its indebtedness depends on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control.
Although the Company's cash flow from its operations has been sufficient to meet
its debt service obligations in the past, there can be no assurance that the
Company's operating results will continue to be sufficient for payment of the
Company's indebtedness. The Company also has significant long-term operating
lease obligations with respect to certain of its eldercare centers.
Ranking. The Existing Notes will be subordinated to all existing and
future Senior Indebtedness of the Company and will rank pari passu in right of
payment with all of the Company's existing and future senior subordinated
indebtedness. The Existing Notes will also be effectively subordinated to the
indebtedness and other liabilities of the Company's subsidiaries. As of June 30,
1996, on a pro forma basis
-13-
<PAGE>
after giving effect to the National Health Transaction and the GMC Transaction
and the Offering and the use of proceeds therefrom, the aggregate amount of
Senior Indebtedness outstanding would have been approximately $401,143,000
(which includes approximately $9,980,000 of indebtedness and approximately
$61,000,000 of lease obligations of subsidiaries and approximately $6,000,000 of
indebtedness of other persons, all of which are guaranteed by the Company, and
approximately $15,900,000 of letters of credit issued under the Credit Facility
primarily related to the Company's self-insurance programs) and, as of such
date, the aggregate amount of liabilities of the subsidiaries of the Company,
which consist primarily of trade payables and accrued compensation, that will
effectively rank senior to the Existing Notes was approximately $64,163,000.
Upon any payment or distribution of assets of the Company in a total or partial
liquidation, dissolution, reorganization or similar proceeding, the holders of
Senior Indebtedness may be entitled to receive payment in full before the
holders of the Notes are entitled to receive any payment. In addition, under
certain circumstances, no payment may be made with respect to the principal of
or interest on the Notes if a payment default or other defaults exist with
respect to certain Senior Indebtedness. See "Description of the Notes --
Subordination."
Risk of Adverse Effect of Healthcare Reform. In addition to extensive
existing government healthcare regulation, there are numerous initiatives on the
federal and state levels for comprehensive reforms affecting the payment for and
availability of healthcare services. It is not clear at this time what
proposals, if any, will be adopted, or what effect such proposals would have on
the Company's business. Aspects of certain of these healthcare proposals, such
as reductions in funding of the Medicare and Medicaid programs, potential
changes in reimbursement regulations by the Health Care Financing Administration
("HCFA"), enhanced pressure to contain healthcare costs by Medicare, Medicaid
and other payors and permitting greater state flexibility in the administration
of Medicaid, could adversely affect the Company. There can be no assurance that
currently proposed or future healthcare legislation or other changes in the
administration or interpretation of governmental healthcare programs or
regulations will not have a material adverse effect on the Company. Concern
about the potential effects of the proposed reform measures has contributed to
the volatility of prices of securities of companies in healthcare and related
industries, including the Company, and may similarly affect the price of the
Company's securities in the future. See "Business --Government Regulation."
Regulation. The federal government and all states in which the Company
operates regulate various aspects of the Company's business. In particular, the
development and operation of eldercare centers and the provision of healthcare
services are subject to federal, state and local laws relating to the delivery
and adequacy of medical care, distribution of pharmaceuticals, equipment,
personnel, operating policies, fire prevention, rate-setting and compliance with
building codes and environmental laws. Eldercare centers are subject to periodic
inspection by governmental and other authorities to assure continued compliance
with various standards, their continued licensing under state law, certification
under the Medicare and Medicaid programs and continued participation in the
Veterans Administration program and the ability to participate in other third
party programs. The Company is also subject to inspection regarding record
keeping and inventory control. The failure to obtain or renew any required
regulatory approvals or licenses could adversely affect the continued expansion
of the Company and could prevent it from offering its existing services.
Many states have adopted Certificate of Need or similar laws which
generally require that the appropriate state agency approve certain acquisitions
and determine that a need exists for certain bed additions, new services and
capital expenditures or other changes prior to beds and/or new services being
added or capital expenditures being undertaken. To the extent that Certificates
of Need or other similar approvals are required for expansion of Company
operations, either through center acquisitions or expansion
-14-
<PAGE>
or provision of new services or other changes, such expansion could be adversely
affected by the failure or inability to obtain the necessary approvals, changes
in the standards applicable to such approvals and possible delays and expenses
associated with obtaining such approvals.
The Company is also subject to federal and state laws which govern
financial and other arrangements between healthcare providers. These laws often
prohibit certain direct and indirect payments or fee-splitting arrangements
between healthcare providers that are designed to induce or encourage the
referral of Patients to, or the recommendation of, a particular provider for
medical products and services. These laws include the federal "Stark
legislations" which prohibit, with limited exceptions, the referral of patients
for certain services, including home health services, physical therapy and
occupational therapy, by a physician to an entity in which the physician has an
ownership interest and the federal "anti-kickback law" which prohibits, among
other things, the offer, payment, solicitation or receipt of any form of
remuneration in return for the referral of Medicare and Medicaid patients or the
purchasing, leasing, ordering or arranging for any goods, facility services or
items for which payment can be made under Medicare and Medicaid. The federal
government, private insurers and various state enforcement agencies have
increased their scrutiny of providers, business practices and claims in an
effort to identify and prosecute fraudulent and abusive practices. In addition,
the federal government has issued recent fraud alerts concerning nursing
services, double billing, home health services and the provision of medical
supplies to nursing facilities; accordingly, these areas may come under closer
scrutiny by the government. See "Business -- Governmental Regulation."
Furthermore, some states restrict certain business relationships between
physicians and other providers of healthcare services. Many states prohibit
business corporations from providing, or holding themselves out as a provider
of, medical care. Possible sanctions for violation of any of these restrictions
or prohibitions include loss of licensure or eligibility to participate in
reimbursement programs and civil and criminal penalties. These laws vary from
state to state, are often vague and have seldom been interpreted by the courts
or regulatory agencies. From time to time, the Company has sought guidance as to
the interpretation of these laws; however, there can be no assurance that such
laws will ultimately be interpreted in a manner consistent with the practices of
the Company.
Payment by Third Party Payors. For the years ended September 30, 1994
and 1995, and the nine months ended June 30, 1996, respectively, the Company
derived approximately 41%, 38% and 39% of its patient service revenue from
private pay sources, 16%, 21% and 23% from Medicare and 43%, 41% and 38% from
various state Medicaid agencies. Both governmental and private third party
payors have employed cost containment measures designed to limit payments made
to healthcare providers such as the Company. Those measures include the adoption
of initial and continuing recipient eligibility criteria which may limit payment
for services, the adoption of coverage and duration criteria which limit the
services which will be reimbursed and the establishment of payment ceilings
which set the maximum reimbursement that a provider may receive for services.
Furthermore, government payment programs are subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings and government
funding restrictions, all of which may materially increase or decrease the rate
of program payments to the Company for its services. There can be no assurance
that payments under governmental and private third party payor programs will
remain at levels comparable to present levels or will, in the future, be
sufficient to cover the costs allocable to patients eligible for reimbursement
pursuant to such programs. In addition, there can be no assurance that centers
owned, leased or managed by the Company, or the provision of services and
supplies by the Company, now or in the future will initially meet or continue to
meet the requirements for participation in such programs. The Company could be
adversely affected by the continuing efforts of governmental and private third
party payors to contain the amount of reimbursement for healthcare services. In
an attempt to limit the federal budget deficit, there have been, and the Company
expects that there will continue to be, a number of proposals to limit Medicare
and Medicaid reimbursement for healthcare services. In certain states
-15-
<PAGE>
there have been proposals to eliminate the distinction in Medicaid payment for
skilled versus intermediate care services and to establish a case mix
prospective payment system pursuant to which the payment to a facility for a
patient is based upon the patient's condition and need for services. The Company
cannot at this time predict whether any of these proposals will be adopted or,
if adopted and implemented, what effect, if any, such proposals will have on the
Company. In addition, private payors, including managed care payors,
increasingly are demanding discounted fee structures or the assumption by
healthcare providers of all or a portion of the financial risk through prepaid
capitation arrangements. Efforts to impose reduced allowances, greater discounts
and more stringent cost controls by government and other payors are expected to
continue. See "Business -- Revenue Sources."
Competition. The healthcare industry is highly competitive. The Company
competes with a variety of other companies in providing eldercare services.
Certain competing companies have greater financial and other resources and may
be more established in their respective communities than the Company. Competing
companies may offer newer or different centers or services than the Company and
may thereby attract the Company's customers who are either presently residents
of its eldercare centers or are otherwise receiving its eldercare services. See
"Business -- Competition."
Risks Associated with Acquisition Strategy. The Company has recently
completed several acquisitions of eldercare businesses. The Company also intends
to pursue additional acquisitions in the future. There can be no assurance that
the Company will be able to realize expected operating and economic efficiencies
from its recent acquisitions or from any future acquisitions or that such
acquisitions will not adversely affect the Company's results of operations or
financial condition. In addition, there can be no assurance that the Company
will be able to locate suitable acquisition candidates in the future, consummate
acquisitions on favorable terms or successfully integrate newly acquired
businesses with the Company's operations. The consummation of acquisitions
likely will result in the incurrence or assumption by the Company of additional
indebtedness.
Absence of Public Market. The Existing Notes currently are owned by a
relatively small number of beneficial owners. The Existing Notes have not been
registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for the Exchange
Notes. The Exchange Notes will constitute a new issue of securities with no
established trading market. Although the Exchange Notes generally will be
permitted to be resold or otherwise transferred by the holders (who are not
affiliates of the Company) without compliance with the registration requirements
under the Securities Act, the Company does not intend to list the Exchange Notes
on any national securities exchange or to seek the admission thereof to trading
in the National Association of Securities Dealers Automated Quotation System.
The Exchange Notes may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities, the
performance of the Company and certain other factors. The Company has been
advised by the Initial Purchasers that they intend to make a market in the
Exchange Notes, as permitted by applicable laws and regulations; however, the
Initial Purchasers are not obligated to do so and any such market making
activities may be discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
may be limited during the Exchange Offer. Accordingly, no assurance can be given
that an active public or other market will develop for the Exchange Notes or as
to the liquidity of the trading market for the Exchange Notes. Pursuant to the
Registration Rights Agreement, the Company is required to consummate the
Exchange Offer for the Existing Notes or file the Shelf Registration Statement
covering resales of the Existing Notes within 120 days following the original
issue of the Existing Notes. Until the Company performs its obligations under
the Registration Rights Agreement, the Existing Notes may only be offered or
sold pursuant to an exemption
-16-
<PAGE>
from the registration requirements of the Securities Act and applicable state
securities laws or pursuant to an effective registration statement under the
Securities Act and applicable state securities laws.
Exchange Offer Procedures. Issuance of Exchange Notes in exchange for
Existing Notes pursuant to the Exchange Offer will be made only after a timely
receipt by the Company of such Existing Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of the Existing Notes desiring to tender such Existing Notes in exchange
for Exchange Notes should allow sufficient time to ensure timely delivery. The
Company is under no duty to give notification of defects or irregularities with
respect to the tenders of Notes for exchange. Existing Notes that are not
tendered or are tendered but not accepted will, following the consummation of
the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, the registration
rights under the Registration Rights Agreement will terminate. In addition, any
holder of Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Existing Notes, where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." To the extent that Existing Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Existing Notes could be adversely affected. See "--Consequences of
the Exchange Offer on Non-Tendering Holders of the Existing Notes."
Consequences of the Exchange Offer on Non-Tendering Holders of the
Existing Notes. The Company intends for the Exchange Offer to satisfy its
registration obligations under the Registration Rights Agreement. If the
Exchange Offer is consummated, the Company does not intend to file further
registration statements for the sale or other disposition of Existing Notes.
Consequently, following completion of the Exchange Offer, holders of Existing
Notes seeking liquidity in their investment would have to rely on an exemption
to the registration requirements under applicable securities laws, including the
Securities Act, with respect to any sale or other disposition of the Existing
Notes.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer.
The net proceeds to the Company from the Offering after deducting offering
expenses and the Initial Purchasers' discount was approximately $121,000,000.
The Company used the net proceeds from the Offering together with borrowings
under its Credit Facility as follows: approximately $93,900,000 was used to pay
the cash portion of the purchase price of the GMC Transaction; approximately
$87,600,000 was used to made a loan to GMC immediately prior to the GMC
Transaction to prepay $82,800,000 of debt which bore interest at a rate of
12 1/4 % per annum and was due in 2002 and to pay related prepayment expenses;
and approximately $2,400,000 was used to prepay debt assumed as a part of the
GMC Transaction which bore interest at a rate of 11 1/4% per annum and was due
in 2001. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Certain Transactions."
-17-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company: (i)
as of June 30, 1996; (ii) on a pro forma basis to give effect to the National
Health Transaction and GMC Transaction; and (iii) as adjusted to give effect to
the Offering and the application of the estimated net proceeds therefrom as
described in "Use of Proceeds."
<TABLE>
<CAPTION>
June 30, 1996
----------------------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
------------- ------------ -------------
(in thousands)
<S> <C> <C> <C>
Current installment of long-term debt.............................. $ 2,512 $ 7,332 $ 2,512
============= ============ =============
Long-term debt, less current maturities:
Senior long-term debt ......................................... $ 132,263 $ 422,911 $ 306,731 (1)
9 1/4% Senior Subordinated Notes due 2006...................... -- -- 125,000
9 3/4% Senior Subordinated Notes due 2005 (2).................. 119,730 119,730 119,730
6% Convertible Senior Subordinated Debentures
due 2003..................................................... 43,904 43,904 43,904
------------- ------------ -------------
Total long-term debt...................................... 295,897 586,545 595,365
Shareholders' equity:
Common stock, $.02 par value, 60,000,000 shares
authorized; 31,981,680 shares issued and
31,936,079 shares outstanding................................ 476 476 476
Additional paid-in capital..................................... 411,677 411,677 411,677
Retained earnings.............................................. 88,328 88,328 88,328
Treasury stock, at cost, 45,601 shares......................... (243) (243) (243)
------------- ------------ -------------
Total shareholders' equity................................... 500,238 500,238 500,238
------------- ------------ -------------
Total capitalization...................................... 796,135 1,086,703 1,095,603
============= ============ =============
</TABLE>
- --------------------------
(1) Primarily includes $260,300,000 under the revolving credit facility of
the Credit Facility; $23,700,000 9 1/4 % First Mortgage Bonds Series A
due October 2007; and approximately $9,980,000 of indebtedness of
subsidiaries guaranteed by the Company. The Company has recently
entered into an agreement with the lenders of the Credit Facility which
increases the revolving credit facility and the lease financing
facility to $300,000,000 and $150,000,000, respectively.
(2) Net of remaining original issue discount of $270,000.
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EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Existing Notes were originally sold by the Company on October 7,
1996 to the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Existing Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act and to a limited number
of institutional accredited investors that agreed to comply with certain
transfer restrictions and other conditions. As a condition to the closing under
the Purchase Agreement, the Company entered into the Registration Rights
Agreement with the Initial Purchasers, pursuant to which the Company agreed, for
the benefit of the holders of the Existing Notes, at the Company's cost, among
other things, to use its best efforts to (i) file within 30 days, and cause to
become effective within 90 days, of the date of the original issuance of the
Existing Notes, a registration statement on Form S-4 (the "Exchange Offer
Registration Statement") which term shall encompass all amendments, exhibits,
annexes and schedules thereto and of which this Prospectus is a part and (ii)
cause the Exchange Offer to be consummated within 120 days of the original
issuance of the Existing Notes. Promptly after the Exchange Offer Registration
Statement has been declared effective, the Company will offer the Exchange Notes
in exchange for the Existing Notes.
The Company will keep the Exchange Offer open until the Expiration
Date. For each Existing Note validly tendered to the Company pursuant to the
Exchange Offer and not withdrawn by the holder thereof, the holder of such
Existing Note will receive an Exchange Note having a principal amount equal to
that of the tendered Existing Note. Interest on each Exchange Note will accrue
from the last interest payment date on which interest was paid on the tendered
Existing Note in exchange therefor or, if no interest has been paid on such
Existing Note, from the date of the original issuance of the Existing Note.
Under existing interpretations of the staff of the Commission contained
in several no-action letters to third parties and subject to the immediately
following sentence, the Company believes that the Exchange Notes would in
general be freely tradeable after the Exchange Offer without further compliance
with the registration and prospectus delivery requirements of the Securities
Act. However, any purchaser of Existing Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Existing Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Existing Notes unless such sale or
transfer is made pursuant to an exemption from such requirements.
Each holder of the Existing Notes (other than certain specified
holders) who wishes to exchange Existing Notes for Exchange Notes in the
Exchange Offer will be required to represent that (i) it is not an "affiliate"
of the Company, (ii) it is not a broker-dealer tendering Existing Notes acquired
directly from the Company or if it is such a broker-dealer, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable, (iii) any Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iv) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes. In addition, in connection with any resales of Exchange
Notes, any broker-dealer who acquired the Existing Notes for its own account as
a result of market-making or other trading activities (a "Participating
Broker-Dealer") must deliver a prospectus meeting the requirements of the
Securities Act. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from
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the original sale of the Existing Notes), with the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights Agreement,
the Company is required to allow Participating Broker-Dealers and other persons
subject to similar prospectus delivery requirements, if any, to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such Exchange Notes; provided however that the Company is
only required to use its best efforts to maintain the effectiveness of the
Exchange Offer Registration Statement for a period of 120 days following the
closing of the Exchange Offer.
In the event that any changes in law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any reason the Exchange Offer is not consummated within 120
days following the date of original issue of the Existing Notes, or if any
holder of the Existing Notes (other than the Initial Purchasers) is not eligible
to participate in the Exchange Offer, or upon the request of any Initial
Purchaser under certain circumstances, the Company will, at its cost, use its
best efforts to (a) as promptly as practicable, file the Shelf Registration
Statement covering resales of the Existing Notes, (b) cause the Shelf
Registration Statement to be declared effective under the Securities Act by the
120th day after the original issue of the Existing Notes and (c) keep effective
the Shelf Registration Statement until three years after its effective date (or
until one year after such effective date if such Shelf Registration Statement is
filed at the request of any Initial Purchaser under certain circumstances) or
until such shorter period when all the Existing Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or are eligible for resale pursuant to Rule 144 under the Securities
Act without volume limitations. The Company will, in the event of the filing of
a Shelf Registration Statement, provide to each holder of the Existing Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement for the Existing
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Existing Notes. A holder of Existing Notes
that sells such Existing Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such a holder (including certain
indemnification obligations). In addition, each holder of the Existing Notes
will be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Existing Notes included in the Shelf Registration
Statement and to benefit from the provisions regarding liquidated damages set
forth in the following paragraph.
In the event that either (i) the Exchange Offer Registration Statement
is not filed with the Commission on or prior to the 30th calendar day following
the date of original issue of the Existing Notes, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to the 90th
calendar day following the date of original issue of the Existing Notes or (iii)
the Exchange Offer is not consummated or a Shelf Registration Statement with
respect to the Existing Notes is not declared effective on or prior to the 120th
calendar day following the date of original issue of the Existing Notes, the
interest rate borne by the Existing Notes shall be increased by one-quarter of
one percent per annum following such 30-day period in the case of clause (i)
above, following such 90-day period in the case of clause (ii) above or
following such 120-day period in the case of clause (iii) above, which rate will
be increased by an additional one-quarter of one percent per annum for each
90-day period that any additional interest continues to accrue. The aggregate
amount of such increase from the original interest rate pursuant to those
provisions will in no event exceed one percent. Upon (x) the filing of the
Exchange Offer Registration Statement after the 30-day period described in
clause (i) above, (y) the effectiveness of the Exchange Offer Registration
Statement after the
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90-day period described in clause (ii) above or (z) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 120-day period described in clause (iii) above, the
interest rate borne by the Existing Notes from the date of such filing, the date
of such effectiveness or the day before the date of consummation, as the case
may be, will be reduced to the original interest rate.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Existing Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
outstanding Existing Notes accepted in the Exchange Offer. Holders may tender
some or all of their Existing Notes pursuant to the Exchange Offer. However,
Existing Notes may be tendered only in integral multiples of $1,000. The Company
has fixed the close of business on , 1996 as the record date for the
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially.
The form and terms of the Exchange Notes are the same as the form and
terms of the Existing Notes (which they replace), except that as of the date
hereof the Exchange Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer and will not contain
certain provisions included in the terms of the Existing Notes relating to an
increase in the interest rate in certain circumstances relating to the timing of
the Exchange Offer. The holders of the Exchange Notes will not be entitled to
certain rights under the Registration Rights Agreement, which rights will
terminate when the Exchange Offer is consummated. The Exchange Notes will
evidence the same debt as the Existing Notes and will be entitled to the
benefits to the Indenture.
Holders of the Existing Notes do not have any appraisal or dissenters'
rights under the Business Corporation Law of Pennsylvania or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Existing
Notes when, as and if the Company has given written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Existing Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Existing Notes will be
returned to the tendering holder thereof, at the Company's expense, as promptly
as practicable after the Expiration Date.
Holders who tender Existing Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Existing Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
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Expiration Date; Extension; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1996, unless the Company in its sole discretion extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the
Exchange Agent of any extension by written notice prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Existing Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions" shall
not have been satisfied, by giving written notice of such delay, extension or
termination to the Exchange Agent, or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by written notice thereof
to the registered holders.
Interest on the Exchange Notes
Interest on each Exchange Note will accrue from the last date on which
interest was paid on the Existing Note surrendered in exchange therefor or, if
no interest has been paid on the Existing Note, from the date of original
issuance of such Existing Note. No interest will be paid on the Existing Notes
accepted for exchange, and holders of Existing Notes whose Existing Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Existing Notes accrued up to the date of
the issuance of the Exchange Notes. Holders of Existing Notes whose Existing
Notes are not exchanged will receive the accrued interest payable thereon on
April 1, 1997, in accordance with the Indenture.
Interest on the Exchange Notes is payable semi-annually on each April 1
and October 1, commencing on April 1, 1997.
Procedures for Tendering
Only a holder of Existing Notes may tender such Existing Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal, or such facsimile thereof,
together with the Existing Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
To be tendered effectively, the Existing Notes, the Letter of Transmittal and
other required documents must be completed and received by the Exchange Agent at
the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York
City time, on the Expiration Date. Delivery of the Existing Notes may be made by
book-entry transfer in accordance with the procedures described below.
Confirmation of such book-entry transfer must be received by the Exchange Agent
prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the
Company the representations set forth above in the fourth paragraph under
"Purpose and Effect of the Exchange Offer."
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The tender by a holder and the acceptance thereof by the Company will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH
TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Existing Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on the Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or any other "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended that is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange, Inc. Medallion Program or the Stock Exchange Medallion Program
(an "Eligible Institution"), unless the Existing Notes tendered pursuant thereto
are tendered (i) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In the
event that signatures on the Letter of Transmittal or the notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be by an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Existing Notes listed therein, such Existing Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Existing
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Existing Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and (except when
Exchange Notes are being issued to replace Existing Notes registered in the same
name) evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Existing Notes at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Existing Notes by causing such
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Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange
Agent's account with respect to the Existing Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Existing Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate
Letter of Transmittal properly completed and duly executed with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are compiled with, within the time period
provided under such procedures. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Existing Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Existing Notes not properly tendered or any Existing Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Existing
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Existing Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Existing Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Existing Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
Guaranteed Delivery Procedures
Holders who wish to tender their Existing Notes and (i) whose Existing
Notes are not immediately available, (ii) who cannot deliver their Existing
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer, prior
to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder, the certificate number(s) of such Existing Notes
and principal amount of Existing Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Existing Notes (or a
confirmation of book-entry transfer of such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof, as well as the certificate(s) representing all tendered
Existing Notes in proper form for transfer (or a confirmation of
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book-entry transfer of such Existing Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon three New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Existing Notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Existing Notes in the Exchange Offer, a
telegram, telex, facsimile transmission or letter must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Existing Notes to be withdrawn (the
"Depositor"), (ii) identify the Existing Notes to be withdrawn (including the
certificate number(s) and principal amount of such delivered Existing Notes, or,
in the case of Existing Notes transferred by book-entry transfer, the name and
number of the account at the Book-Entry Transfer Facility to be credited and the
transaction code number), (iii) state that such Depositor is withdrawing its
election to have the Existing Notes exchanged and specify the name in which any
such Existing Notes are to be registered, if different from that of the
Depositor and (iv) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Existing Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Existing Notes register the transfer of such Existing Notes into the name of the
person withdrawing the tender. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Existing Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with respect
thereto unless the Existing Notes so withdrawn are validly retendered. Any
Existing Notes which have been tendered but which are not accepted for exchange
will be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Existing Notes may be retendered by following one of
the procedures described above under "Procedures for Tendering" at any time
prior to the Expiration Date.
Conditions
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or exchange Exchange Notes for, any
Existing Notes, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Existing Notes, if:
(a) the Exchange Offer or the making of any exchange by a holder of
Existing Notes violates applicable law or any applicable interpretation by the
staff of the Commission; or
(b) the tendering of the Existing Notes is not in accordance with the
Exchange Offer;
(c) each holder of Existing Notes to be exchanged in the Exchange Offer
shall not have represented that all Exchange Notes to be received by it shall be
acquired in the ordinary course of business and that at the time of the
consummation of the Exchange Offer it shall have no arrangement of
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understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and shall have made such
other representations as may be reasonably necessary under applicable Commission
rules, regulations or interpretations to render the use of the Exchange Offer
Registration Statement or other appropriate form under the Securities Act
available; or
(d) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the judgment of the Company, would reasonably be expected to impair
the ability of the Company to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Existing
Notes and return all tendered Existing Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Existing Notes theretofore tendered in
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Existing Notes (see "Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Existing Notes which have not been withdrawn.
Exchange Agent
First Union National Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
By Registered, Certified or Overnight Mail or Hand:
First Union National Bank
One Rodney Square
920 King Street, 1st Floor
Wilmington, DE 19801
Attention: Corporate Trust Department
By Facsimile: (302) 888-7544
Confirm: (302) 888-7530
Attention: Corporate Trust Department
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION
OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
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Fees and Expenses
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
Accounting Treatment
The Exchange Notes will be recorded at the same carrying value as the
Existing Notes, which is face value, as reflected in the Company's accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company. The expenses of the Exchange Offer
will be expenses over the term of the Exchange Notes.
Consequences of Failure to Exchange
The Existing Notes that are not exchanged for Exchange Notes pursuant
to the Exchange Offer will remain outstanding and continue to accrue interest
and will also remain restricted securities. Accordingly, such Existing Notes may
be resold only (i) to the Company, (ii) pursuant to a registration statement
which has been declared effective under the Securities Act, (iii) for so long as
the Existing Notes are eligible for resale pursuant to Rule 144A under the
Securities Act, to a person the seller reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A that purchases for its own
account or for the account of a qualified institutional buyer and to whom notice
is given that the transfer is being made in reliance on Rule 144A, (iv) pursuant
to offer and sale to non-U.S. persons that occur outside the United States
within the meaning of Regulation S under the Securities Act, (v) to an
institutional "accredited investor" within the meaning of subparagraphs (a)(1),
(a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act that is acquiring
the Existing Notes for its own account or for the account of such an
institutional "accredited investor" for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act or (vi) pursuant to any other available exemption from the
registration requirements of the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States and in
accordance with the Indenture. Holders of Existing Notes not tendered in the
Exchange Offer will not retain any rights under the Registration Rights
Agreement, except in limited circumstances.
Resale of the Exchange Notes
With respect to resales of Exchange Notes, based on an interpretation
by the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), who receives Exchange Notes in
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exchange for Existing Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement or
understanding with a person to participate, in the distribution of the Exchange
Notes, will be allowed to resell the Exchange Notes to the public without
further registration under the Securities Act and without delivering to the
purchasers of the Exchange Notes a prospectus that satisfies the requirements of
Section 10 of the Securities Act. However, if any holder acquires Exchange Notes
in the Exchange Offer for the purpose of distributing or participating in a
distribution of the Exchange Notes, such holder cannot rely on the position of
the staff of the Commission enunciated in such no-action letters or any similar
interpretive letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction, unless an exemption from registration is otherwise available.
Further, each Participating Broker-Dealer that receives Exchange Notes for its
own account in exchange for Existing Notes, where such Existing Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. The Company recommends that each holder consult such holder's own tax
advisor as to the particular tax consequences of exchanging such holder's
Existing Notes for Exchange Notes, including the applicability and effect of any
state, local or foreign tax laws.
The exchange of the Existing Notes for Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" for federal income tax
purposes because the Exchange Notes should not be considered to differ
materially in kind or extent from the Existing Notes. Rather, the Exchange Notes
received by a holder should be treated as a continuation of the Existing Notes
in the hands of such holder. As a result, there should be no federal income tax
consequences to holders exchanging Existing Notes for Exchange Notes pursuant to
the Exchange Offer.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for each of
the fiscal years in the five-year period ended September 30, 1995 and as of
September 30, 1995 have been derived from the Company's audited Consolidated
Financial Statements, which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The selected consolidated financial
data presented below for the nine months ended June 30, 1995 and 1996 and as of
June 30, 1996 have been derived from the unaudited Condensed Consolidated
Financial Statements of the Company and, in the opinion of the Company, reflect
and include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position and results of
operations of the Company for such periods. The results of operations for the
nine months ended June 30, 1996 are not necessarily indicative of the results
that may be expected for a full fiscal year. The selected consolidated financial
data set forth below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and with the
Consolidated Financial Statements of the Company and the related notes thereto
included elsewhere in this Prospectus.
-29-
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended September 30, June 30,
-------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
-------- ---------- --------- ---------- --------- --------- ----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenue:
Basic healthcare services.............. $121,854 $134,763 $133,370 $240,264 $278,121 $206,073 $241,107
Specialty medical services............. 43,726 52,254 75,227 125,718 180,327 128,333 193,347
Management services and other, net..... 5,869 9,236 11,212 22,634 27,945 20,059 25,900
-------- -------- -------- -------- -------- -------- --------
Total net revenues.................. 171,449 196,253 219,809 388,616 486,393 354,465 460,354
-------- -------- -------- -------- -------- -------- --------
Income from operations before depreciation,
amortization, lease expense, interest
and Debenture conversion expense....... 30,587 35,597 38,129 69,373 93,253 66,345 87,313
Depreciation and amortization............. 6,258 7,239 7,157 14,982 18,793 13,987 17,883
Lease expense............................. 7,460 7,207 7,026 11,376 13,798 10,388 11,948
Interest expense, net..................... 11,072 8,708 5,042 15,305 20,366 14,369 19,104
Debenture conversion expense.............. -- -- -- -- -- -- 1,245
-------- -------- -------- -------- -------- -------- --------
Earnings before extraordinary items and
cumulative effect of change in accounting
principle.............................. 3,595 7,710 11,909 17,691 25,531 17,508 23,759
Net income................................ 3,283 7,433 11,909 17,673 23,608 15,585 23,759
Preferred stock dividend.................. 441 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income available to common
shareholders........................... $ 2,842 $ 7,433 $ 11,909 $ 17,673 $ 23,608 $ 15,585 $ 23,759
======== ======== ======== ======== ======== ======== ========
Per common share data (fully diluted) (1)
Earnings before extraordinary items,
cumulative effect of change in accounting
principle and Debenture conversion expense $ 0.39 $ 0.53 $0.67 $0.84(2) $ 1.03(2) $ 0.72(2) $ 0.91(2)
Debenture conversion expense.............. -- -- -- -- -- -- (0.03)(3)
Extraordinary item, net of tax............ -- -- -- -- -- (0.06) --
Net income................................ $ 0.35 $ 0.51 $0.67 $0.84(2) $ 0.97(2) $ 0.66(2) $ 0.88(2)
Weighted average share of common stock
and equivalents........................ 9,233,902 14,494,575 17,928,522 24,819,711 28,452,436 28,284,792 29,358,861
Ratio of earnings to fixed charges (4).... 1.27x 1.78x 2.60x 2.02x 2.15x 2.10x 2.14x
</TABLE>
<TABLE>
<CAPTION>
September 30,
----------------------------------------------------------- June 30,
1991 1992 1993 1994 1995 1996
---------- --------- ---------- --------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working Capital................................... $ 14,689 $ 31,986 $ 50,081 $ 66,854 $ 134,114 $227,599
Total assets...................................... 173,220 188,677 236,978 511,698 600,389 878,348
Long-term debt ................................... 89,777 80,170 83,842 250,807 308,052 295,897
Shareholders' equity.............................. 52,340 82,703 125,348 195,466 221,548 500,238
</TABLE>
- -----------------------------
(1) Reflects a three for two stock dividend on the Common Stock effective
March 29, 1996.
(2) Includes the assumed conversion of all of the Convertible Debentures which
were issued on November 30, 1993.
(3) In connection with an early conversion of a portion of the Convertible
Debentures, the Company paid approximately $1,245,000 ($784,000 after tax)
representing the prepayment of interest to converting Convertible
Debenture holders.
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of the sum of earnings before income taxes and
extraordinary items plus fixed charges. Fixed charges consist of interest
on all indebtedness, amortization of debt discount and expenses, and that
portion of rental expense that the Company believes to be representative
of the interest factor. Fixed charges related to approximately $6,000,000
of debt guaranteed by the Company have not been included in the
computation of the ratio. The definition of fixed charges used in this
calculation differs from that used in the Fixed Charge Coverage Ratio
covenants contained in the Indenture.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Since the Company began operations in July 1985, it has focused its
efforts on providing an expanding array of specialty medical services to elderly
customers. The delivery of these services was originally concentrated in the
eldercare centers owned and leased by the Company, but now also includes managed
eldercare centers, independent healthcare facilities, outpatient clinics and
home healthcare.
The Company generates revenues from three sources: basic healthcare
services, specialty medical services and management services and other. The
Company includes in basic healthcare services revenues all room and board
charges for its eldercare customers at its owned and leased eldercare centers.
Specialty medical services include all revenues from providing rehabilitation
therapies, institutional pharmacy and medical supply services, subacute care
programs, home healthcare, physician services, and other specialized services.
Management services and other include fees earned for management of eldercare
centers.
Genesis delivers its services through three divisions. The largest, in
terms of revenues, is Genesis Eldercare Centers, which at August 31, 1996
included 87 owned and leased eldercare centers. The second, Genesis Eldercare
Services, provides specialty medical services to all centers owned, leased or
managed by Genesis as well as to over 600 independent healthcare providers. The
third, Genesis Eldercare Network Services, manages 40 eldercare centers.
Certain Transactions
In October 1996, the Company and GMC consummated the merger of GMC with
a wholly-owned subsidiary of Genesis. Under the terms of the merger agreement,
GMC shareholders received $5.75 per share in cash for each GMC share. The total
consideration paid to stockholders of GMC to acquire their shares (including
shares which may have been issued upon exercise of outstanding warrants, options
and long-term incentive plans) was approximately $93,900,000. Prior to the
Merger, GMC had outstanding approximately $133,100,000 of indebtedness which
included approximately $87,600,000 which the Company loaned to GMC immediately
prior to consummation of the Merger to repay $82,800,000 principal amount of
indebtedness and to pay related prepayment expenses. The cash portion of the
purchase price and the loan to GMC were provided through the sale by the Company
of the Notes and borrowing under its Credit Facility. GMC owns and operates 18
long-term care facilities and six assisted living facilities with approximately
3,000 licensed beds. GMC also operates an ambulance transportation business, a
medical supply business, a pharmacy business, a contract management service
business, a diagnostic and rehabilitative management services business and a
financial services and information systems business. In addition, GMC currently
is developing two long-term care facilities with approximately 240 beds.
In July 1996, the Company acquired the outstanding stock of National
Health. Prior to the closing of the stock acquisitions, an affiliate of a
financial institution purchased nine of the National Health eldercare centers
for $67,700,000 and subsequently leased the centers to a subsidiary of Genesis.
The balance of the total consideration paid to National Health was funded with
available cash of $51,800,000 and assumed debt of $7,900,000. National Health
added 16 eldercare centers in Florida, Virginia and Connecticut with
approximately 2,200 beds to Genesis. National Health also provided enteral
nutrition and rehabilitation therapy services to the eldercare centers which it
owns and leases. In addition, National Health manages four eldercare centers in
Colorado with 382 beds pursuant to an agreement which expires in October 1997.
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<PAGE>
In June 1996, the Company acquired the pharmacy healthcare services
businesses of NeighborCare for total consideration of approximately $57,250,000,
comprised of approximately $47,250,000 in cash and 312,744 shares of Genesis
Common Stock. Based in Baltimore, Maryland, NeighborCare operates institutional
and retail pharmacy and infusion therapy businesses.
In March 1996, the Company acquired for total consideration of
approximately $31,900,000, including the payment of assumed debt, the remaining
approximately 71% joint venture interests of four eldercare centers in Maryland
and the remaining 50% joint venture interest of an eldercare center in Florida
(the "Partnership Interest Purchase") which had been acquired as part of the
Meridian Transaction described below.
In March 1996, the Company entered into a strategic alliance with
Doctors Community Hospital, a 250-bed acute care hospital in Maryland, pursuant
to which the Company sold to an affiliate of the hospital a 51% interest in
Magnolia Gardens Center, a 104-bed eldercare center for approximately
$2,900,000. As part of this transaction, the Company entered into a long-term
agreement to manage the center.
In March 1996, the Company sold four eldercare centers and a pharmacy
in Indiana for approximately $22,250,000 (the "Indiana Transaction"). The
properties were acquired as part of the Meridian Transaction described below.
In January 1996, the Company acquired the speech therapy, occupational
therapy and physical therapy services businesses of Medical and Rehab Support
Services, Inc., Professional Rehabilitation Network, Inc. and Healthcare Rehab
Services, Inc. (collectively, "Therapy Companies") for approximately $9,300,000.
The Therapy Companies provide these services in the Company's Baltimore,
Maryland/Washington, D.C. market. The acquisition was financed with borrowings
under the Company's Credit Facility.
Prior to January 1, 1996, the Company provided management, development
and marketing services to life care communities operated by Adult Community
Total Services, Inc. ("ACTS"), a Pennsylvania non-profit corporation, pursuant
to a management agreement which was to expire in April 1998. Effective January
1, 1996, Genesis restructured its relationship with ACTS. Under the revised
arrangement, Genesis was paid a $2,000,000 restructuring fee and will no longer
manage the ACTS life care communities. Genesis will continue to provide
development services for a fee in an amount equal to five percent of the total
cost of developing and completing facilities developed by ACTS. The development
portion of the contract has been extended to December 2002 and Genesis is
guaranteed a minimum annual development fee of approximately $1,500,000 per
year. Genesis also continues to provide certain ancillary services to the ACTS
communities.
In December 1995, the Company acquired substantially all of the assets
of Franklin Nursing Home, Inc. ("Franklin") for approximately $3,600,000.
Franklin operated a 250-bed long-term care facility located in Greenfield,
Massachusetts. The acquisition was financed with borrowings under the Company's
Credit Facility.
In November 1995, the Company acquired McKerley for total consideration
of approximately $68,700,000, including assumed debt of approximately
$9,100,000. The transaction also provides for up to an additional $6,000,000 of
contingent consideration payable upon the achievement of certain financial
objectives through October 1997. McKerley owns or leases 15 eldercare centers in
New Hampshire and Vermont with a total of 1,535 beds and operates a home
healthcare business. The acquisition was financed with borrowings under the
Company's Credit Facility.
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<PAGE>
In September 1995, the Company sold, and simultaneously entered into a
three-year contract to manage, five eldercare centers totaling 606 beds to the
AGE Institute of Massachusetts ("AIMASS") for $19,570,000 (the "AIMASS
Transaction").
In August 1995, the Company entered into a software license agreement
for a clinical operating system with Health Data Systems, Inc. The total
commitment under the license agreement is $12,000,000. The Company has estimated
the cost to install the system and related hardware, not including amounts paid
for the software license, to be approximately $18,000,000.
In June 1995, the Company acquired Eastern Medical Supplies, Inc. and
its affiliate Eastern Rehab Services, Inc. (collectively, "Eastern Medical") for
approximately $2,000,000. Eastern Medical sells and leases home medical
equipment, respiratory products and services and rehabilitation equipment to
patients at home throughout Maryland. The purchase was financed with borrowings
under the Company's Credit Facility.
In April 1995, the Company acquired TherapyCare Systems, L.P.
("TherapyCare") for approximately $7,000,000. TherapyCare provides physical
therapy, occupational therapy and speech therapy to 73 long-term care centers
throughout Pennsylvania. The purchase was financed with borrowings under the
Company's Credit Facility.
In March 1995, a joint venture in which the Company is a 55% partner
acquired Delta Drug, Inc. ("Delta Drug") for approximately $1,700,000. Delta
Drug, an institutional pharmacy company located in Providence, Rhode Island,
serves over 2,000 long-term care beds. The Company's portion of the purchase
price was financed with borrowings under the Company's Credit Facility.
In November 1993, Genesis completed its acquisition of substantially
all of the assets of Meridian, Inc., Meridian Healthcare, Inc. and their
affiliated entities (collectively, "Meridian"). As a result of the transaction
(the "Meridian Transaction"), Genesis owned, leased or managed an additional 36
eldercare centers. Of these 36 centers, 15 were wholly-owned, six were
jointly-owned, seven were leased and eight were managed. Genesis also acquired
certain of the other Meridian businesses, including the institutional pharmacy,
qualified group purchasing business and rehabilitation therapy business and
manages one additional retirement community. As part of the Meridian
Transaction, Genesis entered into agreements to lease and operate, for ten years
with a five year renewal option, seven eldercare centers that continue to be
owned by certain shareholders of Meridian (the "Leased Centers") and obtained
the option (the "Option") to purchase the Leased Centers after the expiration of
the lease. The assets acquired in the Meridian Transaction are located primarily
within four of the Company's five geographic markets.
Nine Months Ended June 30, 1996 Compared to Nine Months Ended June 30, 1995.
The Company's total net revenues for the nine months ended June 30,
1996 were $460,354,000 compared to $354,465,000 for the nine months ended June
30, 1995, an increase of $105,889,000 or 30%. Basic healthcare services
increased $35,034,000 or 17%, which is primarily due to the McKerley Transaction
and the Partnership Interest Purchase in March 1996 (which was partially offset
by the sale of five eldercare centers in the AIMASS Transaction in September
1995, and the Indiana Transaction in March 1996), along with a shift in payor
mix from Medicaid to Medicare and rate increases. Specialty medical service
revenue increased $65,014,000 or 51%, of which approximately $30,005,000 is due
to acquisitions, with the remainder due to other volume growth in the
institutional pharmacy, medical supply and contract therapy divisions. Specialty
medical service revenue per patient day in the health centers division increased
21% to $29.38 in the nine months ended June 30, 1996 as compared to $24.31 for
the same period in the prior year
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<PAGE>
due primarily to treatment of higher acuity patients. Management services and
other income increased $5,841,000 or 29% primarily due to an increase in service
related business revenues (group purchasing and staff replacement services) of
approximately $1,700,000 and an increase in transactional gains of approximately
$3,700,000. Transactional and other activity in the nine months ended June 30,
1996 included gains recognized in connection with the sale of an investment, the
Indiana Transaction and the sale of a majority interest in one eldercare center
in Maryland.
The Company's operating expenses before debenture conversion expense,
depreciation, amortization and lease expense were $373,041,000 compared to
$288,120,000 in the comparable prior period, an increase of $84,921 or 29%,
which was due to the McKerley Transaction, the NeighborCare Transaction, an
increase in cost of goods sold related to increased specialty medical service
revenues, and inflationary wage and benefit increases.
In the nine months ended June 30, 1996 the Company converted
approximately $42,300,000 of its Convertible Debentures. In connection with the
early conversion of a portion of the Convertible Debentures, the Company paid
approximately $1,245,000 representing the prepayment of interest to converting
debenture holders. The non-recurring cash payment is presented as debenture
conversion expense in the results of operations for the nine months ended June
30, 1996.
Interest expense increased $4,735,000 or 33%. This increase reflects
increased debt levels used to fund acquisitions and a higher average prevailing
interest rate due to the issuance of $120,000,000 of 9 3/4% Notes partially
offset by the repayment of approximately $115,480,000 of indebtedness in June
1996 from a part of the net proceeds of the Company's 1996 Equity Offering and
interest income generated from investment of the remaining net proceeds.
Fiscal 1995 Compared to Fiscal 1994
The Company's total net revenues for the fiscal year ended September
30, 1995 ("Fiscal 1995") were $486,393,000 compared to $388,616,000 for the
fiscal year ended September 30, 1994 ("Fiscal 1994"), an increase of $97,777,000
or 25%. Basic healthcare services increased $37,857,000 or 16% of which
approximately $20,500,000 is due to the Meridian Transaction included in the
entire period in Fiscal 1995 as compared to ten months in Fiscal 1994,
approximately $3,400,000 is due to two centers which were leased in Fiscal 1995
that were managed for a part of Fiscal 1994 and the remaining increase is due to
providing care to higher acuity customers and to rate increases. Specialty
medical services revenue increased $54,609,000 or 43% of which approximately
$6,000,000 is due to the Meridian Transaction, approximately $13,000,000 is due
to acquisitions during Fiscal 1995 and the remainder is due to other volume
growth in the institutional pharmacy, medical supply and contract therapy
divisions and increased acuity in the eldercare centers division. Specialty
medical service revenue per patient day in the health centers division increased
41% to $25.06 in Fiscal 1995 compared to $17.80 in Fiscal 1994 primarily due to
treatment of higher acuity patients. Management services and other income
increased $5,311,000 or 23%. This increase is primarily due to the management
contracts and other unrelated businesses acquired in the Meridian Transaction as
well as inflationary rate increases. The number of eldercare centers under
management contracts increased from 31 at September 30, 1994 to 35 at September
30, 1995.
The Company's operating expenses before depreciation, amortization,
lease expense and interest expense were $393,139,000 for Fiscal 1995 compared to
$319,243,000 for Fiscal 1994, an increase of $73,896,000 or 23%. Salaries, wages
and benefits increased $45,076,000 or 23% of which approximately $14,500,000
relates to the Meridian Transaction, approximately $3,100,000 related to two
centers leased in
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<PAGE>
Fiscal 1995 that were managed for a part of Fiscal 1994 and the remainder is due
to the impact of acquisitions and growth in the institutional pharmacy, medical
supply and contract therapy divisions.
Other operating expenses increased $28,885,000 or 26% of which
approximately $8,500,000 is due to the Meridian Transaction and the remainder is
due to increased sales in the pharmacy and medical supply divisions.
Interest expense increased $5,061,000 or 33%. This increase in interest
expense was due to increased debt used to finance the Meridian Transaction
outstanding for the entire period of Fiscal 1995 compared to ten months in the
prior year, borrowings under the revolving credit agreement and a higher average
interest rate due to the issuance of the Notes in June 1995.
Depreciation and amortization expense increased from $14,982,000 in
Fiscal 1994 to $18,793,000 in Fiscal 1995 primarily due to the Meridian
Transaction.
Lease expense increased from $11,376,000 in Fiscal 1994 to $13,798,000
in Fiscal 1995 of which $1,000,000 is related to the Meridian Transaction,
$500,000 is due to two centers that were leased in Fiscal 1995 that were managed
for a part of Fiscal 1994 and the remainder is due to new leases as a result of
growth of the eldercare services division and inflationary rate increases.
In connection with the early repayment of debt and the restructuring
and amendment of its bank credit facility, the Company recorded an extraordinary
loss of approximately $1,923,000 to write off unamortized, deferred financing
fees.
Fiscal 1994 Compared to Fiscal 1993
The Company's total net revenues for Fiscal 1994 were $388,616,000
compared to $219,809,000 for the fiscal year ended September 30, 1993 ("Fiscal
1993"), an increase of $168,807,000 or 76.8%. Basic healthcare services
increased $106,894,000 or 80.1% of which approximately $97,600,000 was due to
the Meridian Transaction and the remainder was due to providing care to higher
acuity customers and to rate increases. Specialty medical service revenue
increased $50,491,000 or 67.1%. Of this increase, approximately $32,000,000
related to the Meridian Transaction, $13,200,000 related to increased sales to
independent customers and a full year of operations for a medical supply company
acquired in Fiscal 1993, and $5,300,000 related to intensity and rate increases.
Management services and other income increased $11,422,000 or 101.9%. This
increase is primarily attributable to management services contracts acquired in
connection with the Meridian Transaction which accounted for approximately
$4,100,000, approximately $2,700,000 of revenue associated with a qualified
group purchasing business and other unrelated operations acquired in the
Meridian Transaction, and the remainder is attributable to rate increases and a
full year of revenue related to management contracts entered into in Fiscal
1993. The number of eldercare centers under management contracts increased from
24 at September 30, 1993 to 31 at September 30, 1994.
The Company's operating expenses before depreciation, amortization,
lease expense and interest expense were $319,243,000 for Fiscal 1994 compared to
$181,680,000 for Fiscal 1993, an increase of $137,563,000 or 75.7%. Salaries,
wages and benefits increased $80,241,000 or 71.5% of which approximately
$66,400,000 was due to the Meridian Transaction and the remainder is related to
other additional full-time equivalent personnel and increases in wages,
incentive compensation accruals, workers' compensation and other payroll related
benefits.
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<PAGE>
Other operating expenses increased $47,268,000 or 76.5% of which
approximately $42,000,000 was related to the Meridian Transaction and $5,200,000
was due to an increase in cost of goods sold related to increased sales of
specialty medical services.
Interest expense increased $10,263,000 due to additional indebtedness
of approximately $205,000,000 incurred in connection with the Meridian
Transaction. This increase was partially offset by the June 1994 equity offering
of 3,219,000 shares of Common Stock resulting in net proceeds of approximately
$51,700,000 which was used to repay debt incurred in the Meridian Transaction.
Depreciation and amortization expense increased $7,825,000 which
consists of approximately $4,700,000 related to the additional depreciation
expense associated with the assets acquired in the Meridian Transaction,
$1,800,000 of goodwill amortization and approximately $500,000 of amortization
from deferred financing fees.
Lease expense increased from $7,026,000 in Fiscal 1993 to $11,376,000
in Fiscal 1994 due primarily to the lease agreements entered into in connection
with the Meridian Transaction.
Liquidity and Capital Resources
Working capital increased to $227,599,000 at June 30, 1996 from
$134,114,000 at September 30, 1995 due primarily to cash raised in the 1996
Equity Offering which was not used to repay indebtedness. Accounts receivable
increased to $144,036,000 at June 30, 1996 from $101,124,000 at September 30,
1995. Approximately $14,300,000 of this increase relates to accounts receivables
purchased as a part of the NeighborCare Transaction, approximately $4,800,000 of
this increase relates to accounts receivables purchased as part of the McKerley
Transaction, approximately $3,000,000 relates to accounts receivables purchased
as part of the acquisition of the Therapy Companies in January 1996,
approximately $3,800,000 relates to the Partnership Interest Purchase, and the
remaining $17,012,000 relates primarily to the continuing shift in business mix
to specialty medical services including the specialty medical businesses
acquired during Fiscal 1995. Days of revenue in accounts receivable increased to
75 from 72 during this period.
In October 1996, the Company amended and restructured its Credit
Facility to provide for a $150,000,000 lease financing facility which bears
interest at a floating rate equal, at the Company's option, to prime rate or
LIBOR plus 1.09% and a $300,000,000 revolving credit facility which bears
interest at a floating rate equal, at the Company's option, to prime rate or
LIBOR plus 1.25%. Amounts outstanding under the revolving credit facility in
September 1998 convert to a four year term loan that provides for equal annual
amortization payments payable quarterly. At June 30, 1996, $86,800,000 was
outstanding under the revolving credit facility and there were no amounts
outstanding under the acquisition credit facility. The Company used the
borrowings under the Credit Facility to fund the McKerley Transaction, the
Partnership Interest Purchase, the acquisition of the Therapy Companies and a
portion of the GMC Transaction. The revolving Credit Facility is secured by the
stock and partnership interests of the Company's subsidiaries.
In May 1996, the Company completed its 1996 Equity Offering of
6,500,000 shares of Common Stock at $32.50 per share, resulting in net proceeds
of $202,280,000. The Company used the net proceeds from the offering to repay a
portion of amounts outstanding under its Credit Facility and for working capital
purposes.
In March 1996, the Company sold four eldercare centers and a pharmacy
in Indiana for approximately $22,250,000. The Company used the net proceeds from
the sale to repay a portion of its Credit Facility.
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<PAGE>
In November 1995, the Company received in cash approximately
$18,000,000 in connection with the September 1995 sale of five facilities in
Massachusetts. The Company used the proceeds from the sale to repay a portion of
its Credit Facility.
The Company's cash flow from operations for the nine months ended June
30, 1996 was $14,228,000 compared to $7,191,000 for the nine months ended June
30, 1995.
In June 1995, the Company completed an offering of $120,000,000 of 9
3/4% Notes. The Company used $100,000,000 of the net proceeds of the 9 3/4 %
Notes offering to repay in full the term loan component of its Credit Facility
and the remaining proceeds to repay a part of the revolving portion of the
Credit Facility.
In June 1994, the Company completed an offering of 3,264,457 shares of
Common Stock at $17.00 per share, of which 3,219,457 were offered by the
Company. The net proceeds to the Company of approximately $51,700,000 were used
to repay a portion of the indebtedness incurred in the Meridian Transaction.
Certain of the Company's outstanding loans contain covenants which,
without the prior consent of the lenders, limit certain activities of the
Company. Such covenants contain limitations relating to the merger or
consolidation of the Company and the Company's ability to secure indebtedness,
make guarantees, grant security interests and declare dividends. In addition,
the Company must maintain certain minimum levels of tangible net worth, interest
coverage and debt service coverage, and must maintain certain liabilities to net
worth and working capital ratios. Under these loans, the Company is restricted
from paying cash dividends on the Common Stock, unless certain conditions are
met. The Company has not declared or paid any cash dividends on its Common Stock
since its inception.
Legislative and regulatory action has resulted in continuing change in
the Medicare and Medicaid reimbursement programs which has adversely impacted
the Company. The changes have limited, and are expected to continue to limit,
payment increases under these programs. Also, the timing of payments made under
the Medicare and Medicaid programs is subject to regulatory action and
governmental budgetary constraints; in recent years, the time period between
submission of claims and payment has increased. Implementation of the Company's
strategy to expand specialty medical services to independent providers should
reduce the impact of changes in the Medicare and Medicaid reimbursement programs
on the Company as a whole. Within the statutory framework of the Medicare and
Medicaid programs, there are substantial areas subject to administrative rulings
and interpretations which may further affect payments made under those programs.
Further, the federal and state governments may reduce the funds available under
those programs in the future or require more stringent utilization and quality
reviews of eldercare centers. See "Risk Factors -- Regulation."
The Company believes that its liquidity needs can be met by expected
operating cash flow and availability of borrowings under its Credit Facility. At
October 24, 1996, $196,250,000 was outstanding under the revolving credit
facility and approximately $69,700,000 was outstanding under the lease financing
facility, and approximately $86,950,000 was available under the revolving credit
facility as a result of $16,800,000 outstanding letters of credit issued under
the Credit Facility.
Seasonality
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<PAGE>
The Company's earnings generally fluctuate from quarter to quarter.
This seasonality is related to a combination of factors which include the timing
of Medicaid rate increases, seasonal census cycles and the number of calendar
days in a given quarter.
Impact of Inflation
The healthcare industry is labor intensive. Wages and other labor costs
are especially sensitive to inflation and marketplace labor shortages. To date,
the Company has offset its increased operating costs by increasing charges for
its services and expanding its services. Genesis has also implemented cost
control measures to limit increases in operating costs and expenses but cannot
predict its ability to control such operating cost increases in the future.
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BUSINESS
General
Genesis is a leading provider of healthcare and support services to the
elderly. The Company has developed the Genesis ElderCare(sm) delivery model of
integrated healthcare networks to provide cost-effective, outcome-oriented
services to the elderly. Through these integrated healthcare networks, Genesis
provides basic healthcare and specialty medical services to more than 75,000
customers in five regional markets in the Eastern United States in which over
3,000,000 people over the age of 65 reside. The networks include 153 eldercare
centers with approximately 20,120 beds; 18 primary care physician clinics;
approximately 70 physicians, physician assistants and nurse practitioners; 12
institutional pharmacies and six medical supply distribution centers serving
over 52,000 beds; certified rehabilitation agencies providing services through
over 290 contracts; and seven home healthcare agencies. Genesis has concentrated
its eldercare networks in five geographic regions in order to achieve operating
efficiencies, economies of scale and significant market share. The five
geographic markets that Genesis principally serves are:
Massachusetts/Connecticut/New Hampshire; Eastern Pennsylvania/Delaware Valley;
Southern Delaware/Eastern Shore of Maryland; Baltimore, Maryland/Washington,
D.C.; and Central Florida.
Genesis eldercare services focus on the central medical and physical
issues facing the more medically demanding elderly. By integrating the talents
of physicians with case management, comprehensive discharge planning and, where
necessary, home support services, the Company provides cost-effective care
management to achieve superior outcomes and return customers to the community.
The Company believes that its orientation toward achieving improved customer
outcomes through its eldercare networks has resulted in increased utilization of
specialty medical services, high occupancy of available beds, enhanced quality
payor mix and a broader base of repeat customers. Specialty medical services
revenues have increased at a compound annual rate of 37% from the fiscal year
ended September 30, 1990 to the fiscal year ended September 30, 1995 and
comprise 42% of the Company's revenues for the nine month period ended June 30,
1996. Specialty medical services typically generate higher profit margins than
basic healthcare services and are less capital intensive.
The Company's growth strategy is to enhance its existing eldercare
networks, establish new eldercare networks in markets it deems attractive and
broaden its array of high margin specialty medical services through internal
development and selected acquisitions. Consistent with its strategy, the Company
has made selected acquisitions of eldercare centers and rehabilitation,
pharmacy, physician services and home healthcare companies.
The Company's long-term strategy is to provide comprehensive eldercare
services, in collaboration with other providers, on a prepaid basis in a managed
care environment. The Company has undertaken several initiatives to position
itself to compete in a managed care environment. These initiatives include: (i)
establishing a managed care division to pursue and administer contracts with
managed care organizations, develop clinical care protocols and monitor the
delivery and utilization of medical care; (ii) developing a clinical
administration and healthcare management information system to monitor and
measure clinical and patient-outcome data; (iii) establishing the Genesis
ElderCare (sm) brand name to increase awareness of the Company's eldercare
services in the healthcare market; (iv) seeking strategic alliances with other
healthcare providers to broaden the Company's continuum of care; and (v)
creating an independent eldercare advisory board to formulate new and innovative
approaches in the delivery of care.
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<PAGE>
The Company was incorporated in May 1985 as a Pennsylvania corporation.
The Company's principal executive offices are located at 148 West State Street,
Kennett Square, Pennsylvania 19348 and its telephone number at that location is
(610) 444-6350.
Basic Healthcare Services
Genesis operates 153 eldercare centers (76 wholly-owned, three
jointly-owned, 34 leased and 40 managed) located in 13 states. The centers offer
three levels of care for their customers: skilled, intermediate and personal.
Skilled care provides 24-hour per day professional services of a registered
nurse; intermediate care provides less intensive nursing care; and personal care
provides for the needs of customers requiring minimal supervision and
assistance. Each eldercare center is supervised by a licensed healthcare
administrator and employs a Medical Director to supervise the delivery of
healthcare services to residents and a Director of Nursing to supervise the
nursing staff. The Company maintains a corporate quality assurance program to
ensure regulatory compliance and to enhance the standard of care provided in
each center.
In addition to programs to meet the healthcare needs of its customers,
all Genesis eldercare centers offer a variety of quality of life programs. These
include the Intergenerational Learning Program that enables residents to
function both as students and as instructors in programs with community schools,
as well as The Magic Mix Program that provides a supervised setting in which
children of working parents can interact with residents of the centers after
school. These programs have received recognition at both local and national
levels.
In eight of its eldercare centers, the Company operates Genesis
ElderCare Focus programs which are dedicated to meeting the special medical,
emotional and psychological needs of Alzheimer's patients. The Focus programs
were developed in conjunction with the Dementia Research Clinic at the Johns
Hopkins University School of Medicine. These units provide an environment that
is designed or modified to assist those with cognitive loss. Clinical experts
have experienced significant success and produced benefits to customers served
in both Alzheimer's day services and dedicated residential units.
The following table sets forth, for the periods indicated, information
regarding the Company's average number of beds and average occupancy levels at
its eldercare centers.
<TABLE>
<CAPTION>
Nine Months
Year Ended September 30, Ended June 30,
------------------------------------- ----------------------
1993 1994 1995 1995 1996
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Average Beds in Service
Wholly-owned and Leased Centers.................... 4,534 7,530 8,268 8,268 9,062
Jointly-owned and Managed Centers.................. 1,208 4,532 5,158 5,158 5,195
Occupancy Based on Average Beds in Service
Wholly-owned and Leased Centers.................... 95% 92% 92% 92% 92%
Jointly-owned and Managed Centers.................. 94% 93% 95% 95% 95%
</TABLE>
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<PAGE>
Specialty Medical Services
The Company emphasizes the delivery of specialty medical services which
typically requires smaller capital investment and generates higher profit
margins than providing basic healthcare services. The Company provides the
specialty medical services described below.
Institutional Pharmacy and Medical Supply Services. The Company
provides pharmacy and other services including infusion therapy and medical
supplies and equipment to eldercare centers it operates, as well as to
independent healthcare providers by contract. The pharmacy services provided in
these settings are tailored to meet the needs of the institutional customer.
These services include highly specialized packaging and dispensing systems,
computerized medical records processing and 24-hour emergency services. The
Company's institutional pharmacy and medical supply services were developed to
provide the products and support services required in the healthcare market.
Institutional pharmacy services are designed to help assure quality of care and
to control costs at the facilities served. Medical supply services are designed
to assure availability and control through maintenance of a comprehensive
inventory, extensive delivery services and special ordering and tracking
systems. The Company also provides pharmacy consulting services to assure proper
and effective drug therapy. The Company provides these services through 12
pharmacies (of which three are jointly-owned) and six distribution centers
located in its various market areas. Approximately 76% of the sales attributable
to pharmacy operations in Fiscal 1995 were generated through external contracts
with independent healthcare providers with the balance attributable to centers
operated by the Company.
Rehabilitation Therapy. The Company provides an extensive range of
rehabilitation therapy services, including speech pathology, physical therapy
and occupational therapy through seven certified rehabilitation agencies in all
five of its market concentrations. These services are provided by over 1,000
licensed rehabilitation therapists and assistants employed by Genesis to
substantially all of the eldercare centers the Company operates, as well as by
contract to healthcare facilities operated by others.
Subacute Care Programs. The Company has established and actively
markets programs for elderly and other customers who require subacute levels of
medical care. These programs include ventilator care, intravenous therapy,
post-surgical recovery, respiratory management, orthopedic or neurological
rehabilitation, terminal care and various forms of coma, pain and wound
management. Private insurance companies and other third party payors, including
certain state Medicaid programs, have recognized that treating customers
requiring subacute medical care in centers such as those operated by Genesis is
a cost-effective alternative to treatment in an acute care hospital. The Company
provides such care at rates that the Company believes are substantially below
the rates typically charged by acute care hospitals for comparable services.
Physician Services. The Company employs or has consulting arrangements
with approximately 70 physicians, physician assistants and nurse practitioners
to provide physician services at certain of its eldercare centers. These
physicians, physician assistants and nurse practitioners provide a range of
services, including direct patient care, the design and administration of
clinical programs, such as the Company's subacute care program, as well as
traditional medical director and utilization review services. The Company
compensates these employees and consultants for services rendered and, where
appropriate, bills directly for such services. The Company believes that the
involvement of these
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physicians in the Company's eldercare centers provides a significant competitive
advantage. These physicians direct the operations of 18 free-standing physician
clinics, as well as Functional Evaluation and Treatment Units in 16 of its
eldercare centers. The purpose of each of these units is to provide a
comprehensive assessment and treatment plan for all new admissions to the
center. The process is directed by a physician specializing in gerontology and
involves an intensive evaluation in which social service professionals, clinical
staff and the customer and the customer's family participate. The Company
believes that this program reduces average lengths of stay and increases
discharge-to-home rates. The Company also believes the Functional Evaluation and
Treatment Units enhance its reputation for providing quality care and result in
improved occupancy rates, as well as improve its ability to attract subacute and
other high acuity customers.
Home Healthcare Services. The Company provides home healthcare services
to customers in its markets through seven certified home health agencies owned
by the Company. The Company currently provides these services in all of its
geographic markets other than Central Florida and has been granted Certificates
of Need to begin providing services in Central Florida. The services offered
include skilled nursing care, physical, occupational and speech therapy, medical
social services and home health aide services. The Company's focus is on
providing infusion therapy, total parenteral nutrition, ventilator care and
peritoneal dialysis. In June 1994, the Company entered into a joint venture with
six other healthcare providers to purchase the Visiting Nurses Association in
Baltimore ("VNA"), an organization which is one of the largest providers of home
healthcare services in Maryland. Excluding VNA, the Company provided
approximately 47,100 home healthcare visits in the nine months ended June 30,
1996.
Management Services and Other
Management Services. The Company provides management services to 43
eldercare centers (including three jointly-owned centers) pursuant to management
agreements that provide generally for the Company's day-to-day responsibility
for the operation and management of the centers. In turn, Genesis receives
management fees, depending on the agreement, computed as either an overall fixed
fee, a fixed fee per customer, a percentage of net revenues of the center plus
an incentive fee, or a percentage of gross revenues of the center with some
incentive clauses. The various management agreements, including option periods,
terminate between 1996 and 2012.
In March 1996, the Company entered into a strategic alliance with
Doctors Community Hospital, a 250-bed acute hospital in Maryland. As part of
this transaction, the Company entered into a long-term agreement to manage the
hospital's subacute care center.
Prior to January 1, 1996, the Company also provided management,
development and marketing services to 15 life care communities operated by Adult
Community Total Services, Inc. ("ACTS"), a Pennsylvania non-profit corporation
pursuant to a management agreement which was to expire in April 1998. Effective
January 1, 1996, Genesis restructured its relationship with ACTS. Under the
revised arrangement, Genesis was paid a $2,000,000 restructuring fee and will no
longer manage the ACTS life care communities. Genesis will continue to provide
development services for a fee in an amount equal to five percent of the total
cost of developing and completing facilities developed by ACTS. The development
portion of the contract has been extended to December 2002 and Genesis is
guaranteed a minimum annual development fee of $1,500,000 per year. Genesis also
continues to provide certain ancillary services to the ACTS communities.
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Group Purchasing. The Company's subsidiary, The Tidewater Healthcare
Shared Services Group, Inc. ("Tidewater"), is one of the largest group
purchasing companies in the mid-Atlantic region. Tidewater provides purchasing
and shared service programs specially designed to meet the needs of eldercare
centers and other long-term care facilities. Tidewater's services are contracted
to approximately 1,200 members with over 141,000 beds in 25 states and the
District of Columbia.
Managed Care Initiatives
The Company has undertaken several initiatives to position itself to
compete effectively on a prepaid basis in a managed care environment. In January
1995, the Company established a Managed Care division which currently consists
of 55 employees. The Managed Care division is responsible for pursuing and
administering contracts with managed care organizations, developing clinical
care protocol and monitoring the delivery and utilization of medical care. The
Company has begun to develop a clinical administration and healthcare management
information system to monitor and measure clinical and patient outcome data for
use by healthcare providers and the Company. The Company is also seeking
strategic alliances with selected providers in order to further the continuum of
care, increase market share and customer acceptance and create strategic
affiliations for negotiating with payors in a managed care environment. In
addition to these initiatives, the Company has consolidated its core business
under the Genesis ElderCare(sm) brand name in an effort to increase the
Company's visibility among current and potential customers, payors and other
healthcare providers. The Company has also created an independent eldercare
advisory board composed of individuals with distinguished credentials in
geriatric care to formulate new and innovative approaches in the delivery of
care.
Centers
The following table provides information by state regarding the
eldercare centers owned, leased and managed by the Company as of October 15,
1996.
<TABLE>
<CAPTION>
Wholly-Owned Jointly-Owned Managed
Centers Centers Leased Centers Centers Total
----------------- --------------- ----------------- --------------- ------------------
Centers Beds Centers Beds Centers Beds Centers Beds Centers Beds
--------- ------- -------- ------ --------- ------- -------- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Massachusetts................ 8 1,092 -- -- -- -- 5 606 13 1,698
New Hampshire................ 7 651 -- -- 6 608 -- -- 13 1,259
Connecticut.................. 4 615 -- -- 1 120 -- -- 5 735
Vermont...................... 2 256 -- -- -- -- -- -- 2 256
Pennsylvania ................ 19 2,681 1 73 -- -- 8 1,082 28 3,836
New Jersey................... 14 1,606 -- -- 2 404 3 396 19 2,406
Delaware..................... 4 504 -- -- -- -- 1 99 5 603
Maryland..................... 12 1,958 2 206 9 1,326 4 706 27 4,196
Virginia..................... 2 421 -- -- 4 670 -- -- 6 1,091
Florida...................... 4 598 -- -- 10 1,231 13 1,404 27 3,223
West Virginia................ -- -- -- -- 2 180 -- -- 2 180
North Carolina............... -- -- -- -- -- -- 2 340 2 340
Colorado..................... -- -- -- -- -- -- 4 283 4 283
--------- ------- -------- ------ --------- ------- -------- ----- --------- --------
Total............... 76 10,382 3 279 34 4,539 40 4,916 153 20,116
========= ======= ======== ====== ========= ======= ======== ===== ========= ========
</TABLE>
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<PAGE>
Revenue Sources
The Company derives its basic healthcare and specialty medical revenue
from private pay sources, state Medicaid programs and Medicare. The Company
classifies payments from persons or entities other than the government as
private pay and other revenue. The private pay and other classification also
includes revenues from commercial insurers, health maintenance organizations and
other charge-based payment sources. Blue Cross and Veterans Administration
payments are included in private pay and other revenues and are made pursuant to
renewable contracts negotiated with these payors.
Medicare is a federally funded and administered health insurance
program that consists of Parts A and B. Participation in Part B is voluntary and
is funded in part through the payment of premiums. Benefits under Part A include
inpatient hospital services, skilled nursing in an eldercare center and medical
services such as physical, speech and occupational therapy, certain
pharmaceuticals and medical supplies. Part B provides coverage for physician
services. Part B also reimburses for medical services with the exception of
pharmaceutical services. Medicare benefits are not available for intermediate
and custodial levels of care; however, medical and physician services furnished
to such patients may be reimbursable under Part B. Under the Part A
reimbursement methodology, each eldercare center receives an interim payment
during the year which is adjusted to reflect actual allowable direct and
indirect costs of services based on the submission of a cost report at the end
of each year. For services not billed through each eldercare center, the
Company's specialty medical operations bill Medicare directly for nutritional
support services, infusion therapy, certain medical supplies and equipment,
physician services and certain therapy services as provided. Medicare payments
for these services may be based on reasonable cost charges or a fixed-fee
schedule determined by Medicare.
Medicaid is the state administered reimbursement program that covers
both skilled and intermediate long-term care. Although Medicaid programs vary
from state to state, typically they provide for payment for services including
nursing facility services, physician's services, therapy services and
prescription drugs, up to established ceilings, at rates based upon cost
reimbursement principles. Reimbursement rates are typically determined by the
state from cost reports filed annually by each center, on a prospective or
retrospective basis. In a prospective system, a rate is calculated from
historical data and updated using an inflation index. The resulting prospective
rate is final, but in some cases may be adjusted pursuant to an audit. In this
type of payment system, center cost increases during the rate year do not affect
payment levels in that year. In a retrospective system, final rates are based on
reimbursable costs for that year. An interim rate is calculated from previously
filed cost reports, and may include an inflation factor to account for the time
lag between the final cost report settlement and the rate period. Consequently,
center cost increases during any year may affect revenues in that year. Certain
states are scheduled to convert, or have recently converted, from a
retrospective system, which generally recognizes only two or three levels of
care, to a case mix prospective pricing system, pursuant to which payment to a
center for patient services directly considers the individual patient's
condition and need for services. The effect, if any, of such a payment system on
the Company is unclear. The Company employs specialists in reimbursement at the
corporate level to monitor both Medicaid and Medicare regulatory developments to
comply with all reporting requirements and to insure appropriate payments.
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<PAGE>
The following table reflects the allocation of customer service
revenues among these sources of revenue.
<TABLE>
<CAPTION>
Nine Months
Year Ended September 30, Ended June 30,
--------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
-------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Private pay and other.................. 43% 41% 42% 41% 38% 38% 39%
Medicaid............................... 48 47 44 43 41 41 38
Medicare............................... 9 12 14 16 21 21 23
------ ------ ------ ------- ------- ------- -------
Total......................... 100% 100% 100% 100% 100% 100% 100%
====== ====== ====== ======= ======= ======= =======
</TABLE>
Marketing
Marketing for eldercare centers is focused at the local level and is
conducted primarily by the center administrator and its admissions director who
call on referral sources such as doctors, hospitals, hospital discharge
planners, churches and various community organizations. Besides actively
soliciting admissions from these sources, the Company's marketing objective is
to maintain public awareness of the eldercare center and its capabilities. The
Company takes advantage of its regional concentrations in its marketing efforts,
where appropriate, through consolidated marketing programs which benefit more
than one center.
Genesis markets specialty medical services to its managed eldercare
centers, as well as to independent healthcare providers, in addition to
providing such services to its owned and leased eldercare centers. The Company
markets its rehabilitation therapy and institutional pharmacy and medical supply
services through a direct sales force which primarily calls on eldercare
centers, hospitals, clinics and home health agencies. The corporate business
development department, through regional managers, markets the Company's
subacute program directly to insurance companies, managed care organizations and
other third party payors. In addition, the marketing department supports the
eldercare centers in developing promotional materials and literature focusing on
the Company's philosophy of care, services provided and quality clinical
standards. See "Governmental Regulation" below for a discussion of the federal
and state laws which limit financial and other arrangements between healthcare
providers.
In February 1996, the Company announced a consolidation of its core
business under the name Genesis ElderCare(sm). The Genesis ElderCare logo and
trademark have been featured in a series of print advertisements in publications
serving the regional markets in which the Company operates. The Company's
marketing of Genesis ElderCare is aimed at increasing awareness among decision
makers in key professional and business audiences. The Company is using
advertising to promote its brand name in trade, professional and business
publications and to promote services directly to consumers.
Personnel
At October 15, 1996, Genesis employed over 26,500 people, including
approximately 17,900 full-time and 8,500 part-time employees. Approximately 24%
of these employees are physicians and nursing and professional staff.
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The Company currently has collective bargaining agreements which relate
to 41 facilities including eight managed eldercare centers. The agreements
expire beginning in December 1996 through August 2000 and cover approximately
2,900 employees. The Company believes that its relationship with its employees
is generally good.
Employee Training and Development
Genesis believes that nursing and professional staff retention and
development has been and continues to be a critical factor in the successful
operation of the Company. In response to this challenge, a compensation program
which provides for annual merit reviews as well as financial and quality of care
incentives has been implemented to promote center staff motivation and
productivity and to reduce turnover rates. Management believes that the
Company's wage rates for professional nursing staff are commensurate with market
rates. The Company also provides employee benefit programs which management
believes, as a package, exceed industry standards. The Company has not
experienced any significant difficulty in attracting or retaining qualified
personnel.
In addition, Genesis has established an internal training and
development program for both nurse assistants and nurses. Employee training is
emphasized by the Company through a variety of in-house programs as well as a
tuition reimbursement program. The Company has established, company-wide, the
Genesis Nursing Assistant Specialist Program. This program is offered on a joint
basis with community colleges. Classes are held on the employees' time, last for
approximately six months and provide advanced instruction in nursing care. The
Company pays the tuition. When all of the requirements for class participation
have been met through attendance, discussion and examinations, the nurse aide
graduates and is awarded the title of Nursing Assistant Specialist and receives
a salary adjustment. The Company has maintained a retention rate of 75% since
1988 of the nurses aide graduates. Over 1,300 nurse aides have graduated from
the Genesis Nursing Assistant Specialist Program and received an increase in
salary. As the nurse aide continues through the career ladder, the Company
continues to provide incentives. At the next level, Senior Nursing Assistant
Specialist, the employee receives another increase in salary and additional
tuition reimbursement of up to $2,250 toward becoming a Licensed Practical Nurse
("LPN") or Registered Nurse ("RN") and at the Senior Nursing Assistant
Specialist Coordinator level, tuition reimbursement increases to a maximum of
$3,000 per year towards a nursing degree.
The Company began a junior level management and leadership training
program in 1990 referred to as the Pilot Light Program. The target audience for
this training is RNs and LPNs occupying charge nurse positions within the
Company's nursing centers as well as junior level managers throughout the
Genesis networks. Over 475 participants have graduated from this program.
In addition, a flexible RN associate degree program has been
established to meet the needs of those employees who cannot attend nursing
school on a full-time basis. The program is conducted jointly with local
community colleges and Regents College in New York. The program combines
self-study, flexible class scheduling, mentoring and tutoring by Genesis
professional nursing staff. This format allows for a self-paced RN degree.
Currently, there are approximately 18 Genesis employees enrolled in this
program, which the Company believes is the first of its kind in the United
States.
Government Regulation
The federal government and all states in which the Company operates
regulate various aspects of the Company's business. The Company's eldercare
centers are subject to certain federal statutes and regulations and to statutory
and regulatory licensing requirements by state and local authorities. All
Genesis
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<PAGE>
eldercare centers are currently so licensed. In addition, eldercare centers are
subject to various local building codes and other ordinances.
All of the Company's eldercare centers and healthcare services, to the
extent required, are licensed under applicable law. All eldercare centers and
healthcare services, or practitioners providing the services therein, are
certified or approved as providers under one or more of the Medicaid, Medicare
or Veterans Administration programs. Licensing, certification and other
applicable standards vary from jurisdiction to jurisdiction and are revised
periodically. State and local agencies survey all eldercare centers on a regular
basis to determine whether such centers are in compliance with governmental
operating and health standards and conditions for participation in government
sponsored third party payor programs. The Company believes that its centers are
in substantial compliance with the various Medicare and Medicaid regulatory
requirements applicable to them. However, in the ordinary course of its
business, the Company receives notices of deficiencies for failure to comply
with various regulatory requirements. Genesis reviews such notices and takes
appropriate corrective action. In most cases, Genesis and the reviewing agency
will agree upon the measures to be taken to bring the center into compliance
with regulatory requirements. In some cases or upon repeat violations, the
reviewing agency may take various adverse actions against a center, including
the imposition of fines, temporary suspension of admission of new patients to
the center, suspension or decertification from participation in the Medicare or
Medicaid programs and, in extreme circumstances, revocation of a center's
license. These actions may adversely affect the eldercare centers' ability to
continue to operate, the ability of the Company to provide certain services, and
eligibility to participate in the Medicare, Medicaid or Veterans Administration
programs or to receive payments from other payors. Additionally, actions taken
against one center may subject other centers under common control or ownership
to adverse measures, including loss of licensure or eligibility to participate
in Medicare and Medicaid programs. Certain of the Company's centers have
received notices in the past from state agencies that, as a result of certain
alleged deficiencies, the agency was taking steps to decertify the centers from
participation in Medicare and Medicaid programs. In all cases, such deficiencies
were remedied before any centers were decertified.
All but four of the Genesis eldercare centers provide skilled nursing
services and are currently certified to receive benefits provided under Medicare
for these services. Additionally, all Genesis eldercare centers are currently
certified to receive benefits under Medicaid. Both initial and continuing
qualifications of an eldercare center to participate in such programs depend
upon many factors including accommodations, equipment, services, patient care,
safety, personnel, physical environment, and adequate policies, procedures and
controls.
Under the various Medicaid programs, the federal government supplements
funds provided by the participating states for medical assistance to "medically
indigent" persons. The programs are administered by the applicable state welfare
or social service agencies. Although Medicaid programs vary from state to state,
traditionally they have provided for the payment of certain expenses, up to
established limits, at rates based generally on cost reimbursement principles.
All states in which Genesis operates have adopted Certificate of Need
or similar laws which generally require that a state agency approve certain
acquisitions and determine that the need for certain bed additions, new
services, and capital expenditures or other changes exists prior to the
acquisition or addition of beds or services, the implementation of other
changes, or the expenditure of capital. State approvals are generally issued for
a specified maximum expenditure and require implementation of the proposal
within a specified period of time. Failure to obtain the necessary state
approval can result in the inability to provide the service, to operate the
centers, to complete the acquisition, addition or other change, and can also
result in the imposition of sanctions or adverse action on the center's license
and adverse reimbursement action.
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The Company is also subject to federal and state laws which govern
financial and other arrangements between healthcare providers. These laws often
prohibit certain direct and indirect payments or fee-splitting arrangements
between healthcare providers that are designed to induce or encourage the
referral of patients to, or the recommendation of, a particular provider for
medical products and services. These laws include the "anti-kickback" provisions
of the federal Medicare and Medicaid programs, which prohibit, among other
things, knowingly and willfully soliciting, receiving, offering or paying any
remuneration (including any kickback, bribe or rebate) directly or indirectly in
return for or to induce the referral of an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part under Medicare or Medicaid. These laws
also include the "Stark legislations" which prohibit, with limited exceptions,
the referral of patients by physicians for certain services, including home
health services, physical therapy and occupational therapy, to an entity in
which the physician has an ownership interest. In addition, some states restrict
certain business relationships between physicians and other providers of
healthcare services. Many states prohibit business corporations from providing,
or holding themselves out as a provider of medical care. Possible sanctions for
violation of any of these restrictions or prohibitions include loss of licensure
or eligibility to participate in reimbursement programs and civil and criminal
penalties. These laws vary from state to state, are often vague and have seldom
been interpreted by the courts or regulatory agencies. From time to time, the
Company has sought guidance as to the interpretation of these laws; however,
there can be no assurance that such laws will ultimately be interpreted in a
manner consistent with the practices of the Company. Although the Company has
contractual arrangements with some healthcare providers to which the Company
pays fees for services rendered or products provided, the Company believes that
its practices are not in violation of these laws. The Company cannot accurately
predict whether enforcement activities will increase or the effect of any such
increase on its business. There have also been a number of recent federal and
state legislative and regulatory initiatives concerning reimbursement under the
Medicare and Medicaid programs. In particular, the federal government has issued
recent fraud alerts concerning double billing, home health services and the
provisions of medical supplies. Accordingly, it is anticipated that these areas
may come under closer scrutiny by the government. The Company cannot accurately
predict the impact of any such initiatives.
Competition
The Company competes with a variety of other companies in providing
healthcare services. Certain competing companies have greater financial and
other resources and may be more established in their respective communities than
the Company. Competing companies may offer newer or different centers or
services than the Company and may thereby attract the Company's customers who
are either presently residents of its eldercare centers or are otherwise
receiving its healthcare services.
The Company operates eldercare centers in 13 states. In each market,
the Company's eldercare centers may compete for customers with rehabilitation
hospitals, subacute units of hospitals, skilled or intermediate nursing centers
and personal care or residential centers which offer comparable services to
those offered by the Company's centers. Certain of these providers are operated
by not-for-profit organizations and similar businesses which can finance capital
expenditures on a tax-exempt basis or receive charitable contributions
unavailable to the Company. In competing for customers, a center's local
reputation is of paramount importance. Referrals typically come from acute care
hospitals, physicians, religious groups, other community organizations, health
maintenance organizations and the customer's families and friends. Members of a
customer's family generally actively participate in selecting an eldercare
center. Competition for subacute patients is intense among hospitals with
long-term care capability, rehabilitation hospitals and other specialty
providers and is expected to remain so in the future. Important competitive
factors include the reputation in the community, services offered, the
appearance of a center and the cost of services.
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<PAGE>
Genesis competes in providing specialty medical services with a variety
of different companies. Generally, this competition is national, regional and
local in nature. The primary competitive factors in the specialty medical
services business are similar to those in the eldercare center business and
include reputation, the quality of clinical services, responsiveness to patient
needs, and the ability to provide support in other areas such as third party
reimbursement, information management and patient record-keeping.
Insurance
Genesis carries property and general liability insurance, professional
liability insurance, and medical malpractice insurance coverage in amounts
deemed adequate by management. However, there can be no assurance that any
current or future claims will not exceed applicable insurance coverage. Genesis
also requires that physicians practicing at its eldercare centers carry medical
malpractice insurance to cover their individual practices.
Legal Proceedings
On May 10, 1996, the Company's agent for service of process in Maryland
received notice that Orem Medical Home Health Care, Inc. and Orem Medical
Corporation (collectively, "Orem"), which are engaged in the business of
selling, renting and servicing durable medical equipment and supplies, filed
suit in the Circuit Court for Baltimore City on May 2, 1996 against Genesis and
its subsidiary Eastern Medical Supplies, Inc. ("Eastern"). The suit alleges that
Genesis and/or Eastern have interfered with certain contractual obligations and
business relations between Orem and third parties and that Genesis and/or
Eastern have induced such third parties to breach certain contractual
obligations to Orem. The allegations relate to terminated discussions of a
possible acquisition by Genesis of assets of Orem. Orem seeks compensatory and
punitive damages and injunctive relief for such alleged actions. Genesis filed
an answer to the complaint on June 24, 1996, generally denying the allegations
and including a counter-claim for amounts due to its subsidiaries. The Company
believes it has defenses to the claims, intends to vigorously defend such claims
and believes that any amount paid or accrued with respect to this matter will
not have a material adverse effect on the financial position or results of
operations of the Company. However, there can be no assurance as to the outcome
of the suit and that it will not have a material adverse effect on the financial
position or results of operations of the Company.
For a discussion of certain litigation in which GMC is involved see
Note 14 to GMC's financial statements incorporated by reference herein.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to the
executive officers and directors of the Company.
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------------------ ------------ ------------------------------------------------------
<S> <C> <C>
Michael R. Walker (1)..................... 48 Chairman and Chief Executive Officer
Richard R. Howard (1)..................... 47 President, Chief Operating Officer and Director
David C. Barr............................. 46 Executive Vice President
John F. DePodesta......................... 51 Senior Vice President, Law and Public Policy
George V. Hager, Jr....................... 40 Senior Vice President and Chief Financial Officer
Edward B. Romanov, Jr..................... 45 Senior Vice President, Development
Louis Swart............................... 57 Senior Vice President, Managed Operations
Maryann Timon............................. 43 Senior Vice President for Managed Care
Marc D. Rubinger.......................... 47 Vice President and Chief Information Officer
Edward J. Boeggeman....................... 49 Vice President and Controller
Allen R. Freedman (2)..................... 56 Director
Samuel H. Howard (2)(3)................... 57 Director
Roger C. Lipitz (2)....................... 54 Director
Stephen E. Luongo (3)..................... 49 Director
Alan B. Miller (3)........................ 59 Director
Fred F. Nazem (1)......................... 55 Director
</TABLE>
- ----------------------
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
(3) Member of the Compensation Committee of the Board of Directors.
Michael R. Walker is the founder of the Company and has served as
Chairman and Chief Executive Officer of the Company since its inception. In
1981, Mr. Walker co-founded Health Group Care Centers ("HGCC"). At HGCC, he
served as Chief Financial Officer and, later, as President and Chief Operating
Officer. Prior to its sale in 1985, HGCC operated nursing homes with 4,500
nursing beds in 12 states. From 1978 to 1981, Mr. Walker was the Vice President
and Treasurer of AID Healthcare Centers, Inc. ("AID"). AID, which owned and
operated 20 nursing centers, was co-founded in 1977 by Mr. Walker as the nursing
home division of Hospital Affiliates International. Mr. Walker holds a Master of
Business Administration degree from Temple University and a Bachelor of Arts in
Business Administration from Franklin and Marshall College. Mr. Walker serves on
the Board of Directors of Renal Treatment Centers, Inc. and the Board of
Trustees of Universal Health Realty & Income Trust.
Richard R. Howard has served as a director of the Company since its
inception and as Chief Operating Officer since June 1986. He joined the Company
in September 1985 as Vice President of Development. Mr. Howard's background in
healthcare includes two years as the Chief Financial Officer of HGCC. Mr.
Howard's experience also includes over ten years with Fidelity Bank,
Philadelphia, Pennsylvania
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and one year with Equibank, Pittsburgh, Pennsylvania. Mr. Howard is a graduate
of the Wharton School, University of Pennsylvania, where he received a Bachelor
of Science degree in Economics in 1971.
David C. Barr has served as Executive Vice President of the Company
since October 1988. Prior to joining Genesis, Mr. Barr was a principal of a
private consulting firm, Kane Maiwurm Barr, Inc., which provided management
consulting for small and medium-sized firms. Prior to forming this firm, he
served as Executive Vice President of Allegheny Beverage Corporation, a service
conglomerate. During 1984 and 1985, Mr. Barr served with Equibank, Pittsburgh,
Pennsylvania, where he held several positions including Executive Vice President
of Corporate Banking. Mr. Barr graduated in 1972 from the University of Miami
with a Bachelor of Science degree in Accounting.
John F. DePodesta joined the Company as Senior Vice President, Law and
Public Policy in January 1996. Mr. DePodesta was previously a partner and
currently is of-counsel in the law firm of Pepper, Hamilton & Scheetz. Mr.
DePodesta received a Bachelor of Arts degree from Harvard College in 1966 and
his Juris Doctor from the University of Pennsylvania Law School in 1969. Pepper,
Hamilton & Scheetz performs outside legal services for the Company.
George V. Hager, Jr. has served the Company as Senior Vice President
and Chief Financial Officer since February 1994. Mr. Hager joined the Company in
July 1992 as Vice President and Chief Financial Officer. Mr. Hager was
previously partner in charge of the healthcare practice for KPMG Peat Marwick
LLP in the Philadelphia office. Mr. Hager began his career at KPMG Peat Marwick
LLP in 1979 and has over 15 years of experience in the healthcare industry. Mr.
Hager received a Bachelor of Arts degree in Economics from Dickinson College in
1978 and a Master of Business Administration degree from Rutgers Graduate School
of Management. He is a certified public accountant and a member of the AICPA and
PICPA.
Edward B. Romanov, Jr. has served as Senior Vice President, Development
since May 1992. From June 1990 through April 1, 1995, Mr. Romanov served as a
financial consultant to the Company pursuant to a Consulting and Services
Agreement between the Company and American Community Environments Corporation of
which he is an employee. Mr. Romanov was founder and President of WesTerra
Construction, WesTerra Capital Company and WesTerra Development, through which
Mr. Romanov developed and financed real estate projects. Mr. Romanov holds both
a Master of Business Administration and a Bachelor of Science degree from Lehigh
University.
Louis Swart joined the Company in 1990 and became Senior Vice
President, Managed Operations in 1994. Prior to joining the Company, Mr. Swart
established and was President of Wedgwood Retirement Inns. After selling
Wedgwood in 1988, he became President and Chief Executive Officer of Retirement
Corporation of America, until it was sold in 1990. Mr. Swart currently serves on
the Board of Directors of Sterling Health Care Corporation, a behavioral
medicine hospital group. Mr. Swart is a graduate of the University of South
Africa and completed his graduate work at Texas Christian University. He is
founder and past director of the California Association of Senior Living
Industries and is a member of the National Association of Senior Living
Industries and American Association of Homes for the Aged.
Maryann Timon has served as Senior Vice President for Managed Care
since May 1996. From January 1995 through May 1996 she served as Corporate Vice
President of the Managed Care Division. Ms. Timon joined the Company in December
1990 to form and serve as President of a wholly-owned subsidiary, Healthcare
Services Network. Ms. Timon was previously President of Mercy Ventures, Inc., a
five-company healthcare specialty group owned by Mercy Medical Center in
Baltimore, Maryland. Ms. Timon has 25 years of experience providing eldercare
healthcare services. Ms. Timon received an Associate Degree in Applied
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Science in Nursing in 1973 from the State University of New York at Canton, a
Bachelor of Science Degree in Nursing in 1976 from the State University of New
York at Utica/Rome and a Master of Gerontological Nursing Degree in 1978 from
the University of Rochester.
Marc D. Rubinger has served as Vice President and Chief Information
Officer since November 1995. Prior to joining the Company, Mr. Rubinger served
as General Manager-Decision Support Systems of Shared Medical Systems. From 1975
through 1986, Mr. Rubinger was a partner with Ernst & Young in their national
healthcare consulting practice. Mr. Rubinger received a Bachelor of Arts degree
in Bioscience from Binghamton University in 1971 and a Masters of Health
Administration and Planning from The George Washington University in 1973.
Kenneth R. Kuhnle has served as Vice President and Treasurer of the
Company since February 1990. He joined Genesis in October 1988 as Reimbursement
Director, which includes responsibility for monitoring government programs as
well as third party reimbursement planning and maximization. Mr. Kuhnle served
as Reimbursement Manager for Beverly enterprises, owners and operators of
long-term care centers, from January 1986 to October 1988 and as Medicare
Auditor for Aetna Life Insurance Company from November 1982 to December 1985. He
received a Bachelor of Science degree in Business Administration from Temple
University in 1979. Mr. Kuhnle serves as President of the Delaware Healthcare
Facilities Association and President of the Worcester chapter of the
Massachusetts Federation of Nursing Homes.
Edward J. Boeggeman has served as Vice President and Corporate
Controller of the Company since December 1993. He joined Genesis in January 1993
as Controller of Genesis Health Centers. Mr. Boeggeman has over twenty years of
experience in the healthcare industry, including four years with KPMG Peat
Marwick LLP from 1979 to 1983. Prior to joining Genesis, he served in various
accounting positions including Assistant Controller, Controller and Vice
President of Financial Affairs at a teaching hospital, academic medical center
and community hospital, all within the Greater Philadelphia area. Mr. Boeggeman
received a Bachelor of Arts degree in Accounting from Villanova University in
1973 and is a certified public accountant.
Allen R. Freedman has served as a director of the Company since
February 1996. Since 1990, Mr. Freedman has served on the executive board of
Fortis, a multinational financial services organization, which is the operating
entity of Fortis AG, based in Belgium, and Fortis AMEV, based in the
Netherlands. Since 1990, he has been Chairman and Chief Executive Officer of
Fortis, Inc. and Chairman of the Board of its principal insurance and investment
affiliates in the United States. These affiliates include American Security
Group; Fortis Benefits Insurance Company; Time Insurance Company; and United
Family Life Insurance Company. Mr. Freedman served as President of Fortis, Inc.
from 1979 to 1990. Mr. Freedman is also a director of Fortis Advisors, Inc. and
Systems and Computer Technology Corporation.
Samuel H. Howard has served as a director of the Company since March
1988. He is the founder and chairman of Phoenix Healthcare Corporation ("Phoenix
Healthcare") and the founder and President of Phoenix Communications Group, Inc.
("Phoenix Group") and Phoenix Holdings, Inc. all of which are based in
Nashville, Tennessee. Formed in 1993, Phoenix Healthcare provides management
services for managed care organizations, including health maintenance
organizations serving Tennessee's Medicaid population through the innovative
TennCare program which offers a managed care approach to meeting the healthcare
needs of Tennessee's Medicaid and uninsured populations. In April 1990, Phoenix
Group filed a petition under the Federal Bankruptcy laws. Phoenix Group proposed
a plan of reorganization that was approved by the bankruptcy court in August
1991 and became effective in December 1991. Mr. Howard's past corporate and
operations experience in the healthcare industry include having served as the
Senior Vice President of Public Affairs for Hospital Corporation of America from
August 1981 to January 1990, Vice President and
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<PAGE>
Treasurer for Hospital Affiliates International ("HAI"), and Vice President of
Finance and Business for Meharry Medical College. In addition, Mr. Howard was a
financial analyst for General Electric and a White House Fellow with U.S.
Ambassador Arthur Goldberg. Mr. Howard is a member of the Board of Directors of
O'Charley's Inc.
Richard R. Howard and Samuel H. Howard are not related.
Roger Lipitz has served as a director of the Company since March 1994.
From January 1994 until January 1996, Mr. Lipitz served on a consulting basis as
Director of Government Relations of the Company. From 1969 until its acquisition
by the Company in 1993, Mr. Lipitz served as Chairman of the Board of Meridian
Healthcare, Inc., a Maryland based long-term care company which operated over
5,000 beds and related businesses. Mr. Lipitz is a past president of the
American Health Care Association, Health Facilities Association of Maryland and
the National Council of Health Care Services. Since 1994, he has been Chairman
of the Board of Allegis Health Management, Inc. (formerly known as Global Health
Management, Inc.), a privately held Maryland based long-term care company. Mr.
Lipitz is a member of the Board of Directors of Blue Cross and Blue Shield of
Maryland.
Stephen E. Luongo has served as a director of the Company since June
1985. He currently is a partner in the law firm of Blank Rome Comisky &
McCauley. Blank Rome Comisky & McCauley serves as outside legal counsel for the
Company.
Alan B. Miller has served as a director of the Company since October
1993. Since 1978, he has been Chairman of the Board, President and Chief
Executive Officer of Universal Health Services, Inc., a Pennsylvania based
health services company. Prior thereto, Mr. Miller was Chairman of the Board,
President and Chief Executive Officer of American Medicorp, Inc. Mr. Miller is
Chairman of the Board of Trustees of Universal Health Realty Income Trust and a
member of the Board of Directors of CDI Corp., GMIS, Inc., and Penn Mutual Life
Insurance Company.
Fred F. Nazem has served as a director of the Company since January
1989. Since 1981, he has been President of Nazem Inc. and Managing Partner of
the general partner of several Nazem & Company limited partnerships which are
affiliated venture capital funds. Mr. Nazem is a member of the Board of
Directors of Consep, Inc., Tegal Corporation and Oxford Health Plans, Inc. as
well as a number of privately held firms.
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<PAGE>
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued under an Indenture dated as of
October 7, 1996 (the "Indenture") between the Company and First Union National
Bank, as trustee (the "Trustee"). Upon the effectiveness of the Exchange Offer
Registration Statement, the Indenture will be subject to, and governed by, the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Certain
capitalized terms used below are defined under "Certain Definitions." The
following summary of the material provisions of the Indenture and the Notes does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all of the provisions of the Indenture, including the
definitions of certain terms provided therein that are used herein but not
otherwise defined, and to terms made a part of the Indenture by the Trust
Indenture Act. A copy of the Indenture will be made available to holders of the
Notes upon request and is filed as an exhibit to this Exchange Offer
Registration Statement. See "Available Information".
General
The Exchange Notes and any Existing Notes that remain outstanding after
consummation of the Exchange Offer will be treated as a single class of
securities under the Indenture.
The Exchange Notes offered hereby will mature on October 1, 2006, will
be limited to $125,000,000 aggregate principal amount and will be unsecured
obligations of the Company. The Exchange Notes will bear interest at 9 1/4 % per
annum. Each Note will bear interest from October 7, 1996 or from the most recent
interest payment date to which interest has been paid, payable semiannually on
April 1 and October 1 of each year, commencing April 1, 1997 to the Person in
whose name the Note (or any predecessor Note) is registered at the close of
business on the September 15 or March 15 next preceding such interest payment
date. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in the City of New York maintained for such purposes;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the Person entitled thereto as shown on the security
register. The Notes will be issued only in fully registered form without
coupons, in denominations of $1,000 and any integral multiple thereof. No
service charge will be made for any registration of transfer, exchange or
redemption of Notes, except in certain circumstances for any documentary, stamp
or similar issue or transfer taxes or other tax or other governmental charge
that may be imposed in connection therewith.
As discussed under "Exchange Offer; Registration Rights," pursuant to
the Registration Rights Agreement, the Company has agreed for the benefit of the
holders of the Notes, at the Company's cost, either (i) to effect a registered
Exchange Offer under the Securities Act to exchange the Notes for Exchange
Notes, which will have terms identical in all material respects to the Notes
(except that the Exchange Notes will not contain terms with respect to transfer
restrictions or interest rate increases) or (ii) in the event that any changes
in law or applicable interpretations of the staff of the Commission do not
permit the Company to effect the Exchange Offer, or if for any other reason the
Exchange Offer is not consummated within 120 days following the date of the
original issue of the Notes, or if any holder of the Notes (other than the
Initial Purchasers) is not eligible to participate in the Exchange Offer, or
upon the request of any Initial Purchaser in certain circumstances, to register
the Notes for resale under the Securities Act through the Shelf Registration
Statement. In the event that either (a) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 30th calendar day
following the date of original issue of the Notes, (b) the Exchange Offer
Registration Statement has not been declared effective on or prior to the 90th
calendar day following the date of original issue of the Notes or (c) the
Exchange Offer is not consummated
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<PAGE>
or a Shelf Registration Statement is not declared effective on or prior to the
120th calendar day following the date of original issue of the Notes, the
interest rate borne by the Notes shall be increased by one-quarter of one
percent per annum following such 30-day period in the case of clause (a) above,
following such 90-day period in the case of clause (b) above or following such
120-day period in the case of clause (c) above, which rate will be increased by
an additional one-quarter of one percent per annum for each 90-day period that
any additional interest continues to accrue. The aggregate amount of such
increase from the original interest rate pursuant to these provisions will in no
event exceed one percent. Upon (x) the filing of the Exchange Offer Registration
Statement after the 30-day period described in clause (a) above, (y) the
effectiveness of the Exchange Offer Registration Statement after the 90-day
period described in clause (b) above or (z) the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration Statement, as the case may
be, after the 120-day period described in clause (c) above, the interest rate
borne by the Notes from the date of such filing, the date of such effectiveness
or the day before the date of consummation, as the case may be, will be reduced
to the original interest rate if the Company is otherwise in compliance with
this paragraph. See "Exchange Offer; Registration Rights."
Existing Notes that remain outstanding after the consummation of the
Exchange Offer and Exchange Notes issued in connection with the Exchange Offer
will be treated as a single class of securities under the Indenture.
Optional Redemption
The Notes will be subject to redemption at any time on or after October
1, 2001 at the option of the Company, in whole or in part, on not less than 30
nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple
of $1,000 at the following redemption prices (expressed as a percentage of the
principal amount), if redeemed during the 12-month period beginning on October 1
of each of the years indicated below:
Year Redemption Price
------------------------------------------- ----------------
2001....................................... 104.625%
2002....................................... 103.083%
2003....................................... 101.542%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest to the redemption date (subject to the right of
holders of record on relevant record dates to receive interest due on an
interest payment date).
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes or portions thereof to be redeemed pro rata, by lot or by any
other method the Trustee shall deem fair and reasonable.
Sinking Fund
The Notes are not subject to the benefit of any sinking fund.
Change in Control
Upon the occurrence of any of the following events, each holder of the
Notes shall have the right to require that the Company repurchase such holder's
Notes in whole or in part in integral multiples of $1,000, at a purchase price
in cash in an amount equal to 101% of the principal amount thereof, together
with
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accrued and unpaid interest, if any, to the date of purchase, pursuant to an
offer (the "Change in Control Offer") made in accordance with the procedures
described below and the other provisions in the Indenture.
A "Change in Control" shall occur at any time that (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), in a single
transaction or through a series of related transactions, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 50% of the total Voting Stock of the Company; (ii)
the Company consolidates or merges with or into another corporation or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
corporation consolidates or merges with or into the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (A) the outstanding Voting Stock of the Company is
changed into or exchanged for (x) Voting Stock of the surviving corporation
which is not Redeemable Capital Stock or (y) cash, securities or other property
in an amount which could be paid by the Company as a Restricted Payment as
described under "Certain Covenants--Limitation on Restricted Payments" (and such
amount shall be treated as a Restricted Payment subject to the provisions in the
Indenture described under "Certain Covenants--Limitation on Restricted
Payments"), and (B) the holders of the Voting Stock of the Company immediately
prior to such transaction own, directly or indirectly, not less than 50% of the
Voting Stock of the surviving corporation immediately after such transaction;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of at least 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (iv) the
Company is liquidated or dissolved or adopts a plan of liquidation.
Within 30 days following a Change in Control and prior to the mailing
of the notice to the holders of Notes provided for in the next paragraph, the
Company covenants to (i) notify the lenders under the Credit Facility that a
"Change in Control" under the Indenture has occurred and (ii) either (A) repay
in full all Indebtedness under the Credit Facility and permanently reduce the
commitments of the lenders thereunder or offer to repay in full all such
Indebtedness and permanently reduce such commitments and repay the Indebtedness
and permanently reduce the commitment of each lender who has accepted such offer
or (B) obtain the requisite consent under the Credit Facility to permit the
repurchase of the Notes as provided for in this covenant. The Company shall
first comply with the provisions of this paragraph before it shall be required
to repurchase the Notes in accordance with this covenant, but any failure to
comply with the covenant to offer to purchase the Notes upon a Change in Control
shall constitute an Event of Default under the Indenture.
Within 30 days following any Change in Control, the Company shall send
by first-class mail, postage prepaid, to the Trustee and to each holder of
Notes, at his address appearing in the security register, a notice stating,
among other things, that a Change in Control has occurred, the purchase price,
the purchase date, which shall be a business day no earlier than 30 days nor
later than 60 days from the date such notice is mailed, and certain other
procedures that a holder of the Notes must follow to accept a Change in Control
Offer or to withdraw such acceptance.
The Company will comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act and other securities laws or
regulations in connection with the repurchase of the Notes as described above.
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<PAGE>
The use of the term "all or substantially all" in Indenture provisions
such as clause (ii) of the definition of "Change in Control" and under "Merger
and Sale of Assets, etc." has no clearly established meaning under New York law
(which governs the Indenture) and has been the subject of limited judicial
interpretation in a few jurisdictions. Accordingly, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person, which
uncertainty should be considered by prospective purchasers of the Notes.
The occurrence of certain of the events which would constitute a Change
in Control would constitute a default under the Credit Facility (currently in
the principal amount of up to $265,950,000) and would require the Company to
offer to redeem the 9 1/4 % First Mortgage Bonds, Series A (the "First Mortgage
Bonds") (currently in the principal amount of $23,700,000), Convertible
Debentures (currently in the principal amount of $43,904,000) and 9 3/4 % Notes
(currently in the principal amount of $120,000,000). Future Indebtedness of the
Company may contain prohibitions of certain events which would constitute a
Change in Control or require the Company to offer to redeem such Indebtedness
upon a Change in Control. Moreover, the exercise by the holders of the Notes of
their right to require the Company to purchase the Notes could cause a default
under such Indebtedness, even if the Change in Control itself does not, due to
the financial effect of such purchase on the Company. Finally, the Company's
ability to pay cash to the holders of the Notes upon a purchase may be limited
by the Company's then existing financial resources. There can be no assurance
that sufficient funds will be available when necessary to make any required
purchases. Under its current financial condition, the Company believes that
sufficient funds would not be available to make such required purchases. Even if
sufficient funds were otherwise available, the terms of the Credit Facility will
prohibit, subject to certain exceptions, the Company's prepayment of the Notes
prior to their scheduled maturity. Consequently, if the Company is not able to
prepay indebtedness outstanding under the Credit Facility and any other Senior
Indebtedness containing similar restrictions or obtain requisite consents, the
Company will be unable to fulfill its repurchase obligations if holders of the
Notes exercise their purchase rights following a Change in Control, thereby
resulting in a default under the Indenture. Furthermore, the Change in Control
provisions may in certain circumstances make more difficult or discourage a
takeover of the Company and the removal of incumbent management.
Subordination
The payment of the principal of, premium, if any, and interest on, the
Notes will be subordinated, as described below, in right of payment to the prior
payment in full in cash or Cash Equivalents of all Senior Indebtedness. The
Notes will be senior subordinated indebtedness of the Company ranking pari passu
with all other existing and future senior subordinated indebtedness of the
Company and senior to all existing and future Subordinated Indebtedness of the
Company.
Upon the occurrence of any default in the payment of any Designated
Senior Indebtedness no payment (other than any payments made pursuant to the
provisions described under "Satisfaction and Discharge of Indenture; Covenant
Defeasance" which have been deposited with the Trustee for at least 124 days) or
distribution of any assets of the Company or any Subsidiary of any kind or
character (excluding certain permitted equity or subordinated securities) shall
be made by the Company or any Subsidiary or on behalf of, or out of the property
of, the Company, or received by the Trustee or any Noteholder on account of the
principal of, premium, if any, or interest on, the Notes or on account of the
purchase, redemption, defeasance or other acquisition of or in respect of the
Notes unless and until such default has been cured, waived or has ceased to
exist or such Designated Senior Indebtedness shall have been paid in full in
cash or Cash Equivalents.
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Upon the occurrence of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated (a "Non-payment Default") and after the receipt by the Trustee and
the Company from a representative or the holder of any Designated Senior
Indebtedness of written notice of such Non-payment Default, no payment (other
than any payments made pursuant to the provisions described under "--
Satisfaction and Discharge of Indenture; Covenant Defeasance" which have been
deposited with the Trustee for at least 124 days) or distribution of any assets
of the Company or any Subsidiary of any kind or character (excluding certain
permitted equity or subordinated securities) may be made by the Company or any
Subsidiary or on behalf of, or out of the property of, the Company or received
by the Trustee or any Noteholder on account of any principal of, premium, if
any, or interest on, the Notes or on account of the purchase, redemption,
defeasance or other acquisition of or in respect of the Notes for the period
specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice
of the Non-payment Default by the Trustee and the Company from a representative
or the holder of any Designated Senior Indebtedness and shall end on the
earliest of (subject to any blockage of payments that may then or thereafter be
in effect pursuant to the second preceding paragraph) (i) 179 days after receipt
of such notice by the Trustee (provided any Designated Senior Indebtedness as to
which notice was given shall not theretofore have been accelerated), (ii) the
date such Non-payment Default and all other Non-payment Defaults as to which
notice is also given after such period is initiated shall have been cured or
waived or shall have ceased to exist or the Senior Indebtedness related thereto
shall have been paid in full or (iii) the date such Payment Blockage Period and
any Payment Blockage Periods initiated during such period shall have been
terminated by written notice to the Company or the Trustee from the senior
representative and the holders of the Designated Senior Indebtedness that have
given notice of a Non-payment Default at or after the initiation of such Payment
Blockage Period, after which, in the case of clause (i), (ii) or (iii), the
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments. In no event will a Payment Blockage Period
extend beyond 179 days from the date of the receipt by the Trustee of the notice
initiating the first such Payment Blockage Period (such 179-day period referred
to as the "Initial Period"). Any number of notices of events of default may be
given during the Initial Period; provided that during any 365-day consecutive
period only one such period during which payment of principal of, or interest
on, the Notes may not be made may commence and the duration of such period may
not exceed 179 days. No Non-payment Default with respect to Designated Senior
Indebtedness which existed or was continuing on the date of the commencement of
any Payment Blockage Period will be, or can be, made the basis for the
commencement of a second Payment Blockage Period whether or not within a period
of 365 consecutive days, unless such default has been cured or waived for a
period of not less than 90 consecutive days.
If the Company fails to make any payment on the Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "Events of Default."
The Indenture will provide that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to the
Company or its assets, or any liquidation, dissolution or other winding up of
the Company, whether voluntary or involuntary, or any assignment for the benefit
of creditors or other marshaling of assets or liabilities of the Company, all
Senior Indebtedness must be paid in full in cash or Cash Equivalents before any
payment or distribution (excluding certain permitted equity or subordinated
securities) is made on account of the principal of, premium, if any, or interest
on the Notes.
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By reason of such subordination, in the event of liquidation or
insolvency, creditors of the Company who are holders of Senior Indebtedness may
recover more, ratably, than the holders of the Notes and funds which would be
otherwise payable to the holders of the Notes will be paid to the holders of the
Senior Indebtedness to the extent necessary to pay the Senior Indebtedness in
full in cash or Cash Equivalents, and the Company may be unable to meet its
obligations fully with respect to the Notes.
"Senior Indebtedness" means all obligations of the Company or any
Subsidiary or Affiliate of the Company, now or hereafter existing, under or in
respect of the Credit Facility, whether for principal, interest (including
interest accruing after the filing of a petition by or against the Company under
any state or federal Bankruptcy Laws, whether or not such interest is allowed as
a claim after such filing in any proceeding under such law) or otherwise
(including obligations in respect of the lease financing facility of the Credit
Facility) and the principal of, premium, if any, and interest on all other
Indebtedness of the Company (other than the Notes), whether outstanding on the
date of the Indenture or thereafter created, incurred or assumed, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness evidenced by the
Convertible Debentures, (iii) Indebtedness that is by its terms subordinate or
junior in right of payment to any Indebtedness of the Company, (iv) Indebtedness
which when incurred and without respect to any election under Section 1111(b) of
the Bankruptcy Law is without recourse to the Company, (v) Indebtedness which is
represented by Redeemable Capital Stock, (vi) Indebtedness for goods, materials
or services purchased in the ordinary course of business or Indebtedness
consisting of trade payables or other current liabilities (other than any
current liabilities owing under, or in respect of, the Credit Facility), (vii)
Indebtedness of or amounts owed by the Company for compensation to employees or
for services, (viii) any liability for federal, state, local or other taxes owed
or owing by the Company, (ix) Indebtedness of the Company to a Subsidiary of the
Company or any other Affiliate of the Company or any of such Affiliate's
subsidiaries, (x) that portion of any Indebtedness which at the time of issuance
is issued in violation of the Indenture, and (xi) amounts owing under leases
(other than Capital Lease Obligations and obligations in respect of the lease
financing facility of the Credit Facility). The Notes shall rank pari passu in
right of payment with the Indebtedness evidenced by the Convertible Debentures
and the 9 3/4% Notes.
"Designated Senior Indebtedness" is defined as (i) all Senior
Indebtedness under, or in respect of, the Credit Facility and (ii) any other
Senior Indebtedness which, at the time of determination, has an aggregate
principal amount outstanding, together with any commitments to lend additional
amounts, of at least $30,000,000 and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
As of June 30, 1996, after giving effect to the National Health
Transaction and GMC Transaction and the Offering and the use of the proceeds
therefrom, the aggregate amount of Senior Indebtedness outstanding would have
been approximately $402,123,000 (which includes approximately $9,980,000 of
indebtedness and approximately $61,000,000 of lease obligations of subsidiaries
and approximately $6,000,000 of indebtedness of other persons, all of which are
guaranteed by the Company, and approximately $15,900,000 of letters of credit
issued under the Credit Facility primarily related to the Company's
self-insurance programs) and, as of such date, the aggregate amount of
liabilities of the subsidiaries of the Company, which consist primarily of trade
payables and accrued compensation, that will effectively rank senior to the
Notes was approximately $64,163,000. See "Risk Factors -- Ranking" and
"Capitalization."
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Certain Covenants
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume, or directly or indirectly
guarantee or in any other manner become directly or indirectly liable for the
payment of, any Indebtedness (including any Acquired Indebtedness but excluding
Permitted Indebtedness) unless at the time of such event and after giving effect
thereto on a pro forma basis the Company's Fixed Charge Coverage Ratio for the
four full fiscal quarters immediately preceding such event, taken as one period,
calculated on the assumption that (i) such Indebtedness had been incurred on the
first day of such four-quarter period and (ii) any acquisition or disposition by
the Company and its Subsidiaries of any assets out of the ordinary course of
business, or any company or business facility, in each case since the first day
of its last four completed fiscal quarters, had been consummated on such first
day of such four-quarter period, would have been at least 2.00 to 1.00.
Limitation on Restricted Payments. The Company will not, and will not
permit any Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders
of, any Capital Stock of the Company (other than dividends or distributions
payable solely in shares of Qualified Capital Stock of the Company or in
options, warrants or other rights to acquire Qualified Capital Stock of the
Company);
(ii) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of the Company or any Affiliate thereof (other than any Wholly
Owned Subsidiary of the Company) or any option, warrant or other right to
acquire such Capital Stock of the Company or any Affiliate thereof;
(iii) make any principal payment on, or redeem, repurchase, defease or
otherwise acquire or retire for value in each case, prior to any scheduled
repayment, or maturity, any Subordinated Indebtedness; or
(iv) make any Investment in any Person (other than any Permitted
Investment) unless the Person thereby becomes a Wholly Owned Subsidiary; (such
payments described in (i) through (iv) collectively, "Restricted Payments")
unless at the time of and after giving effect to the proposed Restricted Payment
(the amount of any such Restricted Payment, if other than cash, as determined by
the Board of Directors, whose determination shall be conclusive and evidenced by
a Board Resolution), (x) no Default or Event of Default shall have occurred and
be continuing and such Restricted Payment shall not be an event which is, or
after notice or lapse of time or both, would be, an "event of default" under the
terms of any Indebtedness of the Company or any Subsidiary; (y) immediately
before and immediately after giving effect to such transaction on a pro forma
basis, the Company could incur $1.00 of additional Indebtedness under the
provisions of "--Limitation on Indebtedness" (other than Permitted
Indebtedness); and (3) the aggregate amount of all Restricted Payments (plus,
without duplication, dividends and distributions paid to any Person other than
the Company, a Wholly Owned Subsidiary or a Permitted Joint Venture as permitted
by paragraph (b) under "-- Restrictions on Preferred Stock of Subsidiaries and
Subsidiary Distributions" herein and any Restricted Payments made pursuant to
clauses (i), (iv), (v) and (vi) of the succeeding paragraph) declared or made
after the date of the Indenture shall not exceed the sum of:
(A) 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning on the date of the Indenture and
ending on the last day of the Company's last fiscal quarter ending prior to the
date of such proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss);
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(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company as capital contributions to the Company;
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any of its
Subsidiaries) of shares of Capital Stock (other than Redeemable Capital Stock)
of the Company or any options or warrants to purchase such shares (other than
issuances in respect of clause (ii) of the subsequent paragraph) of Capital
Stock (other than Redeemable Capital Stock) of the Company;
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options or warrants to purchase shares of Capital Stock of the
Company;
(E) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company for debt securities that have been converted into or
exchanged for Qualified Capital Stock of the Company to the extent such debt
securities are originally sold for cash plus the aggregate cash received by the
Company at the time of such conversion or exchange; and
(F) other Restricted Payments in an aggregate amount not to exceed
$10,000,000.
None of the foregoing provisions shall be deemed to prohibit the
following Restricted Payments so long as in the case of clauses (ii), (iii), (v)
and (vi) there is no Default or Event of Default continuing:
(i) dividends paid within 60 days after the date of declaration if at
the date of declaration, such payment would be permitted by the provisions of
the preceding paragraph and such payment shall be deemed to have been paid on
such date of declaration for purposes of the calculation required by the
provisions of the foregoing paragraph;
(ii) the redemption, repurchase or other acquisition or retirement of
any shares of any class of Capital Stock of the Company or Subordinated
Indebtedness in exchange for, or out of the net proceeds of, a substantially
concurrent issue and sale (other than to a Subsidiary) of shares of Qualified
Capital Stock of the Company; provided that any net proceeds from the issue and
sale of such Qualified Capital Stock are excluded from clause 3(C) of the
foregoing paragraph;
(iii) the redemption, repurchase, or other acquisition or retirement of
Subordinated Indebtedness of the Company (other than Redeemable Capital Stock)
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, new Indebtedness of the Company so long as (A) the principal amount of
such new Indebtedness does not exceed the principal amount of the Indebtedness
being so redeemed, repurchased, acquired or retired for value (plus the amount
of any premium required to be paid under the terms of the instrument governing
the Indebtedness being so redeemed, repurchased, acquired or retired), (B) such
Indebtedness is subordinated to Senior Indebtedness and the Notes at least to
the same extent as such Subordinated Indebtedness so purchased, exchanged,
redeemed, repurchased, acquired or retired for value, (C) such Indebtedness has
a Stated Maturity for its final scheduled principal payment later than the
Stated Maturity for the final scheduled principal payment of the Notes and (D)
such Indebtedness has an Average Life to Stated Maturity equal to or greater
than the remaining Average Life to Stated Maturity of the Notes;
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(iv) any purchase, redemption or other acquisition of Capital Stock of
a Permitted Joint Venture from a physician or other healthcare provider which is
required to be purchased, redeemed or otherwise acquired by applicable law;
(v) in addition to the transactions covered by clause (iv) of this
paragraph, any purchase, redemption or other acquisition of Capital Stock of a
Permitted Joint Venture; or
(vi) the making of any payment pursuant to any guarantee of
Indebtedness of a Permitted Joint Venture.
Restrictions on Preferred Stock of Subsidiaries and Subsidiary
Distributions. (a) The Company will not permit any Subsidiary to issue any
Preferred Stock (other than Preferred Stock issued (i) prior to the date of the
Indenture or (ii) to the Company or a Wholly Owned Subsidiary (collectively,
"Permitted Preferred Stock")) or permit any Person (other than the Company or a
Wholly Owned Subsidiary) to own or hold any interest in any Preferred Stock of
any Subsidiary, other than with respect to any Preferred Stock issued prior to
the date of the Indenture, unless a Subsidiary would be entitled to create,
incur or assume Indebtedness pursuant to the covenant described under "--
Limitation on Indebtedness" in the aggregate principal amount equal to the
aggregate liquidation value of the Preferred Stock to be issued.
(b) The Company will not, and will not permit any Subsidiary to,
declare or pay dividends or distributions on any Capital Stock of such
Subsidiary to any Person (other than to the Company or any Wholly Owned
Subsidiary or any lender in its capacity as a pledgee of Capital Stock of any
Subsidiary under the Credit Facility); provided, that the foregoing shall not
prohibit (i) (A) the Company or any Subsidiary from making any payment of
dividends or distributions on the Capital Stock of any Subsidiary in the
aggregate up to the amount of Restricted Payments that the Company could make at
any time pursuant to the covenant described under "-- Limitation on Restricted
Payments;" (B) the purchase, redemption, or other acquisition of the Capital
Stock of a Permitted Joint Venture from a physician or other healthcare provider
which is required to be purchased, redeemed or otherwise acquired by applicable
law; or (C) the payment of pro rata dividends or distributions to holders of
minority interests in the Capital Stock of a Subsidiary made in accordance with
the terms of the Agreement pursuant to which such payment is made or (ii) in
addition to the transactions covered by clause (i) (B) of this paragraph, in the
event no Default or Event of Default has occurred and is continuing, the
purchase, redemption, or other acquisition of the Capital Stock of a Permitted
Joint Venture.
Limitation on Transactions with Affiliates. The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, enter into
or suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (other than a Wholly Owned
Subsidiary or a Permitted Joint Venture) unless (i) such transaction or series
of related transactions is on terms that are no less favorable to the Company or
such Subsidiary, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party and (ii) with
respect to a transaction or series of related transactions involving payments in
excess of $5,000,000 in the aggregate, the Company delivers an Officers'
Certificate to the Trustee certifying that (A) such transaction complies with
clause (i) above and (B) such transaction or series of related transactions
shall have been approved by a majority of the independent directors of the Board
of Directors of the Company; provided, however, that the foregoing restriction
shall not apply to (x) any transaction or series of related transactions entered
into prior to the date of the Indenture, (y) the payment of reasonable and
customary regular fees to directors of the Company or any of its Subsidiaries
who are not employees of the Company or any Affiliate or (z) the Company's
employee compensation and other benefit arrangements.
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Disposition of Proceeds of Asset Sales. (a) The Company will not, and
will not permit any Subsidiary to, make any Asset Sale unless (i) the Company or
such Subsidiary receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets subject to such Asset
Sale (as determined by the Board of Directors of the Company and evidenced in a
board resolution whose determination shall be conclusive) and (ii) at least 75%
of the proceeds from such Asset Sale when received consists of cash or Cash
Equivalents; provided however, any Asset Sale which constitutes a Permitted
Investment under clause (vii) or (viii) of the definition of Permitted
Investment shall not be subject to the condition set forth in clause (ii) of
this sentence.
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are
not required to be applied to repay permanently any outstanding Senior
Indebtedness as required by the terms thereof, or, if not so required to be
applied, the Company determines not to apply such Net Cash Proceeds to the
prepayment of such Senior Indebtedness or if no such Senior Indebtedness is
outstanding, then the Company may within one year of the Asset Sale, invest (or
enter into a legally binding agreement to invest) the Net Cash Proceeds in
properties and assets that (as determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) replace
the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in the businesses of the Company, its
Wholly Owned Subsidiaries or its Permitted Joint Ventures existing on the date
of the Indenture or in any Healthcare Related Business. If any such legally
binding agreement to invest any Net Cash Proceeds is terminated, then the
Company may invest such Net Cash Proceeds, prior to the end of such one-year
period or six months from such termination, whichever is later, in the business
of the Company, its Wholly Owned Subsidiaries or Permitted Joint Ventures or in
any Healthcare Related Business as provided above. The amount of such Net Cash
Proceeds neither used to repay or prepay Senior Indebtedness nor used or
invested as set forth in this paragraph (after the periods specified in this
paragraph) constitutes "Excess Proceeds."
(c) Subject to paragraph (f) below, when the aggregate amount of Excess
Proceeds equals $10,000,000 or more, the Company shall apply the Excess Proceeds
to the repayment of the Notes as follows: the Company shall make an offer to
purchase (an "Offer") from all holders of the Notes in accordance with the
procedures set forth in the Indenture in the maximum principal amount (expressed
as a multiple of $1,000) of Notes that may be purchased out of an amount (the
"Note Amount") equal to the product of such Excess Proceeds multiplied by a
fraction, the numerator of which is the outstanding principal amount of the
Notes, and the denominator of which is the sum of the outstanding principal
amount of the Notes (subject to proration in the event such amount is less than
the aggregate Offered Price (as defined herein) of all Notes tendered). The
offer price shall be payable in cash in an amount equal to 100% of the principal
amount of the Notes plus accrued and unpaid interest, if any, to the date such
Offer is consummated (the "Offered Price"), in accordance with the procedures
set forth in the Indenture. To the extent that the aggregate Offered Price of
the Notes tendered pursuant to an Offer is less than the Note Amount relating
thereto (such shortfall constituting a "Deficiency"), the Company may use such
Deficiency, or a portion thereof, in the business of the Company, its Wholly
Owned Subsidiaries or its Permitted Joint Ventures or any Healthcare Related
Business. Upon completion of the purchase of all the Notes tendered pursuant to
an Offer, the amount of Excess Proceeds shall be reset at zero.
(d) Whenever the Excess Proceeds received by the Company exceed
$10,000,000, such Excess Proceeds shall be set aside by the Company in a
separate account pending (i) deposit with the Trustee or a paying agent of the
amount required to purchase the Notes tendered in an Offer, (ii) delivery by the
Company of the Offered Price to the holders of the Notes tendered in an Offer
and (iii) application, as set forth above, of Excess Proceeds for general
corporate purposes. Such Excess Proceeds may be invested in Temporary Cash
Investments, provided that the maturity date of any investment made after the
amount of Excess
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Proceeds exceeds $10,000,000 shall not be later than the Offer Date. The Company
shall be entitled to any interest or dividends accrued, earned or paid on such
Temporary Cash Investments.
(e) If the Company becomes obligated to make an Offer pursuant to
clause (c) above, the Notes shall be purchased by the Company, at the option of
the holder thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 30 days and not later than 60 days from the date
the notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the amount of Excess Proceeds is less than the aggregate
Offered Price of all Notes tendered and to satisfaction by or on behalf of the
holder of the requirements set forth in clause (f) below.
(f) In the event that the Company shall be unable to purchase Notes
from holders thereof in an Offer because of the provisions (i) of applicable
law, (ii) of the Company's loan agreements, indentures or other contracts in
existence on the date of the Indenture, (iii) permitted to exist or become
effective by subparagraph (h)(ii) below or (iv) of the Credit Facility, the
Company need not make an Offer. The Company shall then be obligated to (i)
invest the Excess Proceeds in properties and assets to replace the properties
and assets that were the subject of the Asset Sale or in properties and assets
that (as determined by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) will be used in the businesses
of the Company, its Wholly Owned Subsidiaries or its Permitted Joint Ventures
existing on the date of the Indenture or in any Healthcare Related Business or
(ii) apply the Excess Proceeds to repay Senior Indebtedness.
(g) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, in connection with an Offer.
(h) The Company will not, and will not permit any Subsidiary to, create
or permit to exist or become effective any restriction (other than restrictions
existing under (i) Indebtedness as in effect on the date of the Indenture or
(ii) any Senior Indebtedness existing on the date of the Indenture or
thereafter) that would materially impair the ability of the Company to make an
Offer to purchase the Notes upon an Asset Sale or, if such Offer is made, to pay
for the Notes tendered for purchase.
Limitation on Liens Securing Subordinated Indebtedness. The Company
will not, and will not permit any Subsidiary to, create, incur, assume or suffer
to exist any Liens of any kind upon any of their respective assets or properties
now owned or acquired after the date of the Indenture or any income or profits
therefrom securing (i) any Indebtedness of the Company which is expressly by its
terms subordinate or junior in right of payment to any other Indebtedness of the
Company, unless the Notes are equally and ratably secured; provided that, if
such Indebtedness which is expressly by its terms subordinate or junior in right
of payment to any other Indebtedness of the Company is expressly subordinate to
the Notes, the Lien securing such subordinated or junior Indebtedness shall be
subordinate and junior to the Lien securing the Notes with the same relative
priority as such subordinated or junior Indebtedness shall have with respect to
the Notes; provided, further, that this clause (i) shall not be applicable to
any Liens securing any such Indebtedness which became Indebtedness of the
Company pursuant to a transaction permitted under "-- Merger and Sale of Assets,
etc." or Liens securing Acquired Indebtedness and, in each case, which Liens
were in existence at the time of such transaction or incurrence of such Acquired
Indebtedness (unless such Indebtedness was incurred in connection with, or in
contemplation of, such transaction or incurrence of such Acquired Indebtedness),
so long as such Liens do not extend to or cover any property or assets of the
Company or any Subsidiary other than property or assets acquired in such
transaction or securing such Acquired Indebtedness, or (ii) any assumption,
guarantee or other liability of any Subsidiary in respect of any Indebtedness of
the Company which is expressly by its terms subordinate or junior in right of
payment to any other Indebtedness
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of the Company, unless the substantially similar assumption, guarantee or other
liability of such Subsidiary in respect of the Notes is equally and ratably
secured; provided that, if such subordinated Indebtedness is expressly by its
terms subordinate or junior to the Notes, then the Lien securing the assumption,
guarantee or other liability of such Subsidiary in respect of such subordinated
or junior Indebtedness shall be subordinate and junior to the Lien securing the
assumption, guarantee or other liability of such Subsidiary in respect of the
Notes with the same relative priority as such subordinated or junior
Indebtedness shall have with respect to the Notes; provided, further, that this
clause (ii) shall not be applicable to Liens securing any such assumption,
guarantee or other liability which existed at the time such Subsidiary became a
Subsidiary and which Liens were in existence at the time of such transaction
(unless such assumption, guarantee or other liability was incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary), so long as
such Liens do not extend to or cover any property or assets of the Company or
any Subsidiary other than the property or assets of such Person.
Limitation on Other Senior Subordinated Indebtedness. The Company will
not create, incur, assume, guarantee or in any other manner become liable with
respect to any Indebtedness, other than the Notes, that is subordinate in right
of payment to any Senior Indebtedness, unless such Indebtedness is also pari
passu with, or subordinate in right of payment to, the Notes pursuant to
subordination provisions substantially similar to those contained in the
Indenture.
Limitation on Issuance of Guarantees of Subordinated Indebtedness. (a)
The Company will not permit any Subsidiary, directly or indirectly, to assume,
guarantee or in any other manner become liable with respect to any Indebtedness
of the Company which is expressly by its terms subordinate or junior in right of
payment to any other Indebtedness of the Company unless (i) such Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a guarantee of payment of the Notes by such Subsidiary and (A) if
any such assumption, guarantee or other liability is subordinated, the guarantee
under the supplemental indenture shall be subordinated to the same extent as the
Notes are subordinated to Senior Indebtedness of the Company under the Indenture
and (B) if such subordinated or junior Indebtedness is by its terms expressly
subordinated to the Notes, any such assumption, guarantee or other liability of
such Subsidiary with respect to such subordinated or junior Indebtedness shall
be subordinated to such Subsidiary's assumption, guarantee or other liability
with respect to the Notes to the same extent as such subordinated or junior
Indebtedness is subordinated or junior to the Notes under the Indenture; and
(ii) such Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Subsidiary as a
result of any payment by such Subsidiary under its Guarantee.
(b) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each such
Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing, any
Guarantee by a Subsidiary of the Notes shall provide by its terms that it
(together with any Liens arising from such Guarantee) shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an affiliate of the Company, of all of the Company's Capital
Stock in, or all or substantially all the assets of, such Subsidiary, which is
in compliance with the Indenture or (ii) the release or discharge of the
assumption, guarantee or other liability which resulted in the creation of such
Guarantee.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any Subsidiary to,
create or otherwise cause or suffer to exist or become effective any restriction
of any kind, on the ability of any Subsidiary to (i) pay dividends or make any
other distribution on its Capital Stock to the Company or any other Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Subsidiary, (iii)
make any Investment in the Company or any other Subsidiary
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or (iv) transfer any of its property or assets to the Company or any other
Subsidiary, except (a) any encumbrance or restriction existing under or by
reason of applicable law; (b) any encumbrance or restriction existing under or
by reason of customary non-assignment provisions of any lease governing a
leasehold interest of the Company, or any Subsidiary; (c) any restriction
pursuant to an agreement in effect at or entered into on the date of the
Indenture as set forth in a schedule to the Indenture; (d) any restriction
existing under the Credit Facility as in effect on the date of the Indenture;
(e) any restriction, with respect to a Subsidiary that is not a Subsidiary on
the date of the Indenture, in existence at the time such Person becomes a
Subsidiary or created on the date it becomes a Subsidiary and not incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary; and
(f) any restriction existing under any agreement that extends, renews,
refinances or replaces the agreements containing the restrictions in the
foregoing clauses (c) through (e), provided that the terms and conditions of any
such restrictions are not materially less favorable to the holders of the Notes
than those under or pursuant to the agreement evidencing the Indebtedness so
extended, renewed, refinanced or replaced (in the opinion of the Board of
Directors of the Company whose determination shall be conclusive).
Reporting Requirements. The Indenture will require that the Company
file with the Commission the annual reports, quarterly reports and other
documents required to be filed with the Commission pursuant to Sections 13 and
15 of the Exchange Act, whether or not the Company has a class of securities
registered under the Exchange Act. The Company will be required to file copies
of such reports and documents with the Trustee within 15 days after it files
them with the Commission.
Additional Covenants. The Indenture also contains covenants with
respect to the following matters: (i) payment of principal, premium and
interest; (ii) maintenance of an office or agency in the City of New York; (iii)
arrangements regarding the handling of money held in trust; (iv) maintenance of
corporate existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
Merger and Sale of Assets, etc. The Company shall not, in a single
transaction or through a series of related transactions, consolidate with or
merge with or into any other Person or sell, assign, convey, transfer or lease
or otherwise dispose of all or substantially all of its properties and assets as
an entirety to any Person or group of affiliated Persons, or permit any of its
Subsidiaries to enter into any such transaction or transactions if such
transaction or transactions, in the aggregate, would result in a sale,
assignment, transfer, lease or disposal of all or substantially all of the
properties and assets of the Company and its Subsidiaries on a consolidated
basis to any other Person or group of affiliated Persons, unless at the time and
after giving effect thereto (i) either (A) the Company shall be the continuing
corporation, or (B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance, transfer, lease or disposition the properties and assets of the
Company, substantially as an entirety (the "Surviving Entity") shall be a
corporation duly organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia and shall, in
either case, expressly assume, by an indenture supplemental to the Indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture, and the
Indenture shall remain in full force and effect; (ii) immediately before and
immediately after giving effect to such transaction on a pro forma basis (and
treating any Indebtedness not previously an obligation of the Company or a
Subsidiary which becomes the obligation of the Company or any of its
Subsidiaries in connection with or as a result of such transaction as having
been incurred at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing; (iii) immediately after giving effect to
such transaction on a pro forma basis, the Consolidated Net Worth of the Company
(or the Surviving Entity if the Company is not the continuing obligor under the
Indenture) is at least equal to the Consolidated Net Worth of the Company
immediately before such transaction;
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(iv) immediately before and immediately after giving effect to such transaction
on a pro forma basis (and treating any Indebtedness not previously an obligation
of the Company or a Subsidiary which becomes the obligation of the Company or
any of its Subsidiaries in connection with or as a result of such transaction
having been incurred at the time of such transaction), the Company (or the
Surviving Entity if the Company is not the continuing obligor under the
Indenture) could incur $1.00 of additional Indebtedness under the provisions of
"-- Certain Covenants -- Limitation on Indebtedness" (other than Permitted
Indebtedness); (v) each Guarantor, if any, unless it is the other party to the
transactions described above, shall have by supplemental indenture confirmed
that its Guarantee of the Notes shall apply to such person's obligations under
the Indenture and the Notes; and (vi) the Company or the Surviving Entity shall
have delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that such consolidation, merger, transfer, lease or
disposition and such supplemental indenture comply with the terms of the
Indenture.
Each Guarantor, if any (other than any Subsidiary whose Guarantee is
being released pursuant to the provisions under "Certain Covenants -- Limitation
on Issuance of Guarantees of Subordinated Indebtedness" as a result of such
transaction), shall not, and the Company will not permit a Guarantor to, in a
single transaction or through a series of related transactions, merge or
consolidate with or into any other corporation or other entity (other than the
Company or any Guarantor), or sell, assign, convey, transfer, lease or otherwise
dispose of its properties and assets on a consolidated basis substantially as an
entirety to any entity unless (i) either (A) such Guarantor shall be the
continuing corporation or partnership or (B) the entity (if other than such
Guarantor) formed by such consolidation or into which such Guarantor is merged
or the entity which acquires by sale, assignment, conveyance, transfer, lease or
disposition the properties and assets of such Guarantor substantially as an
entirety shall be a corporation or partnership organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and shall expressly assume by an indenture supplemental to the
Indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of such Guarantor under the Notes and the
Indenture; (ii) immediately before and immediately thereafter (and treating any
Indebtedness not previously an obligation of the Company or a Subsidiary which
becomes the obligation of the Company or any of its Subsidiaries in connection
with or as a result of such transaction as having been incurred at the time of
such transaction), no Default or Event of Default shall have occurred and be
continuing; and (iii) such Guarantor shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or
disposition and such supplemental indenture comply with the Indenture, and
thereafter all obligations of the predecessor shall terminate.
Notwithstanding the foregoing, any Wholly Owned Subsidiary may (i)
merge or consolidate with or into any other Wholly Owned Subsidiary or the
Company or (ii) sell, assign, convey, transfer, lease, or otherwise dispose of
all or substantially all of its properties and assets to any other Wholly Owned
Subsidiary or the Company; provided, that (A) any Person surviving any such
merger or consolidation with a Guarantor or which acquires substantially all of
the assets of any Guarantor (the "Acquisition Survivor") shall expressly assume
by a supplemental indenture or guarantee executed and delivered to the Trustee,
in form satisfactory to the Trustee, any obligations of such Subsidiary to
guarantee the obligations owing under the Indenture; and (B) the Acquisition
Survivor shall have delivered to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that the transaction and the supplemental
guarantee or indenture executed in connection therewith comply with this
provision and that all conditions precedent provided for in the Indenture
relating to such transaction have been complied with.
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or any Guarantor in accordance with the immediately
preceding paragraphs, the successor Person formed by such consolidation or into
which the Company or such Guarantor, as the case may be, is merged or the
successor Person to which such sale,
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assignment, conveyance, transfer, lease or disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
or such Guarantor, as the case may be, under the Indenture and/or the
Guarantees, as the case may be, with the same effect as if such successor had
been named as the Company or such Guarantor, as the case may be, herein and/or
in the Guarantees, as the case may be. When a successor assumes all the
obligations of its predecessor under the Indenture, the Notes or a Guarantee, as
the case may be, the predecessor shall be released from those obligations;
provided that in the case of a transfer by lease, the predecessor shall not be
released from the payment of principal and interest on the Notes or a Guarantee,
as the case may be.
Events of Default
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any Note
when it becomes due and payable, and such default shall continue for a period of
30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Stated Maturity;
(iii) (A) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company or of any Guarantor under the Indenture
(other than a default in the performance or breach of a covenant or agreement
which is specifically dealt with elsewhere in the Indenture) and such default or
breach shall continue for a period of 30 days after written notice has been
given, by certified mail (x) to the Company by the Trustee or (y) to the Company
and the Trustee by the holders of at least 25% in aggregate principal amount of
the outstanding Notes; (B) there shall be a default in the performance or breach
of the provisions of "-- Merger and Sale of Assets, etc;" (C) the Company shall
have failed to make or consummate an Offer in accordance with the provisions of
"-- Certain Covenants -- Dispositions of Proceeds of Asset Sales;" or (D) the
Company shall have failed to make or consummate a Change in Control Offer in
accordance with the provisions of "Change in Control;"
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company or any Subsidiary then has
outstanding Indebtedness in excess of $5,000,000 in the aggregate and, if not
already matured at its final maturity in accordance with its terms, such
Indebtedness shall have been accelerated;
(v) one or more judgments, orders or decrees for the payment of money
in excess of $5,000,000, either individually or in the aggregate, shall be
entered against the Company or any Subsidiary or any of their respective
properties which is not fully covered by insurance, bond, surety or similar
instrument and shall not be discharged and there shall have been a period of 60
days during which a stay of enforcement of such judgment or order, by reason of
an appeal or otherwise, shall not be in effect; or
(vi) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Subsidiary shall have occurred.
If an Event of Default (other than as specified in clause (vi) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee upon the
request of the holders of not less than 25% in aggregate principal amount of the
Notes then outstanding shall, declare the principal of all the Notes due and
payable immediately in an amount equal to the principal amount of the Notes,
together with accrued and unpaid interest to the date the Notes become
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due and payable, by a notice in writing to the Company (and to the Trustee, if
given by the holders of the Notes and, if the Credit Facility is in effect, to
the representative of the Credit Facility) and, upon any such declaration such
principal shall become immediately due and payable and the Trustee may, at its
discretion, proceed to protect and enforce the rights of the holders of Notes by
appropriate judicial proceedings. If an Event of Default specified in clause
(vi) above occurs and is continuing, then the principal of all the Notes shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any holder of the Notes.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
Notes then outstanding, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if (a) the Company has
paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or
advanced by the Trustee under the Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Notes, (iii) the principal of and premium, if
any, on any Notes which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, and (iv) to
the extent that payment of such interest is lawful, interest upon overdue
interest at the rate borne by the Notes; and (b) all Events of Default, other
than the non-payment of principal of the Notes which have become due solely by
such declaration of acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount
of the Notes then outstanding may on behalf of the holders of all the Notes
waive any past Defaults under the Indenture, except a Default in the payment of
the principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note then outstanding.
The Company is also required to notify the Trustee within five days of
the occurrence of any Default.
The Trust Indenture Act contains limitations on the rights of the
Trustee, should it become a creditor of the Company or any Guarantor, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions, provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
Satisfaction and Discharge of the Indenture; Covenant Defeasance
The Indenture will cease to be of further effect as to all outstanding
Notes (except as to (i) rights of registration of transfer and exchange and the
Company's right of optional redemption; (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Notes; (iii) rights of holders of
the Notes to receive payments of principal and interest on the Notes; (iv)
rights, obligations and immunities of the Trustee under the Indenture; and (v)
rights of the holders of the Notes as beneficiaries of the Indenture with
respect to the property so deposited with the Trustee payable to all or any of
them), if (A) the Company will have paid or caused to be paid the principal of
and interest on the Notes as and when the same will have become due and payable
or (B) all outstanding Notes (except lost, stolen or destroyed Notes which have
been replaced or paid) have been delivered to the Trustee for cancellation or
(C) (x) the Notes not previously delivered to the Trustee for cancellation will
have become due and payable or are by their terms to become due and payable
within one year or are to be called for redemption under arrangements
satisfactory to the Trustee upon delivery of notice and (y) the Company will
have irrevocably deposited with the Trustee, as trust funds, cash, in an amount
sufficient to pay principal of and interest on the outstanding
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Notes, to maturity or redemption, as the case may be. Such trust may only be
established if such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument pursuant to which the
Company is a party or by which it is bound and the Company has delivered to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions related to such defeasance have been complied with.
The Indenture will also cease to be in effect (except as described in
(i)-(v) in the immediately preceding paragraph) and the Indebtedness on all
outstanding Notes will be discharged on the 123rd day after the irrevocable
deposit by the Company with the Trustee, in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the holders of the Notes,
of cash, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay the principal of and
interest on the Notes then outstanding in accordance with the terms of the
Indenture and the Notes. Such a trust may only be established if (i) such
deposit will not result in a breach or violation of, or constitute a default
under, any agreement or instrument to which the Company is a party or by which
it is bound; (ii) the Company has delivered to the Trustee an opinion of counsel
stating that (A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling, or (B) since the date of this Indenture
there has been a change in the applicable federal income tax law, in either case
to the effect that, based thereon such opinion shall confirm that, the holders
of the Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred; (iii) the Company has delivered to the Trustee an
opinion of counsel to the effect that after the 123rd day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (iv) the Company has delivered to the Trustee an Officer's
Certificate and an opinion of counsel, each stating that all conditions related
to the defeasance have been complied with.
The Company and any Guarantor may also be released from its obligations
under certain covenants that are described in the Indenture and shall cease to
be subject to clause (iii) of the first paragraph under "Events of Default,"
with respect to the Notes outstanding on the 123rd day after the irrevocable
deposit by the Company with the Trustee, in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the holders of the Notes,
cash, U.S. Government Obligations, or a combination thereof, in an amount
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay the principal of and interest on the Notes then outstanding in
accordance with the terms of the Indenture and the Notes ("covenant
defeasance"). Such covenant defeasance may only be effected if (i) such deposit
will not result in a breach or violation of, or constitute a default under, any
agreement or instrument to which the Company or any Guarantor is party or by
which it is bound; (ii) the Company delivers to the Trustee an Officers'
Certificate and an opinion of counsel to the effect that the holders of the
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such deposit and covenant defeasance and will be subject to federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit and covenant defeasance had not occurred;
(iii) the Company has delivered to the Trustee an opinion of counsel to the
effect that after the 123rd day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and (iv)
the Company has delivered to the Trustee an Officer's Certificate and an opinion
of counsel, each stating that all conditions related to the covenant defeasance
have been complied with. Following such covenant defeasance, the Company may
omit to comply with and will have no liability in respect of any term, condition
or limitation set forth in such sections of the Indenture, whether directly or
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indirectly by reason of any reference elsewhere in the Indenture of such
sections or by reason of any reference in such sections to any other provision
in the Indenture or in any other document, and such omission will not constitute
an Event of Default.
Modifications and Amendments
Modifications and amendments of the Indenture may be made by the
Company, the Guarantors, if any, and the Trustee with the consent of the holders
of not less than a majority in aggregate principal amount of the outstanding
Notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby: (i) change
the Stated Maturity of the principal of, or any installment of interest on, any
Note, or reduce the principal amount thereof or the rate of interest thereon or
any premium payable upon the redemption thereof, or change the coin or currency
in which the principal of any Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of redemption, on or
after the redemption date); (ii) amend, change or modify the obligation of the
Company to make and consummate a Change in Control Offer in the event of a
Change in Control or make and consummate the Offer with respect to any Asset
Sales or modify any of the provisions or definitions with respect thereto; (iii)
reduce the percentage in principal amount of outstanding Notes, the consent of
whose holders is required for any such supplemental indenture or the consent of
whose holders is required for any waiver of compliance with certain provisions
of the Indenture or certain Defaults thereunder and their consequences provided
for in the Indenture or with respect to any Guarantee; (iv) modify any of the
provisions relating to supplemental indentures requiring the consent of holders
or relating to the waiver of past defaults or relating to the waiver of certain
covenants, except to increase the percentage of outstanding Notes required for
such actions or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the holder of each Note affected
thereby; (v) except as otherwise permitted under "-- Merger and Sale of Assets,
etc.," consent to the assignment or transfer by the Company or any Guarantor of
any of their rights and obligations under the Indenture; or (vi) modify any of
the provisions of the Indenture relating to the subordination of the Notes or
any Guarantee in a manner adverse to the holders of the Notes. Any amendment to
the subordination provisions of the Notes will also require the consent of the
holders of Designated Senior Indebtedness.
The holders of a majority in aggregate principal amount of the Notes
then outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Governing Law
The Indenture, the Notes and any Guarantees will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at
the time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Affiliate" means with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any
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other Person that owns, directly or indirectly, 5% or more of such specified
Person's Capital Stock, (iii) any officer or director of (A) any such specified
Person, (B) any Subsidiary of such specified Person or (C) any Person described
in clauses (i) or (ii) above or (iv) any other Person having a relationship with
any natural Person described in clauses (i), (ii) or (iii) above by blood,
marriage or adoption not more remote than first cousin or any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such other Person described in this clause (iv). For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (i) any
Capital Stock of any Subsidiary; (ii) all or substantially all of the properties
and assets of any division or line of business of the Company or its
Subsidiaries; or (iii) any other properties or assets of the Company or any
Subsidiary, other than in the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" shall not include (i) any transfer of
properties and assets that is governed by the provisions described under
"--Merger, Sale of Assets, etc.," (ii) any transfer of properties or assets of
the Company to any Wholly Owned Subsidiary, or of any Subsidiary to the Company
or any Wholly Owned Subsidiary in accordance with the terms of the Indenture or
(iii) transfers of properties or assets in any twelve month period (A) the Fair
Market Value of which does not, in the aggregate, exceed 2.5% of the Company's
Consolidated Total Assets and (B) the Consolidated EBITDA related to such
properties or assets does not, in the aggregate, exceed 2.5% of the Company's
Consolidated EBITDA.
"Attributable Debt" in respect of a sale-leaseback transaction or an
operating lease in respect of a healthcare facility means, at the time of
determination, the present value (discounted at the interest rate implicit in
the lease, compounded semiannually) of the obligation of the lessee of the
property subject to such sale-leaseback transaction or operating lease in
respect of a healthcare facility for rental payments during the remaining term
of the lease included in such transaction including any period for which such
lease has been extended or may, at the option of the lessor, be extended or
until the earliest date on which the lessee may terminate such lease without
penalty or upon payment of penalty (in which case the rental payments shall
include such penalty), after excluding all amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water,
utilities and similar charges.
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (A) the number of years from the date of
determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (B) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Code, as amended, or any
similar United States Federal or State law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded on
the balance sheet of such Person as a capitalized lease obligation.
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"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or equity interests.
"Cash Equivalent" means (i) any security, maturing not more than six
months after the date of acquisition, issued by the United States of America, or
an instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (ii) any
certificate of deposit, time deposit, money market account or bankers'
acceptance, maturing not more than six months after the date of acquisition,
issued by any commercial banking institution that is a member of the Federal
Reserve System and that has combined capital and surplus and undivided profits
of not less than $500,000,000, whose debt has a rating, at the time as of which
any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard & Poor's Corporation or any successor rating agency and
(iii) commercial paper, maturing not more than three months after the date of
acquisition, issued by any corporation (other than an Affiliate or Subsidiary of
the Company) organized and existing under the laws of the United States of
America with a rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's Investors Service, Inc. or any
successor rating agency, or "A-1" (or higher) according to Standard & Poor's
Corporation or any successor rating agency.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
date of the Indenture such Commission is not existing and performing the duties
now assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Company" means Genesis Health Ventures, Inc., a corporation
incorporated under the laws of Pennsylvania, until a successor Person shall have
become such pursuant to the applicable provisions of the Indenture, and
thereafter "Company" shall mean such successor Person. To the extent necessary
to comply with the requirements of the provisions of Trust Indenture Act
Sections 310 through 317 as they are applicable to the Company, the term
"Company" shall include any other obligor with respect to the Notes for purposes
of complying with such provisions.
"Consolidated EBITDA" of any Person means with respect to any
determination date, Consolidated Net Income before extraordinary items and gains
or losses realized in connection with Asset Sales, plus (i) Consolidated Income
Tax Expense, plus (ii) consolidated depreciation expense, plus (iii)
consolidated amortization expense, plus (iv) Consolidated Interest Expense, plus
(v) all other non-cash items reducing Consolidated Net Income of such Person and
its Subsidiaries, determined on a consolidated basis in accordance with GAAP,
and less all non-cash items increasing Consolidated Net Income of such Person
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP, in each case, for such Person's prior four full fiscal quarters for which
financial results have been reported immediately preceding the determination
date.
"Consolidated Income Tax Expense" means for any period, as applied to
any Person, the provision for federal, state, local and foreign income taxes of
such Person and its Consolidated Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without
duplication, for any period, as applied to any Person, the sum of (i) the
interest expense of such Person and its Consolidated Subsidiaries for such
period, on a consolidated basis, including, without limitation, (A) amortization
of debt discount, (B) the net
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cost under interest rate contracts (including amortization of discounts), (C)
the interest portion of any deferred payment obligation and (D) accrued
interest, plus (ii) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid, or accrued by such Person during such
period, in each case as determined in accordance with GAAP, plus (iii) Preferred
Stock dividends in respect of Preferred Stock of the Company or any Subsidiary
held by Persons other than the Company or a Wholly Owned Subsidiary. For
purposes of clause (c) of the preceding sentence, dividends shall be deemed to
be an amount equal to the actual dividends paid divided by one minus the
applicable actual combined Federal, state, local and foreign income tax rate of
the Company and its Consolidated Subsidiaries (expressed as a decimal).
"Consolidated Net Income (Loss)" of any Person means, for any period,
the Consolidated net income (or loss) of the Company and its Consolidated
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income (loss), by excluding (i) all
extraordinary gains or losses (less all fees and expenses relating thereto),
(ii) the portion of net income of the Company and its Consolidated Subsidiaries
allocable to investments in unconsolidated Persons to the extent that cash
dividends or distributions have not actually been received by the Company or one
of its Consolidated Subsidiaries, (iii) net income (or loss) of any Person
combined with the Company or any of its Subsidiaries in a "pooling of interests"
basis attributable to any period prior to the date of combination, (iv) any gain
or loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) any gains or losses (less all fees and expenses relating
thereto) in respect of dispositions of assets other than in the ordinary course
of business, or (vi) the net income of any Subsidiary to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulations applicable to that Subsidiary or its
shareholders.
"Consolidated Net Worth" of any Person means the Consolidated
stockholders' equity (excluding Redeemable Capital Stock) of such Person and its
Consolidated Subsidiaries, as set forth on the most recent consolidated balance
sheet of such Person and its Consolidated Subsidiaries determined in accordance
with GAAP.
"Consolidated Rental Payments" of any Person means, for any period, the
aggregate rental obligations of such Person and its Consolidated Subsidiaries
(not including taxes, insurance, maintenance and similar expenses that the
lessee is obligated to pay under the terms of the relevant leases), determined
on a consolidated basis in conformity with GAAP, payable in respect of such
period under Attributable Debt or leases of real or personal property not
constituting Attributable Debt (net of income from subleases thereof, not
including taxes, insurance, maintenance and similar expenses that the sublessee
is obligated to pay under the terms of such sublease), whether or not such
obligations are reflected as liabilities or commitments on a consolidated
balance sheet of such Person and its Subsidiaries or in the notes thereto,
excluding, however, in any event, (i) that portion of Consolidated Interest
Expense of such Person representing payments by such person or any of its
Consolidated Subsidiaries in respect of Capital Lease Obligations (net of
payments to such Person or any of its Consolidated Subsidiaries under subleases
qualifying as capitalized lease subleases to the extent that such payments would
be deducted in determining Consolidated Interest Expense) and (ii) the aggregate
amount of amortization of obligations of such Person and its Consolidated
Subsidiaries in respect of such Capital Lease Obligations for such period (net
of payments to such Person or any of its Consolidated Subsidiaries and subleases
qualifying as capitalized lease subleases to the extent that such payments would
be deducted in determining such amortization amount).
"Consolidated Total Assets" of any Person means the Consolidated total
assets of such Person and its Consolidated Subsidiaries, as set forth on the
most recent consolidated balance sheet of such Person and its Consolidated
Subsidiaries determined in accordance with GAAP.
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"Consolidation" means, with respect to any Person, the consolidation of
the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Credit Facility" means (i) the Credit Agreement, dated as of November 22, 1993,
among the Company, the other borrowers parties thereto, the lenders parties
thereto, Mellon Bank, N.A. as issuing bank and Mellon Bank, N.A. as agent for
such lenders and such issuing bank, as the same may be amended, restated,
renewed, extended, restructured, supplemented or otherwise modified from time to
time, (ii) any Loan Documents (as defined in the Credit Agreement as in effect
from time to time) and any other documents or instruments executed by the
Company pursuant to or in connection with the Credit Agreement and (iii) any
credit agreement, loan agreement, note purchase agreement, indenture or other
agreement, document or instrument refinancing, refunding or otherwise replacing
the Credit Agreement or any other agreement deemed a Credit Facility under
clauses (i), (ii) or (iii) hereof, whether or not with the same agent, trustee,
representative, lenders or holders, regardless of whether the Credit Agreement
or Credit Facility or any portion thereof was outstanding or in effect at the
time of such restatement, renewal, extension, restructuring, supplement or
modification (including without limitation, the Second Amended and Restated
Credit Agreement, dated October 7, 1996, among the Company, the other borrowers
parties thereto, the lenders parties thereto, Mellon Bank, N.A. as issuing bank
and Mellon Bank, N.A. as agent for such lenders and the Amended and Restated
Participation Agreement, dated October 7, 1996, among Genesis ElderCare
Properties, Inc., Mellon Financial Services Corporation #4, the lenders parties
thereto and Mellon Bank, N.A. as agent for such lenders, as the same may be
amended, restated, renewed, extended, restructured, supplemented and otherwise
modified from time to time). Without limiting the generality of the foregoing,
the term "Credit Facility" shall include any amendment, restatement, renewal,
extension, restructuring, supplement or modification to any Credit Facility and
all refundings, refinancings and replacements of any Credit Facility, including
any agreement (a) extending the maturity of any Indebtedness incurred thereunder
or contemplated thereby, (b) adding or deleting borrowers or guarantors
thereunder, so long as such borrowers and guarantors include one or more of the
Company and its Subsidiaries and their respective successors and assigns,
provided that on the date thereof the addition of such borrower or guarantor
would not be prohibited by the definition of "Permitted Indebtedness" and the
provisions described under "-- Certain Covenants--Limitation on Liens securing
Subordinated Indebtedness" and "-- Certain Covenants--Limitation on Issuance of
Guarantees of Subordinated Indebtedness," (c) increasing the amount of
Indebtedness incurred thereunder or available to be borrowed thereunder provided
such increase is permitted to be incurred under the definition of "Permitted
Indebtedness" or is or will be permitted to be incurred under the provisions
described under "-- Certain Covenants--Limitation on Indebtedness" or (d)
otherwise altering the terms and conditions thereof in a manner not prohibited
by the definition of "Permitted Indebtedness" and the provisions described under
"-- Certain Covenants--Limitation on Liens Securing Subordinated Indebtedness",
"-- Certain Covenants-- Limitation on Issuance of Guarantees of Subordinated
Indebtedness" and "-- Certain Covenants--Limitation on Dividends and Other
Payment Restrictions Affecting Subsidiaries" and as such agreement may be
amended, renewed, extended, substituted, refinanced, replaced or otherwise
modified from time to time, and includes any agreement extending the maturity of
all or any portion of the Indebtedness thereunder.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Eligible Accounts Receivables" as of any date means the book value of
all accounts receivables of the Company and its Subsidiaries that would be shown
on a Consolidated balance sheet of the Company and its Subsidiaries prepared on
such date in accordance with GAAP, which are not more than 180 days past their
due date and were entered into on normal payment terms.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer.
"Fiscal Year" with respect to the Company shall mean the fiscal year of
the Company.
"Fixed Charge Coverage Ratio" of any Person means, for any period, the
ratio of (i) the sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense, and one-third of Consolidated Rental Payments
plus, without duplication, all depreciation, amortization and all other non-cash
charges (excluding any such non-cash charge constituting an extraordinary item
or loss or any non-cash charge which requires an accrual of or a reserve for
cash charges for any future period), in each case, for such period, of the
Company and its Subsidiaries on a Consolidated basis, as determined in
accordance with GAAP to (ii) the sum of (A) Consolidated Interest Expense for
such period and (B) one-third of Consolidated Rental Payments for such period;
provided that in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, as in
effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor which guarantees the
Indenture Obligations pursuant to a guarantee given in accordance with the
Indenture.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "Guaranteed Debt" shall not include
endorsements for collection or deposit, in either case in the ordinary course of
business.
"Guarantor" means any Person which guarantees the Indenture Obligations
pursuant to the Indenture.
"Healthcare Related Business" means a business, the majority of whose
revenues result from healthcare, long-term care, or managed care related
businesses or facilities, including businesses which provide insurance relating
to the costs of healthcare, long-term care or managed care services.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit or acceptances issued under
letter of credit facilities, acceptance facilities or other similar facilities
and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or
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hereafter outstanding, (ii) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (iii) every obligation of such
Person issued or contracted for as payment in consideration of the purchase by
such Person or an Affiliate of such Person of the Capital Stock or substantially
all of the assets of another Person or in consideration for the merger or
consolidation with respect to which such Person or an Affiliate of such Person
was a party (other than any obligation of such Person to pay an amount to
another Person based on income in respect of Capital Stock or assets which were
purchased or in respect of such merger to which such Person or an Affiliate was
a party except for such obligations which are required in accordance with GAAP
to be classified as a liability on the balance sheet of such Person), (iv) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables and other accrued current liabilities arising in the
ordinary course of business, (v) all obligations under Interest Rate Contracts
of such Person, (vi) all Capital Lease Obligations of such Person, (vii) all
indebtedness referred to in clauses (i) through (vi), (ix) and (x) of other
Persons and all dividends of other Persons, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien, upon any property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
(viii) all Guaranteed Debt of such Person, (ix) all Redeemable Capital Stock
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends and (x) all Attributable Debt of such
Person. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value to be determined in good faith by the Board of
Directors of the issuer of such Redeemable Capital Stock.
"Indenture Obligations" means the obligations of the Company and any
other obligor under the Indenture or under the Notes, including any Guarantor,
to pay principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with the Indenture,
the Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the terms thereof.
"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Investments" means, with respect to any Person, directly or
indirectly, any advance, loan or other extension of credit (including any
guarantee) or capital contribution to (by means of any transfer of cash or other
property (tangible or intangible) to others, or any payment for property or
services for the account or use of others or otherwise), or any purchase,
acquisition or ownership by such Person of any Capital Stock, bonds, notes,
debentures or other securities (including, without limitation, any interests in
any partnership or joint venture) issued or owned by any other Person.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
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"Maturity" when used with respect to any Note means the date on which
the principal of such Note becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, or any redemption date
and whether by declaration of acceleration, Offer in respect of Excess Proceeds,
Change in Control Offer in respect of a Change in Control, call for redemption
or otherwise.
"Net Cash Proceeds" means, with respect to any Asset Sale by any
Person, the proceeds thereof in the form of cash or Cash Equivalents including
payments in respect of deferred payment obligations when received in the form
of, or stock or other assets when disposed for, cash or Cash Equivalents (except
to the extent that such obligations are financed or sold with recourse to the
Company or any Subsidiary) net of (i) brokerage commissions and other reasonable
fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes payable as a
result of such Asset Sale, (iii) payments made to retire Indebtedness where
payment of such Indebtedness is secured by the assets or properties the subject
of such Asset Sale, (iv) amounts required to be paid to any Person (other than
the Company or any Subsidiary) owning a beneficial interest in the assets
subject to the Asset Sale and (v) appropriate amounts to be provided by the
Company or any Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate delivered to the Trustee.
"Permitted Indebtedness" means:
(a) Indebtedness of up to $300,000,000 outstanding principal amount
under the Credit Facility;
(b) any guarantee by the Company or any Subsidiary under the Credit
Facility;
(c) Indebtedness (other than Indebtedness included in clause (d) below)
in existence on the date of the Indenture;
(d) Indebtedness of the Company pursuant to the Convertible Debentures;
(e) Indebtedness of the Company pursuant to the Notes;
(f) Indebtedness evidenced by letters of credit issued in the ordinary
course of business consistent with past practice to support the Company's or any
Subsidiary's insurance or self-insurance obligations (including to secure
workers' compensation and other similar insurance coverages);
(g) Interest Rate Contracts, to the extent that the notional principal
amount of such obligations does not exceed the amount of Indebtedness
outstanding or committed to be incurred on the date such Interest Rate Contracts
are entered into;
(h) Indebtedness of the Company to a Wholly Owned Subsidiary and
Indebtedness of a Subsidiary to the Company or another Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock or any
other event which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Issuer or a Wholly Owned Subsidiary) shall be
deemed, in each case to be incurred and shall be treated as an incurrence for
purposes of the covenant described under "-- Limitation on Indebtedness" at the
time the Wholly Owned Subsidiary in question ceased to be a Wholly Owned
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Subsidiary;
(i) any guarantees of Indebtedness by a Subsidiary entered into in
accordance with "-- Certain Covenants--Limitation on Issuance of Guarantees of
Subordinated Indebtedness";
(j) Indebtedness incurred by the Company or any Subsidiary consisting
of Purchase Money Obligations in an amount not to exceed $15,000,000 at any one
time outstanding;
(k) Indebtedness incurred by the Company or any Wholly Owned Subsidiary
consisting of Capital Lease Obligations in an amount not to exceed $15,000,000
at any time outstanding;
(l) Indebtedness of the Company or any Wholly Owned Subsidiary, in
addition to that described in clauses (a) through (k) of this definition of
"Permitted Indebtedness," in an aggregate principal amount outstanding at any
given time not to exceed $40,000,000; and
(m) any renewals, extensions, substitutions, refundings, refinancings
or replacements of any Indebtedness described in clauses (a) through (e) of this
definition of "Permitted Indebtedness," including any successive renewals,
extensions, substitutions, refundings, refinancings or replacements, so long as
(i) any such new Indebtedness shall be in a principal amount that does not
exceed the principal amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced, plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness being refinanced
or the amount of any premium reasonably determined by the Company as necessary
to accomplish such refinancing through means of a tender offer or privately
negotiated transactions and, in each case, actually paid, plus the amount of
expenses of the Company incurred in connection with such refinancing; (ii) in
the case of any refinancing of Subordinated Indebtedness, such new Indebtedness
is made subordinate to the Notes at least to the same extent as the Indebtedness
being refinanced; and (iii) any such new Subordinated Indebtedness has an
Average Life to Stated Maturity longer than the Average Life to Stated Maturity
of the refinanced Subordinated Indebtedness and a final Stated Maturity later
than the final Stated Maturity of the Notes.
"Permitted Investment" means (i) the Notes or any Guarantees; (ii)
Temporary Cash Investments; (iii) Indebtedness of the Company to a Subsidiary
and Indebtedness of a Subsidiary to the Company or another Subsidiary; (iv)
Investments in existence on the date of the Indenture; (v) Investments in any
Wholly Owned Subsidiary by the Company or any Wholly Owned Subsidiary or any
Investment in the Company by any Wholly Owned Subsidiary; (vi) receivables owing
to the Company and its Subsidiaries if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (vii) Investments in any Permitted Joint Ventures; (viii)
Investments in any Healthcare Related Businesses, provided that the Company is
able, at the time of such Investment and immediately after giving pro forma
effect thereto, to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the "Limitation on Indebtedness"
covenant; (ix) Investments acquired or retained from another Person in
connection with any sale, conveyance, transfer, lease or other disposition of
any properties or assets to such Person in accordance with the covenant
described under "-- Disposition of Asset Sales"; and (x) in addition to
Permitted Investments described in the foregoing clauses (i) through (ix),
Investments in the aggregate amount of $20,000,000 at any one time outstanding.
"Permitted Joint Venture" means any Subsidiary which owns, operates or
services Healthcare Related Businesses.
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"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock," as applied to any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Property" means, with respect to any Person, all types of real,
personal, tangible, intangible or mixed property owned by such Person whether or
not included in the most recent consolidated balance sheet of such Person.
"Purchase Money Obligations" means any Indebtedness of the Company or
any Subsidiary incurred to finance the acquisition or construction of any
Property or business (including Indebtedness incurred within 90 days following
such acquisition or construction), including Indebtedness of a Person existing
at the time such Person becomes a Subsidiary or assumed by the Company or a
Subsidiary in connection with the acquisition of assets from such Person;
provided, however, that any Lien on such Indebtedness shall not extend to any
Property other than the Property so acquired or constructed.
"Qualified Capital Stock" of any Person means any and all Capital Stock
of such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to any Stated Maturity of the principal of the
Notes or is redeemable at the option of the holder thereof at any time prior to
any such Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to any such Stated Maturity at the option of the
holder thereof.
"Redemption Date" when used with respect to any Note to be redeemed
pursuant to any provision in the Indenture means the date fixed for such
redemption by or pursuant to the Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
subordinated in right of payment to the Notes.
"Subsidiary" means (i) a corporation (A) at least 50% of the Voting
Stock of which is at the time owned, directly or indirectly, by the Company and
(B) of which the Company, directly or indirectly, has the right to elect a
majority of the members of the Board of Directors either as a result of the
ownership of a majority of the Voting Stock of such corporation or pursuant to a
shareholders or other voting agreement or (ii) any partnership, joint venture,
limited liability company or similar entity at least 50% of the total equity and
voting interests of which (x) is at the time owned, directly or indirectly, by
the Company whether in the
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form of membership, general, special or limited partnership, or otherwise and
(y) the Company or any Wholly Owned Subsidiary is a controlling general partner
or otherwise controls such entity.
"Temporary Cash Investments" means (i) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof and guaranteed
fully as to principal, premium, if any, and interest by the United States of
America, (ii) any certificate of deposit, maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a commercial banking
institution that is a member of the Federal Reserve System and that has combined
capital and surplus and undivided profits of not less than $500,000,000, whose
debt has a rating, at the time as of which any investment therein is made, of
"P-1" (or higher) according to Moody's Investors Service, Inc. or any successor
rating agency, or "A-1" (or higher) according to Standard & Poor's Corporation
or any successor rating agency and (iii) commercial paper, maturing not more
than one year after the date of acquisition, issued by a corporation (other than
an Affiliate or Subsidiary of the Company) organized and existing under the laws
of the United States of America with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's Investors
Service, Inc. or any successor rating agency, or "A-1" (or higher) according to
Standard & Poor's Corporation or any successor rating agency.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Voting Stock" means stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of
which is owned by the Company or another Wholly Owned Subsidiary.
Trustee
The Trustee is expected to be the trustee for the First Mortgage Bonds
and the 9 3/4% Notes.
Book-Entry Delivery and Form
The certificates representing the Notes will be issued in fully
registered form. Except as described in the next paragraph, the Notes initially
will be represented by a Global Note in fully registered form without interest
coupons (the "Global Note") and will be deposited with, or on behalf of, the
Depository Trust Company, New York, New York ("DTC") and registered in the name
of a nominee of DTC.
Existing Notes (i) originally purchased by or transferred to
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) ("Institutional Accredited Investors") who are not
"qualified institutional buyers" (as defined in Rule 144A) ("Qualified
Institutional Buyers"), (ii) except as described below, purchased by or
transferred to Persons outside the United States pursuant to sales in accordance
with Regulation S under the Securities Act or (iii) held by Qualified
Institutional Buyers who elect to take physical delivery of their certificates
instead of holding their interest through the Global Note (and which are then
unable to trade through DTC) (collectively referred to herein as the "Non-Global
Purchasers"), will be in registered form without interest coupons ("Certificated
Notes"). Upon the transfer of Certificated Notes initially issued to a
Non-Global Purchaser to a Qualified Institutional Buyer, such
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Certificated Notes will, unless the transferee requests otherwise or the Global
Note has previously been exchanged in whole for Certificated Notes, be exchanged
for an interest in the Global Note.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Upon the issuance of the Global Note, DTC or its custodian will credit,
on its internal system, the respective principal amount of the individual
beneficial interests represented by such Global Note to the accounts of persons
who have accounts with such depositary. Ownership of beneficial interests in the
Global Note will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
So long as DTC or its nominee is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owners of an interest
in the Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture. Payments of the principal of, premium, if any, and interest on the
Global Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee, nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal, premium, if any, or interest in respect of the Global Note
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial ownership interests in the principal amount of such
Global Note, as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules. If a Holder requires physical delivery of
Certificates Notes for any reason, including to sell Notes to persons in states
which require such delivery of such Notes or to pledge such Notes, such holder
must transfer its interest in the Global Note, in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture. Neither the
Company nor the Trustee will have any responsibility for the
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<PAGE>
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations. Subject to certain conditions, any person having a beneficial
interest in the Global Note may, upon request to the Trustee, exchange such
beneficial interest for Notes in the form of Certificated Notes. Upon any such
issuance, the Trustee is required to register such Certificates Notes in the
name of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). In addition, if DTC is at any time unwilling or unable
to continue as a depositary for the Global Note and a successor depositary is
not appointed by the Company within 90 days, the Company will issue Certificates
Notes in exchange for the Global Note.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Existing Notes where such Existing Notes were acquired
as a result of market-making activities or other trading activities. The Company
has agreed that it will furnish to each Participating Broker-Dealer as many
copies of this Prospectus, as amended or supplemented, as such Participating
Broker-Dealer may reasonably request. In addition, each Participating
Broker-Dealer shall be authorized to deliver this Prospectus in connection with
the sale or transfer of the Exchange Notes. In addition, until ,
all dealers effecting transactions in the Exchange Notes may be required to
deliver a Prospectus.
The Company will not receive any proceeds from any sales of the
Exchange Notes by Participating Broker-Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating Broker-Dealer and/or the purchasers of any such Exchange Notes.
Any Participating Broker-Dealer that resells the Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any omissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The Company will promptly send additional copies of this Prospectus and
any amendment or supplement to this Prospectus to any Participating
Broker-Dealer that requests such documents in the Letter of Transmittal. See
"Exchange Offer -- Purpose and Effect of the Exchange Offer."
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of
the Exchange Notes offered hereby will be passed upon for the Company by Blank
Rome Comisky & McCauley, Philadelphia, Pennsylvania. As to matters of New York
laws, Blank Rome Comisky & McCauley will rely upon the
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<PAGE>
opinion of Simpson Thacher & Bartlett (a partnership which includes professional
corporations) New York, New York. Stephen Luongo, a partner in Blank Rome
Comisky & McCauley, is the beneficial owner of 36,847 shares of Common Stock and
is a director of the Company.
EXPERTS
The consolidated financial statements of Genesis Health Ventures, Inc.
and subsidiaries as of September 30, 1994 and 1995, and for each of the years in
the three-year period ended September 30, 1995 have been included herein and in
the Registration Statement in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein or
incorporated by reference herein and upon the authority of said firm as experts
in accounting and auditing.
The financial statements of McKerley Health Care Centers, Inc. for the
years ended December 31, 1994 and 1993, the financial statements of McKerley
Health Facilities for the years ended December 31, 1994 and 1993, and the
financial statements and other financial information of McKerley Health Care
Center -- Concord Limited Partnership for the period from March 11, 1994 to
December 31, 1994, appearing in Genesis Health Ventures, Inc.'s Current Report
on Form 8-K/A dated April 5, 1996, and the financial statements of National
Health Care Affiliates, Inc. and Related Entities for the year ended December
31, 1995, appearing in Genesis Health Venture, Inc.'s Current Report on Form
8-K/A dated May 3, 1996, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon included therein and
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Geriatric & Medical Companies,
Inc. and subsidiaries as of May 31, 1996 and for each of the years in the
two-year period ended May 31, 1996 appearing in the Genesis Health Ventures,
Inc.'s Current Report on Form 8-K/A dated July 11, 1996 have been audited by BDO
Seidman, LLP, independent auditors, as set forth in their report therein and
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission") . Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621 and 75 Park Place, 14th Floor, New York, New York 10007.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
In addition, the Company's Common Stock, Convertible Debentures and
9 3/4% Notes are listed on the New York Stock Exchange. The Company's reports,
proxy statements and other information filed under the Exchange Act may also be
inspected and copied at the offices of the New York Stock Exchange, 120 Broad
Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by
the Company with the Commission under the Securities Act. This Prospectus omits
certain of the information contained in that
-84-
<PAGE>
Registration Statement, and reference is hereby made to that Registration
Statement and the exhibits filed therewith for further information with respect
to the Company and the Common Stock offered hereby. Any statements contained
herein concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents and portions of documents filed by the Company
with the Commission are hereby incorporated by reference into this Prospectus
and made a part hereof: (i) the Annual Report on Form 10-K for the year ended
September 30, 1995; (ii) the Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1995, March 31, 1996 and June 30, 1996, as amended;(iii) the
Current Report on Form 8-K dated November 30, 1995, as amended; (iv) the Current
Report on Form 8-K dated April 21, 1996; (v) the Current Report on Form 8-K
dated May 3, 1996, as amended; (vi) the Current Report on Form 8-K dated May 8,
1996; (vii) the Current Report on Form 8-K dated July 11, 1996, as amended;
(viii) the Current Report on Form 8-K dated July 26, 1996; and (ix) the Current
Report on Form 8-K dated October 11, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be
part of this Prospectus from the date of filing of such documents. Any statement
contained herein or in any document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus, except as so modified or superseded.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the information that has been incorporated by reference in this Prospectus (not
including exhibits to such information unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Written or oral requests for such copies should be directed to
Genesis Health Ventures, 148 West State Street, Kennett Square, Pennsylvania
19348, Attention: Investor Relations, telephone: (610) 444-6350.
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<PAGE>
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Consolidated Financial Statements
Genesis Health Ventures, Inc. and Subsidiaries
Independent Auditors' Report ...................................................................... F-3
Consolidated Balance Sheets as of September 30, 1994 and 1995 ..................................... F-4
Consolidated Statements of Operations for the years ended September 30, 1993, 1994 and 1995 ....... F-5
Consolidated Statements of Shareholders' Equity for the years ended September 30, 1993, 1994 and
1995 ............................................................................................. F-6
Consolidated Statements of Cash Flows for the years ended September 30, 1993, 1994 and 1995 ....... F-7
Notes to Consolidated Financial Statements ........................................................ F-8
Unaudited Condensed Consolidated Balance Sheet as of June 30, 1996 ................................ F-18
Unaudited Condensed Consolidated Statements of Operations for the three months and for the nine
months ended June 30, 1995 and 1996 .............................................................. F-19
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 1995
and 1996 ......................................................................................... F-20
Notes to Condensed Unaudited Consolidated Financial Statements .................................... F-21
Pro Forma Condensed Consolidated Financial Information
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended September
30, 1995 and the nine months ended June 30, 1996 ................................................. F-23
Unaudited Pro Forma Condensed Consolidated Balance Sheet at June 30, 1996 ......................... F-31
</TABLE>
F-1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
F-2
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Genesis Health Ventures, Inc.:
We have audited the accompanying consolidated balance sheets of Genesis
Health Ventures, Inc. and subsidiaries as of September 30, 1994 and 1995, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended September 30,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Genesis
Health Ventures, Inc. and subsidiaries as of September 30, 1994 and 1995, and
the results of their operations, and their cash flows for each of the years
in the three-year period ended September 30, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, Genesis
Health Ventures, Inc. and subsidiaries adopted the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, in 1994.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
November 29, 1995, except for Note 2
which is as of November 30, 1995, and
Note 13 which is as of March 29, 1996
F-3
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, September 30,
1994 1995
--------------- ---------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents ........................ $ 3,817,425 $ 10,387,506
Accounts receivable, net of allowance for
doubtful accounts of $4,553,364 in 1994 and
$6,178,673 in 1995 ........................ 72,920,814 101,123,573
Other receivables ........................... 22,107,924 36,739,637
Cost report receivables ..................... 12,035,953 26,270,819
Inventory ................................... 6,231,118 9,600,551
Prepaid expenses and other current assets ... 3,038,699 6,934,725
--------------- ---------------
Total current assets ...................... 120,151,933 191,056,811
--------------- ---------------
Property, plant and equipment, net ............... 243,549,782 243,660,567
Funds held by trustee ............................ 1,121,000 1,121,000
Contract rights, net ............................. 3,105,325 2,217,522
Other long-term assets ........................... 41,851,014 49,603,457
Goodwill, net .................................... 101,919,173 112,729,811
--------------- ---------------
Total assets ................................. $511,698,227 $600,389,168
=============== ===============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ............................ $ 10,709,815 $ 19,401,254
Accrued expenses ............................ 14,251,912 13,951,011
Current installments of long-term debt ...... 9,942,806 2,538,675
Accrued compensation ........................ 14,589,921 13,656,490
Interest .................................... 3,321,236 5,513,003
Income taxes payable ........................ 481,805 1,882,594
--------------- ---------------
Total current liabilities ................. 53,297,495 56,943,027
--------------- ---------------
Long-term debt ................................... 250,806,778 308,052,441
Deferred income taxes ............................ 9,268,272 8,698,272
Deferred gain and other long-term liabilities .... 2,859,522 5,147,891
Shareholders' equity:
Common stock, par $.02, authorized 60,000,000
shares; issued and outstanding 21,829,365
and 21,773,125 at September 30, 1994;
22,081,267 and 22,035,666 at September 30,
1995 ...................................... 291,057 294,460
Additional paid-in capital .................. 153,573,281 155,927,049
Retained earnings ........................... 41,961,608 65,569,282
Treasury stock, at cost ..................... (359,786) (243,254)
--------------- ---------------
Total shareholders' equity .................. 195,466,160 221,547,537
--------------- ---------------
Total liabilities and shareholders' equity .. $511,698,227 $600,389,168
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended September 30,
------------------------------------------------
1993 1994 1995
------------- ------------ ------------
<S> <C> <C> <C>
Net revenues:
Basic healthcare services . $133,370,007 $240,263,861 $278,120,711
Specialty medical services 75,226,895 125,717,823 180,326,730
Management services and
other ................... 11,212,275 22,634,576 27,945,341
----------- ------------ ------------
Total net revenues ...... 219,809,177 388,616,260 486,392,782
----------- ------------ ------------
Operating expenses:
Salaries, wages, and
benefits ................ 112,293,001 192,533,861 237,610,082
Other operating expenses .. 61,791,025 109,059,421 137,944,784
General corporate expense . 7,595,972 17,649,907 17,584,487
Depreciation and amortization .. 7,157,110 14,982,173 18,792,823
Lease expense .................. 7,026,491 11,376,029 13,798,412
Interest expense, net .......... 5,042,254 15,305,139 20,366,456
----------- ------------ ------------
Earnings before income
taxes, extraordinary
items and cumulative
effect of a change in
accounting principle .... 18,903,324 27,709,730 40,295,738
Income taxes ................... 6,994,230 10,018,535 14,764,941
----------- ------------ ------------
Earnings before
extraordinary items and
cumulative effect of a
change in accounting
principle ............... 11,909,094 17,691,195 25,530,797
Extraordinary items, net of tax -- (552,585) (1,923,123)
Cumulative effect of a change in
accounting principle ......... -- 534,659 --
----------- ------------ ------------
Net income ................. $ 11,909,094 $ 17,673,269 $ 23,607,674
=========== ============ ============
Per common share data:
Primary:
Earnings before
extraordinary items and
cumulative effect of a
change in accounting
principle ............... $ 0.67 $ 0.89 $ 1.13
Net income ................ $ 0.67 $ 0.89 $ 1.05
Weighted average shares of
common stock and
equivalents ............. 17,800,200 19,930,828 22,587,035
----------- ------------ ------------
Fully diluted:
Earnings before
extraordinary items and
cumulative effect of a
change in accounting
principle ............... $ 0.67 $ 0.84 $ 1.03
Net income ................ $ 0.67 $ 0.84 $ 0.97
Weighted average shares of
common stock and
equivalents ............. 17,928,522 24,819,711 28,452,436
----------- ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
---------- -------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at September 30,
1992 .................. $206,389 $ 70,576,932 $12,379,245 $(459,786) $ 82,702,780
Issuance of additional
common stock net of
issuance costs ........ 38,700 30,051,359 -- -- 30,090,059
Exercise of common stock
options and issuance of
stock bonus awards .... 1,856 644,356 -- -- 646,212
1993 net earnings ...... -- -- 11,909,094 -- 11,909,094
---------- -------------- ------------- ------------ -------------
Balance at September 30,
1993 .................. 246,945 101,272,647 24,288,339 (459,786) 125,348,145
========== ============== ============= ============ =============
Issuance of additional
common stock, net of
issuance costs ........ 42,926 51,572,278 -- -- 51,615,204
Issuance of shares from
Treasury .............. -- -- -- 100,000 100,000
Exercise of common stock
options ............... 1,186 728,356 -- -- 729,542
1994 net earnings ...... -- -- 17,673,269 -- 17,673,269
---------- -------------- ------------- ------------ -------------
Balance at September 30,
1994 .................. 291,057 153,573,281 41,961,608 (359,786) 195,466,160
========== ============== ============= ============ =============
Issuance of additional
common stock .......... 486 620,860 -- -- 621,346
Issuance of shares from
Treasury .............. -- -- -- 116,532 116,532
Exercise of common stock
options and issuance of
stock bonus awards .... 2,917 1,732,908 -- -- 1,735,825
1995 net earnings ...... -- -- 23,607,674 -- 23,607,674
---------- -------------- ------------- ------------ -------------
Balance at September 30,
1995 .................. $294,460 $155,927,049 $65,569,282 $(243,254) $221,547,537
========== ============== ============= ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------------------------
1993 1994 1995
-------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................ $ 11,909,094 $ 17,673,269 $ 23,607,674
Adjustments to reconcile net income to net cash
provided by operating activities:
Charges (credits) included in operations not
requiring funds:
Provision for deferred taxes ................. 2,671,000 4,483,022 (1,270,000)
Depreciation and amortization ................ 7,157,110 14,982,173 18,792,823
Amortization of deferred gain ................ (319,073) (319,000) (460,000)
Extraordinary loss ........................... -- 552,585 1,923,123
Cumulative effect of a change in accounting
principle ................................. -- (534,659) --
Changes in assets and liabilities excluding
effects of acquisitions and dispositions:
Increase in accounts receivable .............. (7,633,812) (15,485,474) (25,563,759)
Increase in cost report receivables .......... (2,269,892) (1,769,744) (15,064,866)
Increase in inventory ........................ (680,965) (936,575) (3,176,433)
Increase in prepaid expenses and other current
assets .................................... (2,416,862) (6,705,392) (420,516)
Increase (decrease) in accounts payable and
accrued expenses .......................... (673,355) 4,418,452 7,235,133
Increase in accrued compensation and interest 159,806 4,558,311 1,258,336
Increase (decrease) in income taxes payable .. (986,268) (353,955) 871,443
-------------- --------------- ---------------
Total adjustments ................................... (4,992,311) 2,889,744 (15,874,716)
-------------- --------------- ---------------
Net cash provided by operating activities .... 6,916,783 20,563,013 7,732,958
-------------- --------------- ---------------
Cash flows from investing activities:
Capital expenditures .............................. (23,151,427) (18,784,116) (24,718,616)
Cash paid net -- acquisitions ..................... (579,000) (214,306,437) (8,194,000)
Other long-term asset additions ................... (11,874,540) (9,224,541) (13,130,338)
(Increase) decrease in funds held by trustee ...... 710,913 (48,781) 25,777
-------------- --------------- ---------------
Net cash used in investing activities .......... (34,894,054) (242,363,875) (46,017,177)
-------------- --------------- ---------------
Cash flows from financing activities:
Net borrowings (repayments) under working capital
revolving credit ............................... 34,644,287 (10,200,000) 30,100,000
Repayment of long-term debt ....................... (92,068,067) (26,059,621) (102,450,468)
Proceeds from issuance of long-term debt .......... 60,828,534 125,000,000 119,700,000
Proceeds from issuance of convertible debentures .. -- 86,250,000 --
Proceeds from issuance of common stock ............ 30,505,275 52,047,896 100,000
Stock issuance costs .............................. (415,216) (432,692) --
Common stock options exercised .................... 576,588 522,542 1,735,825
Debt issuance costs ............................... (3,433,526) (5,050,930) (4,331,057)
-------------- --------------- ---------------
Net cash provided by financing activities ...... 30,637,875 222,077,195 44,854,300
-------------- --------------- ---------------
Net increase in cash and equivalents ................ 2,660,604 276,333 6,570,081
Cash and equivalents:
Beginning of year ................................. 880,488 3,541,092 3,817,425
End of year ....................................... $ 3,541,092 $ 3,817,425 $ 10,387,506
============== =============== ===============
Supplemental disclosure of cash flow information:
Interest paid ..................................... $ 5,455,423 $ 12,085,369 $ 18,174,689
Income taxes paid ................................. $ 5,310,100 $ 5,159,000 $ 13,037,150
============== =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Genesis
Health Ventures, Inc. (the Company) and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The Company provides a broad range of healthcare services to the geriatric
population, principally within five geographic markets in the eastern United
States. These services include basic healthcare services traditionally
provided in geriatric care facilities; specialty medical services, such as
rehabilitation therapy, institutional pharmacy and medical supply services
and subacute care; and management services to independent geriatric care
providers.
PROPERTY, PLANT AND EQUIPMENT
Land, land improvements, buildings, and equipment are stated at cost.
Subsequent additions are recorded at cost. Depreciation of land improvements,
buildings and equipment is calculated on the straight-line method over their
estimated useful lives that range from three years to 35 years.
Expenditures for maintenance and repairs necessary to maintain property
and equipment in efficient operating condition are charged to operations.
Costs of additions and betterments are capitalized. Interest costs associated
with construction or renovation are capitalized in the period in which they
are incurred.
INVENTORIES
Inventories of drugs and supplies are stated at the lower of cost or
market. Cost is determined primarily on the first-in, first-out (FIFO)
method.
CONTRACTUAL ADJUSTMENTS
Patient revenues are recorded based on standard charges applicable to all
patients. Under Medicare, Medicaid, and other cost-based reimbursement
programs, each facility is reimbursed for services rendered to covered
program patients as determined by reimbursement formulas. The differences
between established billing rates and the amounts reimbursable by the
programs and patient payments are recorded as contractual adjustments and
deducted from revenues.
Retroactively calculated third-party contractual adjustments are accrued
on an estimated basis in the period the related services are rendered.
Revisions to estimated contractual adjustments are recorded based upon audits
by third-party payors, as well as other communications with third-party
payors such as desk reviews, regulation changes and policy statements. These
revisions are made in the year such amounts are determined.
INVESTMENTS
Investments are carried at cost, which approximates fair value, and
interest income is recognized as earned.
DEFERRED FINANCING COSTS
Financing costs have been deferred and are being amortized on a
straight-line basis over the term of the related debt. Net deferred financing
costs included in other long term assets were $8,123,000 and $9,425,000 at
September 30, 1994 and 1995, respectively.
F-8
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
CONTRACT RIGHTS
Contract rights represent the value assigned to a management contract
obtained in conjunction with the Company's acquisition of Genesis Management
Resources, Inc. (formerly, Total Care Systems, Inc.). The contract is with a
company that owns life care communities and provides for a management fee in
exchange for management, marketing and development services provided to the
communities. The Company obtained an independent appraisal with respect to
the assigned value of the contract rights. Contract rights are being
amortized over ninety-four months which represents the term of the related
contract.
GOODWILL
Goodwill represents the excess of the purchase price over the fair market
value of net assets acquired and is amortized on a straight-line basis from
ten to forty years. Accumulated amortization at September 30, 1994 and 1995
was $3,300,000 and $6,200,000, respectively. Goodwill is reviewed for
impairment whenever events or circumstances provide evidence that suggest
that the carrying amount of goodwill may not be recoverable. The Company
assesses the recoverability of goodwill by determining whether the
amortization of the goodwill balance can be recovered through projected
undiscounted future cash flows.
INCOME TAXES
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (Statement 109) was adopted by the Company in 1994. Statement
109 required a change from the deferred method to the asset and liability
method of accounting for income taxes. Under the asset and liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. Under Statement 109, the effect
on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
Provision is made for deferred income taxes applicable to temporary
differences between financial statement and taxable income.
EARNINGS PER SHARE
Primary earnings per share is based on the average number of shares of
common stock outstanding during the period and the dilutive effect of stock
options and other common stock equivalents. Fully diluted earnings per share
reflect the conversion of the Convertible Senior Subordinated Debentures as
if such conversion had occurred on the date of issuance and the related
interest expense had not been incurred.
CASH EQUIVALENTS
Short-term investments which have a maturity of ninety days or less at
acquisition are considered cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to
various market data and other valuation considerations. The fair value of
financial instruments approximates their recorded values.
NEW ACCOUNTING PRONOUNCEMENTS
In March, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(Statement 121). Statement 121 provides guidance for recognition and
measurement of impairment of long-lived assets, certain identifiable
intangibles and goodwill related both to
F-9
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
assets to be held and used and assets to be disposed of. The Company is
required to adopt Statement 121 for the year ending September 30, 1997. The
Company has not yet quantified the impact, if any, of the adoption of
Statement 121 may have on its consolidated financial statements.
In October, 1995, the FASB issued Statement 123, "Accounting for
Stock-Based Compensation" (Statement 123). Statement 123 allows companies the
option to retain the current accounting approach for recognizing stock-based
expense in the financial statements or to adopt a new accounting method based
on the estimated fair value of employee stock options. Companies that do not
follow the new fair value based method will be required to provide expanded
disclosures in the footnotes. The Company is required to adopt Statement 123
for the year ending September 30, 1997. The Company expects to continue
applying its current accounting approach and upon adoption will present the
required footnote disclosures.
(2) ACQUISITIONS/DISPOSITIONS
On November 30, 1995, subsequent to fiscal year end, the Company acquired
McKerley Health Care Centers, Inc. and related entities (collectively,
"McKerley") for total consideration of approximately $68,700,000. The
transaction also provides for up to an additional $6,000,000 of contingent
consideration payable upon the achievement of certain financial objectives
through October 1997. McKerley owns or leases 15 geriatric care facilities in
New Hampshire and Vermont with a total of 1,535 beds and operates a home
healthcare company. The acquisition was financed with long-term debt.
On September 30, 1995, the Company sold, subject to a three year
management contract, five facilities totaling 606 beds to the AGE Institute
of Massachusetts ("AIMASS") for $19,570,000.
On June 1, 1995, the Company acquired Eastern Medical Supplies, Inc. and
its affiliate Eastern Rehab Services, Inc. (collectively, "Eastern Medical")
for approximately $2,000,000. Eastern Medical sells and leases home medical
equipment, respiratory products and services and rehabilitation equipment to
patients at home throughout Maryland.
On April 1, 1995, the Company acquired TherapyCare Systems, L.P.
("TherapyCare") for approximately $7,000,000. TherapyCare provides physical
therapy, occupational therapy and speech therapy to 73 long-term care
facilities throughout Pennsylvania.
On March 1, 1995, a joint venture in which the Company is a 55% partner
acquired Delta Drug, Inc. ("Delta Drug") for approximately $1,700,000. Delta
Drug, an institutional pharmacy company located in Providence, Rhode Island,
serves over 2,000 long-term care beds.
On November 30, 1993, the Company acquired substantially all of the assets
of Meridian, Inc., Meridian Healthcare, Inc. and their affiliated entities
(Meridian). The purchase price was approximately $205,000,000, which included
approximately $70,000,000 of debt paid prior to the consummation of the
transaction. The transaction (Meridian Transaction) was financed with
approximately $84,000,000 in proceeds from an offering of 6% Convertible
Senior Subordinated Debentures issued in November 1993 and a bank credit
facility. Meridian operated 36 geriatric care facilities and provided
specialty medical and management services in six geographic markets in the
United States. The Company allocated $121,000,000 of the excess purchase
price to tangible assets and recorded approximately $84,000,000 in goodwill
as a result of this transaction.
The following unaudited pro forma statement of operations information
gives effect to the Meridian Transaction described above as though it had
occurred on October 1, 1992, after giving effect to certain adjustments,
including amortization of goodwill, additional depreciation expense,
increased interest expense on debt related to the acquisition and related
income tax effects. The pro forma financial information does not necessarily
reflect the results of operations that would have occurred had the
acquisition occurred on October 1, 1992.
F-10
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
Year Ended
September 30,
------------------------
1993 1994
---------- ----------
(In thousands except per
share data)
<S> <C> <C>
Pro Forma Statement of Operations Information:
Total net revenues ................................................ $364,266 $416,819
Income before extraordinary items and cumulative effect of an
accounting change ................................................ 14,013 18,143
Net income ........................................................ 14,013 18,125
Primary earnings per share before extraordinary items and
cumulative effect of an accounting change ........................ 0.78 0.91
Fully diluted earnings per share before extraordinary items and
cumulative effect of an accounting change ........................ 0.73 0.85
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at September 30, 1994 and 1995 consist of
the following:
<TABLE>
<CAPTION>
September 30,
-----------------------------------
1994 1995
-------------- -------------
<S> <C> <C>
Land ............................. $ 18,357,703 $ 17,606,305
Land improvements ................ 2,849,424 3,193,296
Buildings ........................ 222,355,216 219,636,621
Equipment ........................ 39,966,560 46,196,213
Construction in progress ......... 3,061,394 8,136,354
-------------- -------------
286,590,297 294,768,789
Less accumulated depreciation .... 43,040,515 51,108,222
-------------- -------------
Net property, plant and equipment $243,549,782 $243,660,567
============== =============
</TABLE>
(4) LONG-TERM DEBT
Long-term debt at September 30, 1994 and 1995 was as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------------
1994 1995
-------------- --------------
<S> <C> <C>
Secured--due 1996 to 2014; 7.88% to 12.00% (weighted
average interest rate 1994--6.8%; 1995--8.22%) ........... $172,958,506 $101,138,191
Unsecured--due 1996 to 2008; 5.5% to 11.00% (weighted
average interest rate 1994--8.3%; 1995-- 9.6%) ........... 1,572,492 123,523,700
Convertible Senior Subordinated Debentures due 2003--6% ... 86,250,000 86,250,000
-------------- --------------
260,780,998 310,911,891
Less:
Debt discount, net of amortization ................... 31,414 320,775
Current installments and short-term borrowings ....... 9,942,806 2,538,675
-------------- --------------
$250,806,778 $308,052,441
============== ==============
</TABLE>
At September 30, 1995, the Company has approximately $66,500,000 of
floating rate debt based on prime or LIBOR with a weighted average interest
rate of 7.19%. At September 30, 1995, the Company has $244,411,891 of fixed
rate debt with a weighted average interest rate of 8.3%.
On or after November 30, 1996, the Company may redeem the 6% Convertible
Senior Subordinated Debentures (the Debentures) in whole or in part at a
redemption price initially equal to 104.2% of the principal amount and
decreasing annually thereafter. The Debentures are convertible into Common
Stock at the option of the holder at anytime prior to maturity unless
previously redeemed at a conversion price of $15.104 per share.
F-11
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
In connection with financing the Meridian Transaction, the Company
obtained a $200,000,000 bank facility to replace the then existing
$65,000,000 term loan/revolving credit facility. The agreement provided for a
$125,000,000 term loan and a $75,000,000 revolving credit facility which bore
interest at the prime rate plus 1.5% or LIBOR plus 2.5%.
In September 1995, the Company amended and restructured its bank credit
facility to provide for a $200,000,000 revolving credit facility and a
$100,000,000 acquisition credit facility. Both credit facilities bear
interest at a floating rate equal, at the Company's option, to the prime rate
or LIBOR plus 1.25%. Amounts outstanding under the credit facilities in
September 1998 convert to a term loan that provides for equal annual
amortization payable quarterly. At September 30, 1995, $66,500,000 was
outstanding under the revolving credit facility. The credit facilities are
secured by the stock of the Company's subsidiaries and first priority liens
on the Company's accounts receivable, inventory and all other personal
property.
In June 1995, the Company completed an offering of $120,000,000 of 9 3/4 %
Senior Subordinated Notes due 2005 (the Notes). Interest is payable on the
Notes on June 15 and December 15 of each year commencing December 15, 1995.
The Notes are redeemable at the option of the Company in whole or in part, at
any time, on or after June 15, 2000 at a redemption price initially equal to
104.05% of the principal amount and decreasing annually thereafter. The
Company used the net proceeds from the Notes offering to repay a portion of
the bank credit facility.
At September 30, 1995, sinking fund requirements and installments of
long-term debt are as follows:
<TABLE>
<CAPTION>
Year ending Principal
September 30, Amount
--------------- -------------
<S> <C>
1996 .......... $ 2,538,675
1997 .......... 2,291,318
1998 .......... 3,015,885
1999 .......... 18,863,477
2000 .......... 18,771,255
Thereafter .... $265,431,281
</TABLE>
In November 1995, the Company entered into two separate interest rate swap
agreements with two financial institutions. The first agreement is for a term
of five years and a notional amount of $15,000,000 whereby the Company will
make quarterly payments at a fixed rate of 5.86% and receive quarterly
payments at a floating rate based on three month LIBOR (5.97% at September
30, 1995). The second agreement is for a term of three years and a notional
amount of $5,000,000 whereby the Company will make quarterly payments based
on a fixed rate of 5.66% and receive quarterly payments at a floating rate
based on three month LIBOR
In November 1995, the Company entered into an interest rate collar
agreement for five years for a notional amount of $10,000,000. The agreement
requires the Company to receive payments when three month LIBOR rate exceeds
6.25% and make payments when the three month LIBOR rate falls below 5.05%.
Interest of $405,118 in 1994 and $457,000 in 1995 was capitalized in
connection with facility renovations.
During 1994 and 1995, the Company recorded an extraordinary loss, net of
tax, of $552,585 and $1,923,123, related to the early retirement of debt.
The Company is restricted from declaring any dividends or authorizing any
other distribution on account of ownership of its capital stock unless
certain conditions are met.
(5) LEASES AND LEASE COMMITMENTS
The Company leases certain facilities and equipment under operating
leases. Future minimum payments for the next five years under operating
leases at September 30, 1995 were as follows:
F-12
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
Year ending Minimum
September 30, payments
--------------- -------------
<S> <C>
1996 .......... $14,835,340
1997 .......... 14,298,366
1998 .......... 11,083,307
1999 .......... 10,568,196
2000 .......... 8,504,859
</TABLE>
In connection with the Meridian Transaction, the Company entered into
agreements to lease seven geriatric care facilities for ten years, including
a purchase option, that will continue to be owned by certain of Meridian's
former shareholders. The annual lease payment is $6,000,000. If the Company
exercised its option to purchase the leased facilities, the price at the end
of the lease term would be $59,000,000.
(6) PATIENT SERVICE REVENUE
The distribution of net patient service revenue by class of payor for the
years ended September 30, 1993, 1994 and 1995 was as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------------
Class of payor 1993 1994 1995
--------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Private pay and other $ 87,122,847 $148,945,566 $175,205,592
Medicaid ............ 92,885,512 156,893,671 185,611,801
Medicare ............ 28,588,543 60,142,447 97,630,048
-------------- -------------- --------------
$208,596,902 $365,981,684 $458,447,441
============== ============== ==============
</TABLE>
The above revenue amounts are net of third-party contractual allowances of
$46,170,589, $81,544,600 and $98,494,511 in 1993, 1994 and 1995,
respectively.
The Company has recorded cost report receivables from third-party payors
(i.e., Medicare and Medicaid) of approximately $12,036,000 and $26,271,000 at
September 30, 1994 and 1995, respectively. These amounts at September 30,
1995 are due primarily from Massachusetts ($6,900,000), Pennsylvania
($3,600,000) and Medicare ($15,600,000) for the 1987 through 1995 cost
reporting periods.
(7) RELATED PARTY TRANSACTIONS
During 1987, certain directors and officers of the Company formed a
partnership, Salisbury Medical Office Building General Partnership ("SMOB"),
and purchased a building, a pharmacy and a medical center located in
Salisbury, Maryland. The Company has entered into annual lease agreements
with SMOB to lease the building. In Fiscal 1989, the Company entered into a
five-year lease agreement to finance approximately $1,100,000 of equipment
from SMOB. In accordance with the equipment lease agreement, the Company
purchased the equipment at fair market value. The total lease payments and
equipment purchase payments to SMOB for Fiscal 1993, 1994 and 1995 were
$382,000, $420,000 and $198,000, respectively.
In August 1993, the Company guaranteed a loan in the amount of $1,000,000
to Samuel H. Howard which amount was invested by Mr. Howard in Phoenix
Healthcare Corporation. The guarantee is secured by a pledge of Mr. Howard's
stock in Phoenix Healthcare Corporation. In return for such guarantee the
Company received an option to purchase up to 25% of the stock of Phoenix
Healthcare Corporation at a price of $.25 per share, subject to Mr. Howard's
right to purchase the option for $1,000,000 upon release of the guarantee.
In September 1994, Mr. Howard exercised his right to purchase the option
for $1,000,000. The Company received as consideration $150,000 in cash and an
$850,000 note bearing interest at 12% from Mr. Howard. At September 30, 1995,
the balance of the note was $718,000 which was repaid in full subsequent to
year end. Samuel H. Howard, a director of the Company, is the principal
shareholder of Phoenix Healthcare Corporation.
F-13
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(8) INCOME TAXES
As discussed in Note 1, the Company adopted Statement 109 as of October 1,
1993. The cumulative effect of this change in accounting for income taxes of
$534,659 is determined as of October 1, 1993 and is reported separately in
the consolidated statement of operations for the year ended September 30,
1994. As a result of applying Statement 109, earnings before income taxes for
the years ended September 30, 1995 and 1994 were decreased $390,000 due to
the effects of adjustments for prior purchase business combinations. Prior
years financial statements have not been restated to apply the provisions of
Statement 109.
The Company has provided no valuation allowance for deferred tax assets.
The Company believes it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the deferred
tax assets.
Total income tax expense for the years ended September 30, 1994 and 1995
was allocated as follows:
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------
1994 1995
------------- -------------
<S> <C> <C>
Income from continuing operations $10,018,536 $14,764,941
Extraordinary item .............. (324,534) (1,129,452)
------------- -------------
Total .......................... $ 9,694,001 $13,635,489
============= =============
</TABLE>
The components of the provision for income taxes for the years ended
September 30, 1993, 1994 and 1995 were as follows:
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------------------------------
1993 1994 1995
------------ ------------- -------------
<S> <C> <C> <C>
Current:
Federal .. $3,859,230 $ 4,768,513 $13,483,941
State .... 464,000 767,000 2,551,000
------------ ------------- -------------
4,323,230 5,535,513 16,034,941
------------ ------------- -------------
Deferred:
Federal .. 2,603,000 3,973,022 (650,000)
State .... 68,000 510,000 (620,000)
------------ ------------- -------------
2,671,000 4,483,022 (1,270,000)
------------ ------------- -------------
Total ..... $6,994,230 $10,018,535 $14,764,941
============ ============= =============
</TABLE>
Total income tax expense differed from the amounts computed by applying
the U.S. federal income tax rates of 34.75% for 1993 and 35% for 1994 and
1995 to net income before income taxes and extraordinary items as a result of
the following:
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------------------
1993 1994 1995
------------ ------------- -------------
<S> <C> <C> <C>
Computed "expected" tax expense ....................... $6,568,905 $ 9,698,246 $14,103,508
Increase (reduction) in income taxes resulting from:
State and local income taxes, net of federal tax
benefit ........................................ 348,000 830,000 1,255,000
Amortization of goodwill ............................ 260,000 154,000 197,000
Targeted jobs credits ............................... (128,000) (600,000) (528,000)
Other, net .......................................... (54,675) (63,711) (262,567)
------------ ------------- -------------
Total income tax expense .............................. $6,994,230 $10,018,535 $14,764,941
============ ============= =============
</TABLE>
F-14
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The sources of the differences between consolidated earnings for financial
statement purposes and tax purposes and the tax effects are as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------
1993 1994 1995
------------ ------------- --------------
<S> <C> <C> <C>
Excess tax depreciation expense versus book depreciation $ 311,000 $ 1,007,000 $ 1,064,000
Excess tax gain versus book gain ....................... -- (302,000) (2,879,000)
Accounts receivable allowance for doubtful accounts .... -- (312,000) (221,000)
Amortization of deferred gain on sale and leaseback .... 125,000 128,000 103,000
Targeted jobs credit carryforward ...................... (128,000) 446,000 --
Accrued liabilities and reserves ....................... (58,000) (1,401,000) (280,000)
Goodwill ............................................... -- 3,790,000 920,000
Alternative minimum tax credit ......................... 2,421,000 1,192,000 --
Other .................................................. -- (64,978) 23,000
------------ ------------- --------------
Net deferred tax provision ............................ $2,671,000 $ 4,483,022 $(1,270,000)
============ ============= ==============
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at September
30, 1994 and 1995 are presented below:
<TABLE>
<CAPTION>
1994 1995
-------------- --------------
<S> <C> <C>
Deferred Tax Assets
Accounts receivable .......... $ 970,000 $ 1,303,000
Accrued compensation ......... 220,000 532,000
Amortization of deferred gain 440,000 297,000
Goodwill ..................... 4,995,000 4,075,000
Accrued liabilities and
reserves .................. 961,000 24,000
Other, net ................... 109,000 --
-------------- --------------
Net deferred tax assets ........ 7,695,000 6,231,000
-------------- --------------
Deferred Tax Liabilities
Goodwill and Contract Rights . (7,061,000) (6,590,000)
Depreciation ................. (9,770,000) (8,272,000)
Other, net ................... (132,000) (67,000)
-------------- --------------
Total deferred tax liability ... (16,963,000) 14,929,000
-------------- --------------
Net deferred liability ......... $ (9,268,000) $(8,698,000)
============== ==============
</TABLE>
(9) STOCK OPTION PLANS
The Company has two stock option plans (the "Employee Plan" and the
"Directors Plan"). Under the Employee Plan, 2,000,000 shares of Common Stock
were reserved for issuance to employees including officers and directors.
Generally, the options granted in the Employee Plan become exercisable over a
5 year period and expire 10 years from the date of grant. All options granted
under the Employee Plan have been at the fair market value of the common
stock on the date of grant.
F-15
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
Option Price Available
per Share Outstanding Exercisable for Grant
-------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Balance at September 30, 1993 $ 2.22-$13.33 1,164,033 514,429 161,517
------------- ---------- --------- ----------
Authorized ................... -- -- -- 450,000
Granted ...................... 13.17-17.00 691,500 -- (691,500)
Became Exercisable ........... -- -- 305,156 --
Exercised .................... 4.45-10.50 (88,980) (88,980) --
Cancelled .................... -- (156,450) -- 156,450
------------- ----------- --------- ----------
Balance at September 30, 1994 2.22-17.00 1,610,103 730,605 76,467
------------- ----------- --------- ----------
Authorized ................... -- -- -- 1,050,000
Granted ...................... 19.67-20.25 740,625 -- (740,625)
Became Exercisable ........... -- -- 400,692 --
Exercised .................... 5.33-16.83 (204,585) (204,585) --
Cancelled .................... -- (51,975) -- 51,975
------------- ---------- --------- ----------
Balance at September 30, 1995 $ 2.22-$20.25 2,094,168 926,712 437,817
============= ========== ========= ==========
</TABLE>
(10) RETIREMENT PLAN
The Company has a defined contribution plan covering all employees having
1,000 hours or more of service and one year of service in a plan year.
Employees' contributions to the plan may be matched by the Company based on
years of service. During the plan years ended December 31, 1993, 1994 and
1995, the Company accrued a match of 50% of employee contributions up to 3%
of the employee's annual gross salary.
Additionally, the Plan provides for discretionary employer contributions,
based on profits of the Company, in the form of Company common stock and/or
cash. The Company recorded retirement plan expense for the 401(k) match and
the discretionary contribution of approximately $500,000, $959,000, and
$1,128,000 for the years ended September 30, 1993, 1994, 1995, respectively.
Certain employees of Meridian were eligible to participate in plans which
qualified under Section 401(K) of the Internal Revenue Service Code. In
accordance with the terms of the plans, employees elected to contribute a
percentage of their respective annual compensation to the plans, subject to
certain limitations. The Company was obligated to match 50% of each
employee's contribution up to 3% of their respective annual compensation.
Beginning January 1, 1995 one of these plans was merged into the Genesis
Health Ventures, Inc. Retirement Plan.
(11) COMMITMENTS AND CONTINGENCIES
In connection with certain management agreements, the Company has
guaranteed $23,240,000 of indebtedness of others, has lent $12,881,000 at
various interest rates ranging from 7% to 10% and has agreed to provide
working capital advances totalling $21,909,500. At September 30, 1995,
$15,713,800 was outstanding related to cash advances under these working
capital arrangements.
In August 1995, the Company entered into a software license agreement for
clinical operating system. The total commitment under the license agreement
is $12,000,000 of which the Company has paid $3,500,000. The license
agreement provides for a refund of amounts paid in the event the software
does not meet the acceptance requirements as defined in the license
agreement. The Company has estimated the cost to install the system and
related hardware, not including amounts paid for the software license, to be
approximately $18,000,000 over the next four years.
The Company is self-insured for a portion of its workers' compensation and
health insurance exposures. The Company's maximum self-insured exposure is
$500,000 per claim with certain maximum aggregate policy limits per claim
year.
F-16
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
The Company's exposure to credit loss in the event of non-performance by
the other party to the financial instrument for guarantees, loan commitments
and letters of credit is represented by the dollar amount of those
instruments. The Company uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet financial
instruments. The Company does not anticipate any material losses as a result
of these commitments.
Genesis is a party to litigation arising in the ordinary course of
business. Genesis does not believe the results of such litigation, even if
the outcome is unfavorable to the Company, would have a material adverse
effect on its consolidated financial position or results of operations.
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's unaudited quarterly financial information is as follows:
<TABLE>
<CAPTION>
Fully-diluted
Earnings Earnings Per
before Share before
Cumulative Cumulative
Effect of Effect of
Accounting Accounting
Change and Change and Fully-diluted
Total Net Extraordinary Net Extraordinary Earnings
(In thousands, except per share data) Revenues Items Earnings Items Per Share
---------------------------------- ----------- --------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Quarter ended:
December 31, 1994 ................ $111,553 $ 4,810 $ 4,810 $ .21 $.21
March 31, 1995 ................... 116,953 5,813 5,813 .24 .24
June 30, 1995 .................... 125,959 6,885 4,962 .28 .21
September 30, 1995 ............... 131,928 8,023 8,023 .31 .31
----------- --------------- ---------- --------------- ---------------
$486,393 $25,531 $23,608 $1.03 $.97
----------- --------------- ---------- --------------- ---------------
Quarter ended:
December 31, 1993 ................ $ 71,913 $ 2,915 $ 3,055 $ .15 $.16
March 31, 1994 ................... 98,640 3,584 3,584 .19 .19
June 30, 1994 .................... 105,361 4,708 4,550 .23 .22
September 30, 1994 ............... 112,702 6,484 6,484 .27 .27
----------- --------------- ---------- --------------- ---------------
$388,616 $17,691 $17,673 $ .84 $.84
=========== =============== ========== =============== ===============
</TABLE>
(13) SUBSEQUENT EVENT
Effective March 29, 1996, the Company issued a three for two stock
dividend on the Common Stock. Share and per share information in the
accompanying consolidated financial statements has been adjusted accordingly.
F-17
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1996
-------------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ..................................... $ 10,387 $ 70,626
Accounts receivable, net of allowance for doubtful accounts of
$6,179 at September 30, 1995 and $9,674 at June 30, 1996 ... 101,124 144,036
Cost report receivables ....................................... 26,271 31,413
Inventory ..................................................... 9,601 16,872
Other current assets .......................................... 43,674 34,062
-------------- -----------
Total current assets ..................................... 191,057 297,009
-------------- -----------
Property, plant and equipment ................................... 294,769 375,628
Accumulated depreciation ........................................ (51,108) (62,240)
-------------- -----------
243,661 313,388
Goodwill and other intangibles, net ............................. 114,947 196,119
Other assets .................................................... 50,724 71,832
-------------- -----------
TOTAL ASSETS ............................................. $600,389 $878,348
============== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses ......................... $ 52,522 $ 64,163
Current installments of long-term debt ........................ 2,539 2,512
Income taxes payable .......................................... 1,882 2,735
-------------- -----------
Total current liabilities ................................ 56,943 69,410
-------------- -----------
Long-term debt .................................................. 308,052 295,897
Deferred income taxes ........................................... 8,698 6,586
Deferred gain and other liabilities ............................. 5,149 6,217
Shareholders' Equity:
Common stock, par value $.02, authorized 60,000,000 shares,
issued and outstanding, 22,081,267 and 22,035,666 at
September 30, 1995; 31,981,680 and 31,936,079 at June 30,
1996 ....................................................... 294 476
Additional paid-in capital .................................... 155,927 411,677
Retained earnings ............................................. 65,569 88,328
-------------- -----------
221,790 500,481
Less treasury stock, at cost .................................... (243) (243)
-------------- -----------
Total shareholders' equity ............................... 221,547 500,238
-------------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............... $600,389 $878,348
============== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-18
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------- ----------------------------
1995 1996 1995 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenues:
Basic healthcare services ....... $ 69,701 $ 85,846 $ 206,073 $ 241,107
Specialty medical services ...... 48,188 78,347 128,333 193,347
Management services and other,
net .......................... 8,070 8,643 20,059 25,900
------------ ------------ ------------ ------------
Total net revenues ........... 125,959 172,836 354,465 460,354
Operating expenses:
Salaries, wages and benefits .... 62,009 80,919 175,612 223,244
Other operating expenses ........ 34,978 52,786 99,778 132,180
General corporate expense ....... 4,449 6,515 12,730 17,617
Debenture conversion expense ...... -- 155 -- 1,245
Depreciation and amortization ..... 5,003 6,648 13,987 17,883
Lease expense ..................... 3,657 4,086 10,388 11,948
Interest expense, net ............. 4,976 6,125 14,369 19,104
------------ ------------ ------------ ------------
Earnings before income taxes and
extraordinary item ........... 10,887 15,602 27,601 37,133
Income taxes ...................... 4,002 5,511 10,093 13,374
------------ ------------ ------------ ------------
Earnings before extraordinary
item ......................... 6,885 10,091 17,508 23,759
Extraordinary item, net of tax .. (1,923) -- (1,923) --
------------ ------------ ------------ ------------
Net income ...................... $ 4,962 $ 10,091 $ 15,585 $ 23,759
============ ============ ============ ============
Per common share data:
Primary
Earnings excluding debenture
conversion expense and
extraordinary item, net of tax $ .30 $ .37 $ .78 $ .96
Debenture conversion expense .... -- -- -- (.03)
Extraordinary item, net of tax .. (.08) -- (.09) --
Net income ...................... $ .22 $ .37 $ .69 $ .93
Weighted average shares of Common
Stock and equivalents ........ 22,635,350 27,507,276 22,556,985 25,438,335
Fully diluted
Earnings excluding debenture
conversion expense and
extraordinary item, net of tax $ .28 $ .35 $ .72 $ .91
Debenture conversion expense .... -- -- -- (.03)
Extraordinary item, net of tax .. (.07) -- (.06) --
Net income ...................... $ .21 $ .35 $ .66 $ .88
Weighted average shares of Common
Stock and equivalents ........ 28,387,825 31,108,391 28,284,792 29,358,861
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-19
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
--------------------------
1995 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ......................................................... $ 15,585 $ 23,759
Adjustments to reconcile net income to net cash provided by
operating activities:
Charges (credits) included in operations not requiring funds:
Provision for deferred taxes ..................................... 2,902 3,343
Depreciation and amortization .................................... 13,987 17,883
Amortization of deferred gain .................................... (345) (345)
Debenture conversion expense ..................................... -- 1,245
Extraordinary item, net of tax ................................... 1,923 --
Changes in assets and liabilities excluding effects of acquisitions:
Increase in accounts receivable .................................. (16,425) (16,348)
Increase in cost report receivables .............................. (8,000) (6,418)
Increase in inventory ............................................ (492) (2,207)
(Increase) decrease in other current assets ...................... 1,562 (9,012)
Increase (decrease) in accounts payable and accrued expenses ..... (4,265) 3,144
Increase (decrease) in income taxes payable ...................... 759 (816)
----------- -----------
Total adjustments ................................................ (8,394) (9,531)
----------- -----------
Net cash provided by operating activities ........................ 7,191 14,228
----------- -----------
Cash flows from investing activities:
Capital expenditures ............................................. (19,681) (26,151)
Cash paid, net-- acquisitions .................................... (8,194) (140,816)
Deferred and other long-term asset additions, net ................ (10,376) (8,856)
Increase in trustee-held funds ................................... (490) (50)
----------- -----------
Net cash used in investing activities ............................ (38,741) (175,873)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of Common Stock ........................... -- 211,250
Stock issuance costs ............................................. -- (9,248)
Net borrowings under bank credit facility ........................ 19,600 20,300
Repayment of long-term debt ...................................... (101,353) (1,673)
Proceeds from issuance of long-term debt ......................... 119,700 --
Debenture conversion expense ..................................... -- (1,245)
Proceeds from exercise of common stock options ................... 981 2,500
Debt issuance costs .............................................. (3,600) --
----------- -----------
Net cash provided by financing activities .......................... $ 35,328 $ 221,884
----------- -----------
Net increase in cash and cash equivalents .......................... $ 3,778 $ 60,239
----------- -----------
Cash and cash equivalents:
Beginning of the period .......................................... 3,817 10,387
End of the period ................................................ $ 7,595 $ 70,626
----------- -----------
Supplemental disclosure of cash flow information:
Interest paid .................................................... $ 15,818 $ 22,755
----------- -----------
Income taxes paid ................................................ $ 9,509 $ 12,451
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-20
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's annual report for the fiscal year
ended September 30, 1995. The information furnished is unaudited but reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial information for the periods shown. Such
adjustments are of a normal recurring nature. Interim results are not
necessarily indicative of results expected for the full year.
2. EARNINGS PER SHARE
Primary and fully-diluted earnings per share are based on the weighted
average number of common shares outstanding and the dilutive effect of stock
options, convertible debentures and other common stock equivalents.
3. PRO FORMA FINANCIAL INFORMATION
In July 1996, the Company and Geriatric & Medical Companies, Inc. ("GMC")
entered into an agreement providing for the merger of GMC into a wholly-owned
subsidiary of Genesis. The merger, and a related transaction with an
affiliate of GMC, will add 19 long-term care facilities and eight residential
care and independent living facilities with approximately 3,500 beds and
certain ancillary businesses to Genesis. Under the terms of the merger
agreement, unanimously approved by the board of directors of both companies,
GMC shareholders would receive $5.75 per share in cash for each GMC share.
The purchase price of GMC stock is approximately $91,000,000 and the total
value of the transaction, including approximately $132,000,000 of assumed
debt, is approximately $223,000,000. The Company expects to fund the cash
portion of the transaction through its bank credit facility. Consummation of
the transaction is expected in the fourth quarter of calendar 1996, and is
subject to normal closing conditions, regulatory approvals and GMC
shareholder approval.
In July 1996, the Company acquired the outstanding stock of National
Health Care Affiliates, Inc., Oak Hill Center, Inc., Derby Nursing Center
Corporation, EIDOS, Inc. and Versalink, Inc. (collectively, "National
Health"). Prior to the closing of the stock acquisitions, an affiliate of a
financial institution purchased nine of the eldercare centers for $67,700,000
and subsequently leased the centers to a subsidiary of Genesis under
operating lease agreements. The balance of the total consideration paid to
National Health was funded with available cash ($51,800,000) and assumed debt
($7,900,000). National Health owns six eldercare centers in Florida with 863
beds, leases four eldercare centers in Florida with 368 beds, owns five
eldercare centers in Virginia with 851 beds, and leases one eldercare center
in Connecticut with 120 beds. National Health also provides enteral nutrition
and rehabilitation therapy services to the eldercare centers which it owns
and leases. In addition, National Health manages four eldercare centers in
Colorado with 283 beds pursuant to an agreement which expires in October
1997.
In June 1996, the Company acquired the outstanding stock of NeighborCare
Pharmacies, Inc. ("NeighborCare"), a privately held institutional pharmacy,
infusion therapy and retail pharmacy business based in Baltimore, Maryland.
Total consideration was approximately $57,250,000, comprised of approximately
$47,250,000 in cash and 312,744 shares of Genesis common stock.
On November 30, 1995, the Company acquired all of the issued and
outstanding stock and partnership interests of McKerley Health Care Centers,
Inc., McKerley Health Care Center - Concord, Inc., McKerley Health Facilities
and McKerley Health Care Center - Concord, L.P. (collectively, the "McKerley
Entities"). The Company acquired the outstanding stock and partnership
interests of the McKerley Entities for approximately $68,700,000, including
assumed debt and after giving effect to the funds placed in escrow by the
principals as described below. An additional $6,000,000 of purchase price is
payable if certain financial objectives are achieved through October 1997.
The transaction was financed with borrowings under the Company's bank credit
facility.
F-21
<PAGE>
Pursuant to certain agreements executed on November 30, 1995, the Company
directly or through one or more subsidiaries, agreed to provide certain
services to the principals during the period ending November 30, 1998, and
the principals agreed to make certain lease payments on behalf of the Company
with respect to certain lease obligations of the McKerley Entities. As
security for the principals' or their affiliates' obligation to make the
required payments as they become due, the principals placed approximately
$6,500,000 in an account with a third party escrow agent.
The following unaudited pro forma statement of operations information
gives effect to the GMC, National Health, NeighborCare and McKerley
transactions described above as though they had occurred at the beginning of
the periods presented, after giving effect to certain adjustments, including
amortization of goodwill, additional depreciation expense, increased interest
expense on debt related to the acquisitions and related income tax effects.
The pro forma financial information does not necessarily reflect the results
of operations that would have occurred had the acquisitions occurred at the
beginning of the periods presented.
<TABLE>
<CAPTION>
(In thousands, except per
share data)
Nine Months Ended
June 30,
-------------------------
1995 1996
----------- ----------
<S> <C> <C>
Pro Forma Statement of Operations Information:
Total net revenues ............................ $654,092 $723,109
Net income before extraordinary item and
debenture conversion expense ................ 19,115 32,131
Primary earnings per share before extraordinary
item and debenture conversion expense ....... .83 1.03
Fully diluted earnings per share before
extraordinary item and debenture conversion
expense ..................................... .77 .97
</TABLE>
F-22
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
The following Unaudited Pro Forma Condensed Consolidated Statement of
Operations gives effect to: (i) the McKerley Transaction; (ii) the NeighborCare
Transaction; (iii) the National Health Transaction; (iv) the 1996 Equity
Offering and the application of the net proceeds therefrom; (v) the GMC
Transaction; and (vi) the Offering and the application of the net proceeds
therefrom, as if each had occurred at the beginning of the periods presented.
The pro forma condensed statements of operations are based upon assumptions
and include adjustments as described in the notes below. The pro forma
information should be read in conjunction with the Company's historical
consolidated financial statements, McKerley's historical combined financial
statements, National Health's historical combined financial statements and GMC's
historical combined financial statements. The column entitled "McKerley
Historical Results" represents the historical combined results of McKerley for
the year ended November 30, 1995. The column entitled "McKerley Historical
Results" for the nine months ended June 30, 1996 represents the two months ended
November 30, 1995. As a result of the differing year ends of Genesis and
McKerley, the two months ended November 30, 1995 are included in both periods.
The historical financial statements of NeighborCare for the year ended July 2,
1995 and the seven months ended April 30, 1996 are included in the columns
"NeighborCare" in the tables below. The historical combined financial statements
of National Health for the year ended December 31, 1995 and for the nine months
ended June 30, 1996 are included in the columns "National Health" in the tables
below. As a result of the differing year ends of Genesis and National Health,
the three months ended December 31, 1995 is included in both periods. The column
entitled "GMC Historical Results" for the year ended September 30, 1995
represents the historical results of GMC for the year ended May 31, 1995. The
column entitled "GMC Historical Results" for the nine months ended June 30, 1996
represents the historical results of GMC for the nine months ended May 31, 1996.
For purposes of this presentation, an effective tax rate of 37% has been assumed
for McKerley, NeighborCare, National Health and GMC, for the historical results,
and the resulting pro forma adjustments and offering adjustments. Such data is
not necessarily indicative of the historical financial results that would have
been achieved had the acquisitions occurred at the beginning of the periods
presented or that may be expected to result in the future as a result of such
transactions.
<PAGE>
<TABLE>
<CAPTION>
Year ended September 30, 1995
--------------------------------------------------------------------------------------------------------
National National
Genesis McKerley McKerley NeighborCare NeighborCare Health Health
Historical Historical Pro Forma Historical Pro Forma Historical Pro Forma
Results Results Adjustments Results Adjustments Results Adjustments
---------- ---------- -------------- ------------ -------------- ---------- ------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues ......... $486,393 $57,266 $ 114 (A)(B)(C) $52,751 $ -- $108,785 $(22,949)(L)(P)
Operating expense:
Operating expenses other
than depreciation,
amortization and lease
expense ............ 393,139 52,069 (6,063)(A)(D) 51,986 (1,849)(I)(K) 92,990 (26,435)(L)(O)(P)
Depreciation and
amortization ....... 18,793 1,900 1,079 (F) -- 2,547 (J) 4,055 1,067 (L)(M)
Lease expense ........ 13,798 2,759 (1,244)(G) -- -- 3,176 4,716 (L)(N)
Interest expense, net . 20,367 4,200 1,625 (A)(E) 1,276 1,880 (H) 6,177 (1,498)(L)(N)
--------- --------- ---------- --------- -------- --------- --------
Earnings from operations
before income taxes and
extraordinary items . 40,296 (3,662) 4,717 (511) (2,578) 2,387 (799)
--------- --------- ---------- --------- -------- --------- --------
Earnings from operations
before extraordinary
items .............. $ 25,531 $(2,307) $ 2,972 $ (322) $(1,624) $ 1,504 $(503)
--------- --------- ---------- --------- -------- --------- --------
Fully diluted earnings
per share before
extraordinary items . $1.03
Weighted average common
shares and equivalents 28,452 308 (H)
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Consolidated Consolidated
Genesis/McKerley/ Genesis/McKerley/
NeighborCare/ NeighborCare/
National Health National Health/
1996 Results Adjusted GMC Results
Equity for GMC GMC Adjusted for 1996
Offering 1996 Equity Historical Pro Forma Offering Equity Offering
Adjustment Offering Results Adjustments Adjustment and Offering
----------- ------------------- ---------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues ........... $ -- $682,360 $192,234 $ -- $ -- $874,594
Operating expense:
Operating expenses other
than depreciation,
amortization and lease
expense ............... -- 555,837 163,769 (617)(S)(T) -- 718,989
Depreciation and
amortization .......... -- 29,441 8,734 -- -- 38,175
Lease expense .......... -- 23,205 -- -- -- 23,205
Interest expense, net .. (13,720)(Q) 20,307 14,666 4,987(S)(U) (2,368)(V) 37,592
--------- --------- ---------- -------- -------- --------
Earnings from operations
before income taxes and
extraordinary items ... 13,720 53,570 5,065 (4,370) 2,368 56,633
--------- --------- ---------- -------- -------- --------
Earnings from operations
before extraordinary
items ................. $ 8,644 $ 33,895 $ 3,191 $(2,753) $ 1,492 $ 35,825
--------- --------- ---------- -------- -------- --------
Fully diluted earnings per
share before
extraordinary items ... $1.12
Weighted average common
shares and equivalents . 6,500 35,260
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
Nine Months ended June 30, 1996
---------------------------------------------------------------------------------------------------------
National National
Genesis McKerley McKerley NeighborCare NeighborCare Health Health
Historical Historical Pro Forma Historical Pro Forma Historical Pro Forma
Results Results Adjustments Results Adjustments Results Adjustments
---------- ---------- ------------- - ------------ ------------- ---------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues ......... $460,354 $ 9,671 $ 204(A)(B)(C) $39,765 $ -- $92,092 $(24,764)(L)(P)
Operating expenses:
Operating expenses other
than depreciation,
amortization and lease
expense ............ 373,041 11,537 (3,820)(A)(D) 36,697 (1,078)(I)(K) 79,865 (27,635)(L)(O)(P)
Debenture conversion
expense ............ 1,245 -- -- -- -- -- --
Depreciation and
amortization ....... 17,883 323 180 (F) 506 1,485(J) 3,556 286 (L)(M)
Lease expense ........ 11,948 460 (207)(G) 857 -- 2,617 3,389 (L)(N)
Interest expense, net . 19,104 1,158 (201)(A)(E) 1,171 671(H) 4,898 (1,432)(L)(N)
--------- --------- -------- -------- -------- -------- -------
Earnings from operations
before taxes and
extraordinary items . 37,133 (3,807) 4,252 534 (1,078) 1,156 628
--------- --------- -------- -------- -------- -------- -------
Earnings from operations
before extraordinary
items .............. $ 23,759 $(2,398) $2,678 $ 336 $ (679) $ 728 $ 396
--------- --------- -------- -------- -------- -------- -------
Fully diluted earnings
per share before
extraordinary items
and Debenture
conversion expense . $0.91
Weighted average common
shares and equivalents 29,359 239(H)
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
Pro Forma
Consolidated
Pro Forma Genesis/McKerley/
Consolidated NeighborCare/
Genesis/McKerley/ National Health/
1996 NeighborCare/ GMC Results
Equity National Health GMC GMC Adjusted for 1996
Offering Results Adjusted Historical Pro Forma Offering Equity Offering
Adjustment for 1996 Equity Offering Results Adjustments Adjustment and Offering
---------- ------------------------ ---------- ---------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues ........... $ -- $577,322 $145,787 $ -- $ -- $723,109
Operating expenses:
Operating expenses other
than depreciation,
amortization and lease
expense ............... -- 468,607 125,455 (2,353)(R)(S)(T) 591,709
Debenture conversion
expense ............... -- 1,245 -- -- -- 1,245
Depreciation and
amortization .......... -- 24,219 6,537 -- -- 30,756
Lease expense .......... -- 19,064 -- -- -- 19,064
Interest expense, net .. (8,831)(Q) 16,538 12,408 2,210(R)(S)(U) (1,776)(V) 29,380
-------- --------- ---------- ------- -------- -------
Earnings from operations
before taxes and
extraordinary items ... 8,831 47,649 1,387 143 1,776 50,955
-------- --------- ---------- ------- -------- -------
Earnings from operations
before extraordinary
items ................. $ 5,563 $ 30,383 $ 874 $ 90 $ 1,119 $ 32,466
-------- --------- ---------- ------- -------- -------
Fully diluted earnings per
share before
extraordinary items and
Debenture conversion
expense ............... $1.01
Weighted average common
shares and equivalents . 5,958 35,556
</TABLE>
F-24
<PAGE>
PRO FORMA ADJUSTMENTS ARE AS FOLLOWS:
MCKERLEY TRANSACTION
(A) The historical financial statements of McKerley include unusual,
nonrecurring charges related to a provision to properly state certain
insurance program liabilities, record a loss related to the termination
of an interest rate swap agreement and to write off certain other
long-term assets.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Revenues, net ......................................... $ 204 $ 204
Operating expenses other than depreciation,
amortization and lease expense ....................... (3,248) (3,248)
Interest expense, net ................................. $ (566) $ (566)
</TABLE>
(B) Effective October 1, 1995 the State of New Hampshire issued a reduction
in payment rates under the Medical Assistance program. The annualized
impact of this rate reduction is approximately $1,500,000.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Revenues, net ................ $(1,500) --
</TABLE>
(C) The former owners have agreed to pay certain Genesis subsidiaries for
marketing and other services for approximately two years with annual
payments of approximately $900,000. The former owners also agreed to
lease 30,000 square feet of office space from the Company for
approximately two years at an annual rate of $510,000.
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
Revenues, net ............. $1,410 --
(D) As a result of the McKerley Transaction, corporate overhead functions
related to the prior owners, certain nursing staff and regional
management of the nursing facilities will be merged. The Company has
identified duplicative positions and the costs associated with such
positions, and plans to eliminate these costs according to a transition
plan within one year of the acquisition.
Salary costs and other payments associated with certain McKerley
principals who will not be joining Genesis have been identified and
eliminated, as well as costs associated with other management positions
which have already been vacated and will not be replaced. Support staff
associated with these positions have also been eliminated.
The components of the savings expected upon merging McKerley's operations
into Genesis are as follows:
<TABLE>
<CAPTION>
Annual Cost Nine Months Cost
------------- ----------------
(In thousands)
<S> <C> <C>
Principal salaries, payments and cost of support
personnel .............................................. $(1,693) $(418)
Management to be eliminated due to overlap, and vacated
management positions not to be replaced ................ (622) (104)
Personnel reduction in operating staff to eliminate
duplicative positions .................................. (500) (50)
------------- ----------------
$(2,815) $(572)
============= ================
</TABLE>
F-25
<PAGE>
The impact of the savings has been reflected in a pro forma adjustment as
follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C>
Operating expenses other than depreciation,
amortization and lease expense ....................... $(2,815) $(572)
</TABLE>
(E) The McKerley Transaction was financed with borrowings under the Company's
bank credit facilities aggregating approximately $68,700,000. The Company
has repaid approximately $27,000,000 of assumed McKerley debt. The
Company has also assumed a mortgage obligation of approximately
$9,100,000 which was not immediately repaid. Interest rate assumptions
are 7.25% for the Company's borrowing under its bank credit facilities.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Interest expense, net:
Interest expense -- bank facilities ............... $ 4,930 $ 822
Elimination of historical McKerley remaining
interest expense ............................... (2,739) (457)
------------------ -----------------
$ 2,191 $ 365
================== =================
</TABLE>
(F) In accordance with generally accepted accounting principles, the net
assets acquired are recorded at the lower of purchase price or fair
value. The estimated fair value adjustments have been determined based on
the most recent information available. The resultant excess of purchase
price over fair value of net assets acquired is required to be amortized.
The pro forma adjustment to reflect the increased depreciation and
amortization is as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Depreciation and amortization expense... $1,079 $180
</TABLE>
(G) The former owners have agreed to make certain lease payments on behalf of
the Company with respect to certain lease obligations of the McKerley
entities. The following pro forma adjustment reflects the impact of
recognizing the resulting lease expense on a straight line basis over the
remaining lease term:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Lease expense .......... $(1,244) $(207)
</TABLE>
F-26
<PAGE>
NEIGHBORCARE TRANSACTION
(H) A portion of the NeighborCare Transaction will be financed with
borrowings under the Company's bank credit facilities aggregating
approximately $47,250,000. Genesis expects to repay approximately
$18,000,000 of NeighborCare debt assumed in the transaction. Interest
rate assumptions are 6.8% for the Company's borrowings under its credit
facilities.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Interest expense, net:
Interest expense -- bank facilities ............... $ 3,171 $ 1,842
Elimination of historical NeighborCare remaining
interest expense ............................... (1,291) (1,171)
------------------ -----------------
$ 1,880 $ 671
================== =================
</TABLE>
Adjustment to reflect the issuance of $10,000,000 of Genesis Common Stock
as a portion of the consideration. The stock issuance price has been
estimated at $32.50 per share resulting in the issuance of 307,692 shares.
(I) As a result of the NeighborCare Transaction, corporate and administrative
overhead functions related to the prior ownership structure will be
merged. Accordingly, Genesis has identified duplicative physical
locations which will be merged into existing Genesis pharmacy and medical
supply locations.
<TABLE>
<CAPTION>
Annual Cost Nine Months Cost
------------- ----------------
(In thousands)
<S> <C> <C>
Consolidation of institutional pharmacy locations ....... $ (300) $(175)
Consolidation of medical supply division ................ (300) (175)
Personnel reduction in operating staff to eliminate
duplicative positions .................................. (615) (360)
Other operating costs including legal and accounting
fees, advertising and office expense ................... (474) (275)
------------- ----------------
$(1,689) $(985)
============= ================
</TABLE>
The impact of the savings has been reflected in a pro forma adjustment as
follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Operating expenses other than depreciation,
amortization and lease expense ....................... $(1,689) $(985)
</TABLE>
(J) In accordance with generally accepted accounting principles, the net
assets acquired are recorded at the lower of purchase price or fair
value. The estimated fair value adjustments have been determined based on
the most recent information available. The resultant excess of purchase
price over fair value of net assets acquired is required to be amortized.
The elimination of historical depreciation expense is the result of
certain assets not being acquired by Genesis. The pro forma adjustment to
reflect the net increased depreciation and amortization is as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Impact of step-up and allocation of goodwill . $2,706 $1,578
Elimination of historical depreciation expense (159) (93)
------------------ -----------------
Depreciation and amortization ................ $2,547 $1,485
================== =================
</TABLE>
F-27
<PAGE>
(K) In connection with the NeighborCare Transaction, certain corporate office
and furniture and fixture leases will be terminated. The pro forma
adjustment to reflect this is as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Operating expenses other than depreciation,
amortization and lease expense ....................... $(160) $(93)
</TABLE>
NATIONAL HEALTH TRANSACTION
(L) In connection with the National Health Transaction certain assets and
liabilities were not acquired by Genesis. Additionally, certain
businesses, including home health care, infusion therapy and assisted
living facilities in New York State were not acquired. The statement of
operations data from these assets is presented in a pro forma footnote
below:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Net Revenues ......................................... $(24,949) $(26,264)
Operating expenses other than depreciation,
amortization and lease expense ...................... (27,375) (28,340)
Depreciation and amortization ........................ (1,290) (1,453)
Lease expense ........................................ (233) (323)
Interest expense, net ................................ (1,124) (1,151)
</TABLE>
(M) In accordance with generally accepted accounting principles, the net
assets acquired are recorded at the lower of the purchase price or fair
value. The estimated fair value adjustments have been determined based on
the most recent information available. The resultant excess of purchase
price over fair value of net assets acquired is required to be amortized.
The pro forma adjustment to reflect the increased depreciation and
amortization is as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Depreciation and amortization...... $2,357 $1,739
</TABLE>
(N) The National Health Transaction was financed by Genesis with borrowings
under its bank credit facilities aggregating approximately $51,800,000.
Genesis repaid approximately $36,200,000 of indebtedness assumed upon
consummation of the transaction. The Company also assumed mortgage
obligations of approximately $7,900,000 which were not repaid. Interest
rate assumptions are 6.8% for the Company's borrowing under its bank
credit facilities.
Prior to the closing of the stock acquisitions, an affiliate of a
financial institution purchased nine of the National Health eldercare
centers and subsequently leased the centers to a subsidiary of Genesis
under operating lease agreements.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Interest expense, net:
Interest expense-bank facility .................. $ 3,619 $ 2,714
Elimination of historical National Health
remaining expense ............................ (3,993) (2,995)
------------------ -----------------
$ (374) $ (281)
================== =================
Lease expense ................................... $ 4,949 $ 3,712
</TABLE>
F-28
<PAGE>
(O) Genesis has identified certain cost saving opportunities in connection
with the National Health Transaction. The Company has identified
duplicative positions and the costs associated with such positions, and
plans to eliminate these costs according to a transition plan within one
year of the acquisition.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Reduction in contract labor services .................... $(108) $ (81)
Personnel reduction in operating staff to eliminate
duplicative positions .................................. (252) (189)
------------------ -----------------
$(360) $(270)
================== =================
</TABLE>
(P) Genesis has identified certain revenue synergies relating to its
pharmacy, medical supply and group purchasing businesses. These services
are currently not provided by Genesis to National Health facilities nor
does National Health have the businesses to deliver these services.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
<S> <C> <C>
Revenues, net ........................................ $2,000 $1,500
Operating expenses other than depreciation,
amortization and lease expense ...................... 1,300 975
------------------ -----------------
Net impact ......................................... $ 700 $ 525
================== =================
</TABLE>
1996 EQUITY OFFERING ADJUSTMENT
(Q) Adjustment to reflect the application of the net proceeds of the 1996
Equity Offering to repay indebtedness under the Company's bank credit
facilities which currently bear interest at a weighted average annual
rate of approximately 6.8%.
Year Ended Nine Months Ended
September 30, 1995 June 30, 1996
------------------ -----------------
(In thousands)
Interest, net .......... $(13,720) $(8,831)
GMC TRANSACTION
(R) The historical financial statements of GMC include unusual, non-recurring
charges related to a provision to increase allowance for doubtful
accounts, the settlement of a matter relating to reimbursement for
nutritional services provided at a nursing facility previously managed by
a GMC subsidiary and an amount recorded relating to a class action suit.
The historical financial statements also include non-recurring charges
related to additional interest incurred under GMC's credit facility and a
discount on a note receivable.
<TABLE>
<CAPTION>
Year Ended
September 30, Nine Months Ended
1995 June 30, 1996
----------------- -----------------
(In thousands)
<S> <C> <C>
Operating expenses other than depreciation,
amortization and lease expense ....................... -- $(2,300)
Interest, net ......................................... -- (1,121)
</TABLE>
F-29
<PAGE>
(S) The historical financial results include a provision for costs on the
sale of accounts receivable, which is included in the interest expense
line item. The following pro forma adjustment represents the
reclassification of the portion of the provision that relates to
operating expenses:
<TABLE>
<CAPTION>
Year Ended
September 30, Nine Months Ended
1995 June 30, 1996
----------------- -----------------
(In thousands)
<S> <C> <C>
Operating expenses other than depreciation,
amortization and lease expense ....................... $ 1,383 $ 1,447
Interest expense, net ................................. (1,383) (1,447)
</TABLE>
(T) As a result of the GMC Transaction, certain corporate and administrative
overhead functions related to the prior ownership structure will be
merged. Genesis has identified duplicative physical locations which will
be merged into existing Genesis administrative locations.
<TABLE>
<CAPTION>
Nine Months
Annual Cost Cost
------------ ---------------
(In thousands)
<S> <C> <C>
Personnel reduction in operating staff to eliminate
duplicative position ................................... $(1,000) $ (750)
Other operating costs including legal and accounting
fees, advertising and office expense ................... (1,000) (750)
---------- --------
$(2,000) $(1,500)
========== ========
</TABLE>
The impact of the savings have been reflected in a pro forma adjustment
as follows:
<TABLE>
<CAPTION>
Year Ended
September 30, Nine Months Ended
1995 June 30, 1996
----------------- -----------------
(In thousands)
<S> <C> <C>
Operating expenses other than depreciation,
amortization and lease expense ....................... $(2,000) $(1,500)
</TABLE>
(U) A portion of the purchase price was financed with borrowings under the
Company's bank credit facility of approximately $91,000,000. Interest rate
assumptions are 6.8% for the Company's borrowings:
Year Ended
September 30, Nine Months Ended
1995 June 30, 1996
----------------- -----------------
(In thousands)
Interest expense -- bank
facilities ..................... $6,370 $4,778
OFFERING ADJUSTMENT
(V) Adjustment to reflect the application of the net proceeds of the Offering
to repay a portion of assumed GMC term indebtedness ($108,000,000 at a
weighted average rate of 12.25%) and other GMC indebtedness ($10,000,000
at a weighted average rate of 7%). The assumed rate of this Offering is
9.25%.
Year Ended Nine Months Ended
September 30,
1995 June 30, 1996
----------------- -----------------
(In thousands)
Interest expense, net:
Interest expense -- offering ... $ 11,562 $ 8,672
Eliminate historical interest
expense ...................... (13,930) (10,448)
---------- -----------
$ (2,368) $ (1,776)
=========== ===========
F-30
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet
includes the historical consolidated condensed balance sheet of the Company
at June 30, 1996 and the pro forma adjustments to reflect the National Health
Transaction, the GMC Transaction, as adjusted to reflect the Offering and the
application of the estimated net proceeds as if they occurred on June 30,
1996. The pro forma adjustments should be read in conjunction with the
Company's historical consolidated financial statements, National Health's
historical combined financial statements and GMC's historical combined
financial statements.
<TABLE>
<CAPTION>
Pro Forma,
As Adjusted
Pro Forma Consolidated
National Pro Forma Genesis/
National Health GMC National
Genesis Health Adjustments GMC Adjustments Health/GMC
-------- --------- ------------ --- ------------ -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Current assets................. $297,009 $23,401 $(9,108)(A) $75,834 $ -- $387,136
Property and equipment, net .. 313,388 58,608 7,346 (A)(D) 93,042 73,325(E) 545,709
Other assets ................. 267,951 13,795 (7,426)(A)(D) 22,808 44,000(E) 341,128
------- ------ ------ ------ ------ -------
Total assets ................. $878,348 $95,804 $(9,188) $191,684 $117,325 $1,273,973
======== ======= ======= ======== ======== ==========
Current liabilities .......... $ 69,410 $21,777 $(3,349)(A)(B)(C) $ 37,951 $ (5,820)(F)(G) $ 119,969
Long term debt, excluding
current maturities .......... 295,897 68,826 (1,158)(A)(B) 130,775 101,025 (G) 595,365
Other liabilities ............ 12,803 -- 520 (C) 4,078 41,000 (E) 58,401
Shareholders' equity ......... 500,238 5,201 (5,201)(A)(D) 18,880 (18,880)(E) 500,238
------- ------ ------ ------ ------ -------
Total liabilities and
shareholders' equity ........ $878,348 $95,804 $(9,188) $191,684 $117,325 $1,273,973
======== ======= ======= ======== ======== ==========
</TABLE>
Pro forma adjustments are as follows:
NATIONAL HEALTH TRANSACTION
(A) The assets and liabilities of National Health not acquired or assumed by
Genesis in the National Health Transaction are eliminated in a pro forma
adjustment as follows:
(In thousands)
Current assets ...................................... $(9,108)
Property and equipment ............................. (9,686)
Other assets ....................................... (11,141)
-------
Total assets ....................................... $(29,935)
========
Current liabilities ................................ $ (5,249)
Long term debt, excluding current
maturities ....................................... (16,758)
Other liabilities ................................. --
Shareholders' equity .............................. (7,928)
-------
Total liabilities and shareholders' equity $(29,935)
========
(B) The National Health Transaction was financed by Genesis with borrowings
under its bank credit facilities of approximately $51,800,000 which
includes the repayment of approximately $36,200,000. Additionally,
Genesis assumed existing indebtedness of approximately $7,900,000 which
was not repaid immediately. The impact of the borrowings under the bank
credit facilities is reflected in the following pro forma adjustment:
(In thousands)
Current liabilities ..................................... $ (100)
Long term debt, excluding current maturities ........... 15,600
F-31
<PAGE>
(C) Transaction costs which include professional fees, duplicative salary
costs and severance, taxes and title costs and certain other costs
incurred or to be incurred in order to consummate the transaction will be
accrued, net of tax benefits, in the amount of $2,520,000. The following
pro forma adjustment represents the accrual for these costs:
(In thousands)
Current liabilities ......................................... $2,000
Other liabilities .......................................... 520
(D) Purchase accounting adjustments include the following allocations:
(In thousands)
Property and equipment, net .................................. $17,032
Other assets ................................................ 3,715
Shareholders' equity ........................................ 2,727
GMC TRANSACTION
(E) Purchase accounting adjustments include the following allocations:
(In thousands)
Property and equipment, net .............................. $72,345
Other assets ............................................ 44,000
Other liabilities ....................................... 41,000
Shareholders' equity .................................... (18,880)
(F) Transaction costs which include professional fees, duplicative salary
costs and severance, taxes and title costs and certain other costs
incurred or to be incurred in order to consummate the transaction will be
accrued in the amount of $8,000,000. The following pro forma adjustment
represents the accrual for these costs:
(In thousands)
Current liabilities ....................................... $8,000
(G) The GMC Transaction was financed by the payment of $93,900,000
representing the equity purchase price, the repayment of approximately
$90,000,000 of existing indebtedness and the assumption of approximately
$47,900,000 of other indebtedness. The following pro forma adjustment
represents the incremental debt incurred in the transaction and reflects
the repayment of certain GMC indebtedness with the net proceeds of the
Offering:
(In thousands)
Current liabilities ..................................... $ (8,820)
Long-term debt .... .................................... 101,025
F-32
<PAGE>
No dealer, salesperson or other individual has been authorized to
give any information or make any representations other than those
contained or incorporated by reference in this Prospectus in
connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon
as having been authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy,
the Exchange Notes in any jurisdiction where, or to any person to
whom, it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has not
been any change in the facts set forth in this Prospectus or in
the affairs of the Company since the date hereof.
----------------
TABLE OF CONTENTS
Page
Summary....................................................1
Cautionary Statement Regarding
Forward Looking Statements..............................13
Risk Factors..............................................13
Use of Proceeds...........................................17
Capitalization............................................18
Exchange Offer............................................19
Certain Federal Income Tax Consequences...................28
Selected Consolidated Financial Data .....................29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...........................................31
Business..................................................39
Management................................................50
Description of the Notes..................................54
Plan of Distribution......................................83
Legal Matters.............................................83
Experts...................................................84
Available Information.....................................84
Index to Financial Statements............................F-1
Until , 1996 all dealers effecting transactions in the
Notes offered hereby, whether or not participating in this
distribution, may be required to deliver a Prospectus.
<PAGE>
GENESIS HEALTH VENTURES, INC.
PROSPECTUS
Offer to Exchange its
9 1/4Senior Subordinated Notes due 2006,
which have been registered under the
Securities Act of 1933, as amended, for any
and all of its outstanding 9 1/4Senior
Subordinated Notes due 2006
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Sections 1741 through 1750 of Chapter 17, Subchapter D, of the
Pennsylvania Business Corporation Law of 1988, as amended (the "BCL") contain
provisions for mandatory and discretionary indemnification of a corporation's
directors, officers and other personnel, and related matters.
Under Section 1741, subject to certain limitations, a corporation has
the power to indemnify directors and officers under certain prescribed
circumstances against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
an action or proceeding, whether civil, criminal, administrative or
investigative, to which any of them is a party by reason of his being a
representative, director or officer of the corporation or serving at the request
of the corporation as a representative of another corporation, partnership,
joint venture, trust or other enterprise, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. Under Section 1743, indemnification
of expenses actually and reasonably incurred is mandatory to the extent that the
officer or director has been successful on the merits or otherwise in defense of
any action or proceeding.
Section 1742 provides for indemnification in derivative actions except
in respect of any claim, issue or matter as to which the person has been
adjudged to be liable to the corporation unless and only to the extent that the
proper court determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for the expenses that the court deems
proper.
Section 1744 provides that, unless ordered by a court, any
indemnification under Section 1741 or 1742 shall be made by the corporation only
as authorized in the specific case upon a determination that the representative
met the applicable standard of conduct, and such determination will be made by
the board of directors (i) by a majority vote of a quorum of directors not
parties to the action or proceeding; (ii) if a quorum is not obtainable, or if
obtainable and a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel; or (iii) by the shareholders.
Section 1745 provides that expenses incurred by an officer, director,
employee or agent in defending a civil or criminal action or proceeding may be
paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation.
Section 1746 provides generally that, except in any case where the act
or failure to act giving rise to the claim for indemnification is determined by
a court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17D of the
BCL shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders of disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding that office.
II-1
<PAGE>
Section 1747 also grants to a corporation the power to purchase and
maintain insurance on behalf of any director or officer against any liability
incurred by him or her in his or her capacity as officer or director, whether or
not the corporation would have the power to indemnify him or her against the
liability under Subchapter 17D of the BCL.
Section 1748 and 1749 extend the indemnification and advancement of
expenses provisions contained in Subchapter 17D of the BCL to successor
corporations in fundamental changes and to representatives serving as
fiduciaries of employee benefit plans.
Section 1750 provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, Subchapter 17D of the BCL, shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs and personal representative of such person.
For information regarding provisions under which a director or officer
of the Company may be insured or indemnified in any manner against any liability
which he or she may incur in his or her capacity as such, reference is made to
Article III of the Company's Bylaws, which provides in general that the Company
shall indemnify its officers and directors to the fullest extent authorized by
law. The Company also provides insurance coverage to its directors and officers
for up to $20 million.
Item 21. Exhibits
Exhibit No. Description
- -------------- -------------------------------------------------------------
2.1(1) Agreement and Plan of Reorganization, dated September 19,
1993, by and among Genesis Health Ventures, Inc., a
Pennsylvania corporation, MI Acquisition Corporation, a
Pennsylvania corporation and a wholly-owned subsidiary of
Genesis, MHC Acquisition Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Genesis, PEI
Acquisition Corporation, a Pennsylvania corporation and
wholly-owned subsidiary of Genesis, TW Acquisition
Corporation, a Pennsylvania corporation and a wholly-owned
subsidiary of Genesis, SRS Acquisition, a Pennsylvania
corporation and a wholly-owned subsidiary of Genesis, Meridian
Healthcare, Inc., a Maryland corporation, Meridian Inc., a
Maryland corporation, Pharmacy Equities, Inc., a Maryland
corporation, The Tidewater Healthcare Shared Services Group,
Inc., a Maryland corporation, Staff Replacement Services,
Inc., a Maryland corporation, Michael J. Batza, Jr., Edward A.
Burchell, Earl L. Linehan, Roger C. Lipitz and Arnold I.
Richman (collectively, the "Reorganization Agreement").
2.2(2) Amended and Restated Amendment to Reorganization Agreement
dated November 23, 1993.
2.3(3) Agreement made as of the 18th day of August 1995 by and among
Genesis Health Ventures, Inc., a Pennsylvania corporation, and
Accumed, Inc., a New Hampshire corporation, McKerley Health
Care Centers, Inc., a New Hampshire corporation, McKerley
Health Care Center -- Concord, Inc., a New Hampshire
corporation, McKerley Health Facilities, a New Hampshire
general partnership and McKerley Health Care Center --
Concord, L.P., a New Hampshire limited partnership
(collectively, the "McKerley Agreement").
2.4(4) Amendment Number One to McKerley Agreement dated November 30,
1995.
II-2
<PAGE>
2.5(5) Stock Purchase Agreement dated April 21, 1996, by and among
Genesis Health Ventures, Inc., a Pennsylvania corporation and
NeighborCare Pharmacies, Inc., a Maryland corporation,
Professional Pharmacy Services, Inc., a Maryland corporation,
Medical Services Group, Inc., a Maryland corporation,
CareCard, Inc., a Maryland corporation, Transport Services,
Inc., a Maryland corporation, Michael G. Bronfein, Jessica
Bronfein, Stanton G. Ades, Renee Ades, The Chase Manhattan
Bank, N.A. and PPS Acquisition Corp., a Maryland corporation
and a wholly-owned subsidiary of Genesis.
2.6(5) Merger Agreement dated April 21, 1996, by and among Genesis
Health Ventures, Inc., a Pennsylvania corporation,
Professional Pharmacy Services, Inc., a Maryland corporation,
PPS Acquisition Corp., a Maryland corporation and a
wholly-owned subsidiary of Genesis, and The Chase Manhattan
Bank, N.A.
2.7(6) Purchase Agreement dated as of May 3, 1996, by and among Mark
E. Hamister, Oliver C. Hamister, George E. Hamister, Julia L.
Hamister, The George E. Hamister Trust, and The Oliver C.
Hamister Trust, National Health Care Affiliates, Inc., Oak
Hill Health Care Center, Inc., Derby National Center
Corporation, Delaware Avenue Partnership, EIDOS, Inc.,
VersaLink, Inc., each of the individuals identified in
Schedule A to the Purchase Agreement, Sal H. Alfiero, Gerald
S. Lippes and Genesis Health Ventures, Inc.
2.8(7) Agreement to purchase Partnership Interests, made as of March
1, 1996, by and among Meridian Health, Inc., Fairmont
Associates, Inc. and MHC Holding Company.
2.9(7) Purchase and Sale Agreement, dated January 16, 1996, by and
among Genesis Health Ventures of Indiana, Inc. and Hallmark
Healthcare Limited Partnership, as seller, and Hunter
Acquisitions, L.L.C., as purchaser.
2.10(8) Agreement and Plan of Merger, dated as of July 11, 1996, by
and among Genesis Health Ventures, Inc., a Pennsylvania
corporation, G Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Genesis, and Geriatric &
Medical Companies, Inc., a Delaware corporation.
4.1 Form of 9 1/4% Senior Subordinated Notes Due 2006.
4.2 Indenture dated as of October 7, 1996 between the Company and
First Union National Bank, as trustee.
4.3 Registration Rights Agreement dated October 7, 1996 among the
Company and the Initial Purchasers.
5 Opinion of Blank Rome Comisky & McCauley.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consents of Ernst & Young LLP.
-II-3
<PAGE>
23.3 Consent of BDO Seidman LLP.
23.4 Consent of Blank Rome Comisky & McCauley (included in the
opinion filed as Exhibit 5 hereto).
24.1 Power of Attorney (included on Page II-6).
25.1 Statement of Eligibility of Trustee on Form T-1.
- ----------
(1) Incorporated by reference to Form 8-K dated September 19, 1993.
(2) Incorporated by reference to Form 8-K/A dated November 30, 1993.
(3) Incorporated by reference to the Company's Registration Statement
on Form S-1 (Registration No. 33-40007).
(4) Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 33-51670).
(5) Incorporated by reference to Form 8-K dated April 21, 1996.
(6) Incorporated by reference to Form 8-K dated May 3, 1996.
(7) Incorporated by reference to Form 10-Q for the period ended March
31, 1996.
(8) Incorporated by reference to Form 8-K/A dated July 11, 1996.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
II-4
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement:
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally promptly means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-5
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kennett Square,
Commonwealth of Pennsylvania, on October 31, 1996.
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
----------------------
Michael R. Walker
Chairman, Chief Executive Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael R. Walker and Richard R. Howard,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution or resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documentation in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- ---------------------------------------- ---------------------------------------- ----------------------------------
<S> <C> <C>
/s/ Michael R. Walker Chairman, Chief Executive Officer and October 31, 1996
-------------------------- Director
Michael R. Walker
/s/ Richard R. Howard President, Chief Operating Officer and October 31, 1996
- ----------------------------- Director
Richard R. Howard
_____________________________ Director
Allen R. Freedman
/s/ Samuel H. Howard Director October 31, 1996
- -----------------------------
Samuel H. Howard
/s/ Roger C. Lipitz Director October 31, 1996
- -----------------------------
Roger C. Lipitz
/s/ Stephen E. Luongo Director October 31, 1996
- -----------------------------
Stephen E. Luongo
/s/ Alan B. Miller Director October 31, 1996
- -----------------------------
Alan B. Miller
/s/ Fred F. Nazem Director October 31, 1996
- -----------------------------
Fred F. Nazem
/s/ George V. Hager, Jr. Senior Vice President and Chief October 31, 1996
- ----------------------------- Financial Officer
George V. Hager, Jr.
/s/ Edward J. Boeggeman Vice President and Controller October 31, 1996
- -----------------------------
Edward J. Boeggeman
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- -------------- -------------------------------------------------------------
2.1(1) Agreement and Plan of Reorganization, dated September 19,
1993, by and among Genesis Health Ventures, Inc., a
Pennsylvania corporation, MI Acquisition Corporation, a
Pennsylvania corporation and a wholly-owned subsidiary of
Genesis, MHC Acquisition Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Genesis, PEI
Acquisition Corporation, a Pennsylvania corporation and
wholly-owned subsidiary of Genesis, TW Acquisition
Corporation, a Pennsylvania corporation and a wholly-owned
subsidiary of Genesis, SRS Acquisition, a Pennsylvania
corporation and a wholly-owned subsidiary of Genesis, Meridian
Healthcare, Inc., a Maryland corporation, Meridian Inc., a
Maryland corporation, Pharmacy Equities, Inc., a Maryland
corporation, The Tidewater Healthcare Shared Services Group,
Inc., a Maryland corporation, Staff Replacement Services,
Inc., a Maryland corporation, Michael J. Batza, Jr., Edward A.
Burchell, Earl L. Linehan, Roger C. Lipitz and Arnold I.
Richman (collectively, the "Reorganization Agreement").
2.2(2) Amended and Restated Amendment to Reorganization Agreement
dated November 23, 1993.
2.3(3) Agreement made as of the 18th day of August 1995 by and among
Genesis Health Ventures, Inc., a Pennsylvania corporation, and
Accumed, Inc., a New Hampshire corporation, McKerley Health
Care Centers, Inc., a New Hampshire corporation, McKerley
Health Care Center -- Concord, Inc., a New Hampshire
corporation, McKerley Health Facilities, a New Hampshire
general partnership and McKerley Health Care Center --
Concord, L.P., a New Hampshire limited partnership
(collectively, the "McKerley Agreement").
2.4(4) Amendment Number One to McKerley Agreement dated November 30,
1995.
2.5(5) Stock Purchase Agreement dated April 21, 1996, by and among
Genesis Health Ventures, Inc., a Pennsylvania corporation and
NeighborCare Pharmacies, Inc., a Maryland corporation,
Professional Pharmacy Services, Inc., a Maryland corporation,
Medical Services Group, Inc., a Maryland corporation,
CareCard, Inc., a Maryland corporation, Transport Services,
Inc., a Maryland corporation, Michael G. Bronfein, Jessica
Bronfein, Stanton G. Ades, Renee Ades, The Chase Manhattan
Bank, N.A. and PPS Acquisition Corp., a Maryland corporation
and a wholly-owned subsidiary of Genesis.
2.6(5) Merger Agreement dated April 21, 1996, by and among Genesis
Health Ventures, Inc., a Pennsylvania corporation,
Professional Pharmacy Services, Inc., a Maryland corporation,
PPS Acquisition Corp., a Maryland corporation and a
wholly-owned subsidiary of Genesis, and The Chase Manhattan
Bank, N.A.
2.7(6) Purchase Agreement dated as of May 3, 1996, by and among Mark
E. Hamister, Oliver C. Hamister, George E. Hamister, Julia L.
Hamister, The George E. Hamister Trust, and The Oliver C.
Hamister Trust, National Health Care Affiliates, Inc., Oak
Hill Health Care Center, Inc., Derby National Center
Corporation, Delaware Avenue Partnership, EIDOS, Inc.,
VersaLink, Inc., each of the individuals identified in
Schedule A to the Purchase Agreement, Sal H. Alfiero, Gerald
S. Lippes and Genesis Health Ventures, Inc.
2.8(7) Agreement to purchase Partnership Interests, made as of March
1, 1996, by and among Meridian Health, Inc., Fairmont
Associates, Inc. and MHC Holding Company.
2.9(7) Purchase and Sale Agreement, dated January 16, 1996, by and
among Genesis Health Ventures of Indiana, Inc. and Hallmark
Healthcare Limited Partnership, as seller, and Hunter
Acquisitions, L.L.C., as purchaser.
<PAGE>
2.10(8) Agreement and Plan of Merger, dated as of July 11, 1996, by
and among Genesis Health Ventures, Inc., a Pennsylvania
corporation, G Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Genesis, and Geriatric &
Medical Companies, Inc., a Delaware corporation.
4.1 Form of 9 1/4% Senior Subordinated Notes Due 2006.
4.2 Indenture dated as of October 7, 1996 between the Company and
First Union National Bank, as trustee.
4.3 Registration Rights Agreement dated October 7, 1996 among the
Company and the Initial Purchasers.
5 Opinion of Blank Rome Comisky & McCauley.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consents of Ernst & Young LLP.
23.3 Consent of BDO Seidman LLP.
23.4 Consent of Blank Rome Comisky & McCauley (included in the
opinion filed as Exhibit 5 hereto).
24.1 Power of Attorney (included on Page II-6).
25.1 Statement of Eligibility of Trustee on Form T-1.
- ----------
(1) Incorporated by reference to Form 8-K dated September 19, 1993.
(2) Incorporated by reference to Form 8-K/A dated November 30, 1993.
(3) Incorporated by reference to the Company's Registration Statement
on Form S-1 (Registration No. 33-40007).
(4) Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 33-51670).
(5) Incorporated by reference to Form 8-K dated April 21, 1996.
(6) Incorporated by reference to Form 8-K dated May 3, 1996.
(7) Incorporated by reference to Form 10-Q for the period ended March
31, 1996.
(8) Incorporated by reference to Form 8-K/A dated July 11, 1996.
<PAGE>
[FORM OF FACE OF EXCHANGE NOTE]
No.___________________ $_____________
GENESIS HEALTH VENTURES, INC.
9 1/4% Senior Subordinated Note due 2006
GENESIS HEALTH VENTURES, INC., a corporation duly organized
and validly existing under the laws of the Commonwealth of Pennsylvania (herein
called the "Company", which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received hereby promises
to pay to CEDE & CO., or registered assigns, the principal sum of
_________________________________ United States dollars on October 1, 2006 at
the office or agency of the Company maintained for that purpose in New York, New
York, and to pay interest thereon at the rate per annum specified on this Note.
The Company will pay interest semi-annually on April 1 and October 1 of each
year (the "Interest Payment Date"). Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from October 7, 1996; provided that the first interest payment date shall
be April 1, 1997.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to the Person in whose name this Note is registered at the close of business on
the Record Date for such interest, which shall be March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Notes, to the extent lawful, shall forthwith cease to be payable to the
Noteholder on such Record Date, and may be paid to the Person in whose name this
Note is registered at the close of business on a special record date which date
shall be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest or the next succeeding Business Day if such date
is not a Business Day. The Company shall, by written notice to the Trustee, fix
each such special record date and payment date. At least 15 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to each Noteholder, with a copy to the
Trustee, a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
<PAGE>
If this Note is a Global Note, all payments in respect of this
Note will be made to the Depository or its nominee in immediately available
funds in accordance with customary procedures established from time to time by
the Depository. If this Note is not a Global Note, payment of the principal of,
premium, if any, and interest on this Note will be made at the office or agency
of the Company maintained for that purpose in the City of New York, or at such
other office or agency of the Company as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the address of the Person entitled thereto as such address shall appear on the
Note Register. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal of and premium if any, and interest on
the Notes to all Senior Indebtedness, and provisions giving the holder of this
Note the right to require the Company to repurchase this Note upon any Change in
Control, in each case on the terms and subject to the limitations referred to on
the reverse hereof and as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF SAID STATE.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall
<PAGE>
have been signed by the Trustee under the Indenture referred to
on the reverse hereof.
IN WITNESS WHEREOF, GENESIS HEALTH VENTURES, INC. has
caused this instrument to be duly executed under its corporate
seal.
Dated:
GENESIS HEALTH VENTURES, INC.
By:__________________________
Chief Executive Officer
[Corporate Seal]
Attest:
_____________________
Secretary
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Notes described in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By______________________________
Authorized Officer
<PAGE>
[FORM OF REVERSE OF EXCHANGE NOTE]
GENESIS HEALTH VENTURES, INC.
9 1/4% SENIOR SUBORDINATED NOTE DUE 2006
This Note is one of a duly authorized issue of Notes of the
Company known as its 9 1/4% Senior Subordinated Notes due 2006 (herein referred
to as the "Notes"), limited to the aggregate principal amount of $125,000,000,
all issued or to be issued under and pursuant to an indenture, dated as of
October 7, 1996 (herein referred to as the "Indenture"), duly executed and
delivered between the Company and First Union National Bank, trustee (herein
referred to as the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the
respective rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the holders of the Notes.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness on the Notes and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture), whether outstanding on the date of the Indenture or thereafter,
and this Note is issued subject to such provisions. Each Holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose;
provided, however, that the indebtedness evidenced by this Note shall cease to
be so subordinate and subject in right of payment upon any defeasance of this
Note referred to in clause (a) or (b) of the next preceding paragraph.
The Notes are subject to redemption, as a whole or in part, at
any time on or after October 1, 2001 at the option of the Company upon not less
than 30 nor more than 60 days' prior notice by first-class mail, at the election
of the Company, in amounts of $1,000 or an integral multiple of $1,000 at the
following redemption prices (expressed as a percentage of the
<PAGE>
principal amount) if redeemed during the 12-month period beginning October 1 of
the years indicated below:
Redemption
Year Price
---- ----------
2001 ......................104.625%
2002 ......................103.083%
2003 ......................101.542%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date. If less than all of
the Notes are to be redeemed, such portion of the Notes shall be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Upon the occurrence of a Change in Control, each Noteholder
may require the Company to repurchase all or a portion of such Holder's Notes at
a purchase price in cash equal to 101% of the principal amount thereof, together
with accrued and unpaid interest to the date of repurchase.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from any Asset Sale, which is not used to
prepay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company, exceeds $10,000,000, the Company will be required to
apply such proceeds to the repayment of the Notes.
In the case of any redemption of Notes, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Notes of record at the close of business on the relevant
Record Date referred to on the face hereof. Notes (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the date of redemption.
In the event of redemption of this Note in part only, a new
Note or Notes for the unredeemed portion hereof shall be issued in the name of
the Noteholder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal amount of all the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including
certain amendments permitted without the consent of any Noteholders) as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Noteholders under the Indenture
at any time by
<PAGE>
the Company and the Trustee with the consent of the Noteholders of a specified
percentage in aggregate principal amount of the Notes at the time outstanding.
The Indenture also contains provisions permitting the Noteholders of specified
percentages in aggregate principal amount of the Notes at the time outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of the Indenture and certain past Defaults under the
Indenture and their consequences. Any such consent or waiver by or on behalf of
the Holder of this Note shall be conclusive and binding upon such Noteholder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company or
any Guarantor (in the event such Guarantor is obligated to make payments in
respect of the Notes), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note at the times, place, and rate,
and in the coin or currency, herein prescribed, subject to the subordination
provisions of the Indenture.
A Noteholder shall register the transfer or exchange of Notes
in accordance with the Indenture. No service charge shall be made for any
registration of transfer or exchange or redemption of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to and at the time of due presentment of this Note for
registration of transfer, the Company, the Trustee, the Paying Agent and any
agent of the Company or the Trustee may treat the Person in whose name this Note
is registered as the owner hereof for all purposes, whether or not this Note is
overdue, and neither the Company, the Trustee nor any agent shall be affected by
notice to the contrary.
All terms used in this Note which are defined in the Indenture
and not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to
- ----------------------------------------------------------------
- ----------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- ----------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________________________
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Dated: ____________________ Signed: __________________________
(Sign exactly as name
appears on the other side
of this Note)
<PAGE>
===============================================================================
GENESIS HEALTH VENTURES, INC.
AND
FIRST UNION NATIONAL BANK, Trustee
_________________
INDENTURE
Dated as of October 7, 1996
_________________
9 1/4% Senior Subordinated Notes due 2006
===============================================================================
<PAGE>
RECONCILIATION AND TIE SHEET*
between
PROVISIONS OF THE TRUST INDENTURE ACT OF 1939, AS AMENDED
and
INDENTURE DATED AS OF October 7, 1996
between
GENESIS HEALTH VENTURES, INC.
and
FIRST UNION NATIONAL BANK, Trustee
Section Section of
of Act Indenture
- ------- ----------
310(a)(1).....................................................8.9
310(a)(2).....................................................8.9
310(a)(3).....................................................Inapplicable
310(a)(4).....................................................Inapplicable
310(b)........................................................8.8, 8.10
310(c)........................................................Inapplicable
311(a)........................................................8.13
311(b)........................................................8.13
311(c)........................................................Inapplicable
312(a)........................................................6.1, 6.2(a)
312(b)........................................................6.2(b)
312(c)........................................................6.2(c)
313(a)........................................................6.4(a)
313(b)(1).....................................................Inapplicable
313(b)(2).....................................................6.4(b)
313(c)........................................................6.4(c)
313(d)........................................................6.4(d)
314(a)(1).....................................................6.3(a)
314(a)(2).....................................................6.3(b)
314(a)(3).....................................................6.3(c)
314(a)(4).....................................................5.19
314(b)........................................................Inapplicable
314(c)(1).....................................................15.5
314(c)(2).....................................................15.5
314(c)(3).....................................................Inapplicable
314(d)........................................................Inapplicable
314(e)........................................................15.5
314(f)........................................................Inapplicable
315(a)........................................................8.1(a)
315(b)........................................................8.14
315(c)........................................................8.1(a)
315(d)........................................................8.1(c)
315(e)........................................................7.14
316(a)(1).....................................................7.13, 7.12
316(a)(2).....................................................Inapplicable
316(b)........................................................7.8
317(a)........................................................7.4
317(b)........................................................5.4
318(a)........................................................15.7
- --------
* This Reconciliation and Tie Sheet is not a part of the
Indenture.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS**
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain terms defined..................................................................2
SECTION 1.2 Other Definitions.................................................................... 20
SECTION 1.3 Incorporation by Reference of Trust Indenture Act.................................... 21
SECTION 1.4 Rules of Construction................................................................ 21
ARTICLE II
ISSUE, DESCRIPTION, REGISTRATION
AND EXCHANGE OF NOTES.......................................................... 22
SECTION 2.1 Designation, amount, authentication and
delivery of Notes................................................................. 22
SECTION 2.2 Form of Notes and Trustee's certificate.............................................. 22
SECTION 2.3 Date of Notes and denominations...................................................... 23
SECTION 2.4 Execution of Notes................................................................... 24
SECTION 2.5 Registration, Registration of Transfer
and Exchange of Notes............................................................. 24
SECTION 2.6 Temporary Notes...................................................................... 25
SECTION 2.7 Mutilated, destroyed, lost or stolen Notes........................................... 26
SECTION 2.8 Cancellation of surrendered Notes.................................................... 27
SECTION 2.9 Defaulted Interest................................................................... 27
SECTION 2.10 CUSIP Number......................................................................... 28
SECTION 2.11 Book-Entry Provisions for Global Note................................................ 28
SECTION 2.12 Special Transfer Provisions.......................................................... 29
ARTICLE III
SUBORDINATION OF NOTES
SECTION 3.1 Agreement to subordinate............................................................. 31
SECTION 3.2 Distribution on dissolution, liquidation,
bankruptcy or reorganization...................................................... 32
SECTION 3.3 Suspension of Payment When Senior Indebtedness
in Default........................................................................ 33
SECTION 3.4 Payment Permitted if No Default...................................................... 35
SECTION 3.5 Subrogation to Rights of Holders of Senior
Indebtedness...................................................................... 35
SECTION 3.6 Provisions Solely to Define Relative Rights.......................................... 35
SECTION 3.7 Trustee to Effectuate Subordination.................................................. 36
SECTION 3.8 No Waiver of Subordination Provisions................................................ 36
SECTION 3.9 Notice to Trustee.................................................................... 37
SECTION 3.10 Reliance on Judicial Order or Certificate
of Liquidating Agent.............................................................. 38
</TABLE>
- --------
** This Table of Contents is not part of the Indenture.
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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SECTION 3.11 Rights of Trustee as a Holder of Senior
Indebtedness; Preservation of
Trustee's Rights.................................................................. 38
SECTION 3.12 Article Applicable to Paying Agents.................................................. 39
SECTION 3.13 No Suspension of Remedies............................................................ 39
SECTION 3.14 Trustee's Relation to Senior Indebtedness............................................ 39
SECTION 3.15 Other Rights of Holders of Senior Indebtedness....................................... 39
ARTICLE IV
REDEMPTION AND PURCHASES OF NOTES
SECTION 4.1 Redemption Prices.................................................................... 40
SECTION 4.2 Notice of Redemption; Selection of Notes............................................. 40
SECTION 4.3 When Notes called for redemption become due
and payable....................................................................... 42
SECTION 4.4 Cancellation of Redeemed Notes....................................................... 42
SECTION 4.5 Purchase of Notes Upon Change in Control............................................. 42
ARTICLE V
COVENANTS
SECTION 5.1 Payment of principal of and premium, if any,
and interest on Notes............................................................. 46
SECTION 5.2 Maintenance of office or agency for registration
of transfer, exchange and payment of Notes........................................ 46
SECTION 5.3 Appointment to fill a vacancy in the office
of Trustee........................................................................ 46
SECTION 5.4 Provision as to Paying Agent......................................................... 46
SECTION 5.5 Maintenance of Corporate Existence................................................... 48
SECTION 5.6 Payment of Taxes and Other Claims.................................................... 48
SECTION 5.7 Maintenance of Properties............................................................ 48
SECTION 5.8 Insurance............................................................................ 48
SECTION 5.9 Limitation on Indebtedness........................................................... 49
SECTION 5.10 Limitation on Restricted Payments.................................................... 49
SECTION 5.11 Restrictions on Preferred Stock of Subsidiaries
and Subsidiary Distributions...................................................... 52
SECTION 5.12 Limitation on Transactions with Affiliates........................................... 52
SECTION 5.13 Disposition of Proceeds of Asset Sales............................................... 53
SECTION 5.14 Limitation on Liens Securing Subordinated
Indebtedness...................................................................... 57
SECTION 5.15 Limitation on Other Senior Subordinated
Indebtedness...................................................................... 58
SECTION 5.16 Limitation on Issuance of Guarantees of
Subordinated Indebtedness......................................................... 59
SECTION 5.17 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries............................................... 59
SECTION 5.18 Provision of Financial Statements.................................................... 60
SECTION 5.19 Statement by Officers as to Default.................................................. 60
SECTION 5.20 Waiver of Certain Covenants.......................................................... 61
SECTION 5.21 Further assurance.................................................................... 61
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 6.1 Company to furnish Trustee information as to
names and addresses of Noteholders................................................ 61
SECTION 6.2 Preservation and disclosure of lists................................................. 62
SECTION 6.3 Reports by the Trustee............................................................... 63
SECTION 6.4 Reports by the Company............................................................... 65
ARTICLE VII
REMEDIES
SECTION 7.1 Events of Default.................................................................... 65
SECTION 7.2 Acceleration of Maturity; Rescission
and Annulment..................................................................... 67
SECTION 7.3 Collection of Indebtedness and Suits for
Enforcement by Trustee............................................................ 68
SECTION 7.4 Trustee May File Proofs of Claim..................................................... 69
SECTION 7.5 Trustee May Enforce Claims Without Possession
of Notes.......................................................................... 70
SECTION 7.6 Application of Money Collected....................................................... 70
SECTION 7.7 Limitation on Suits.................................................................. 70
SECTION 7.8 Unconditional Right of Holders to Receive
Principal, Premium and Interest................................................... 71
SECTION 7.9 Restoration of Rights and Remedies................................................... 71
SECTION 7.10 Rights and Remedies Cumulative....................................................... 72
SECTION 7.11 Delay or Omission Not Waiver......................................................... 72
SECTION 7.12 Control by Holders................................................................... 72
SECTION 7.13 Waiver of Past Defaults.............................................................. 72
SECTION 7.14 Undertaking for Costs................................................................ 73
SECTION 7.15 Waiver of Stay, Extension or Usury Laws.............................................. 73
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1 Duties and responsibilities of Trustee............................................... 73
SECTION 8.2 Reliance on document, opinions, etc.................................................. 75
SECTION 8.3 No responsibility for recitals, etc.................................................. 76
SECTION 8.4 Trustee, Paying Agent or Note Registrar may
own Notes......................................................................... 77
SECTION 8.5 Moneys received by Trustee to be held in
trust without interest............................................................ 77
SECTION 8.6 Compensation and expenses of Trustee................................................. 77
SECTION 8.7 Right of Trustee to rely on Officers'
Certificate where no other evidence
specifically prescribed........................................................... 78
SECTION 8.8 Conflicting interest of Trustee...................................................... 78
SECTION 8.9 Requirements for eligibility of Trustee.............................................. 78
SECTION 8.10 Resignation or removal of Trustee.................................................... 79
SECTION 8.11 Acceptance by successor to Trustee; notice
of succession of a Trustee........................................................ 80
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SECTION 8.12 Successor to Trustee by merger, consolidation
or succession to business......................................................... 81
SECTION 8.13 Limitations on rights of Trustee as a creditor....................................... 81
SECTION 8.14 Notice of Defaults................................................................... 81
ARTICLE IX
CONCERNING THE NOTEHOLDERS
SECTION 9.1 Evidence of action by Noteholders.................................................... 82
SECTION 9.2 Proof of execution of instruments and of
holding of Notes.................................................................. 82
SECTION 9.3 Who may be deemed owners of Note..................................................... 82
SECTION 9.4 Notes owned by Company or controlled by
controlling persons disregarded for
certain purposes.................................................................. 83
SECTION 9.5 Record date for action by Noteholders................................................ 83
SECTION 9.6 Instruments executed by Noteholders bind
future holders.................................................................... 83
ARTICLE X
NOTEHOLDERS MEETINGS
SECTION 10.1 Purposes for which meetings may be called............................................ 84
SECTION 10.2 Manner of calling meetings; record date.............................................. 84
SECTION 10.3 Call of meeting by Company or Noteholders............................................ 85
SECTION 10.4 Who may attend and vote at meetings.................................................. 85
SECTION 10.5 Manner of voting at meetings and record to
be kept........................................................................... 85
SECTION 10.6 Exercise of rights of Trustee and Noteholders
not to be hindered or delayed..................................................... 86
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 Purposes for which supplemental Indentures may
be entered into without consent of
Noteholders....................................................................... 86
SECTION 11.2 Modification of Indenture with consent of
holders of 51 percent in principal amount
of Notes.......................................................................... 88
SECTION 11.3 Effect of supplemental indentures.................................................... 89
SECTION 11.4 Conformity with Trust Indenture Act.................................................. 89
SECTION 11.5 Notes may bear notation of changes by
supplemental indentures........................................................... 89
SECTION 11.6 Officers' Certificate and Opinion of Counsel......................................... 89
SECTION 11.7 Modification of Indenture with consent of
holders of Senior Indebtedness.................................................... 90
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ARTICLE XII
CONSOLIDATION, MERGER AND SALE
SECTION 12.1 Merger and Sale of Assets, etc....................................................... 90
SECTION 12.2 Successor Substituted................................................................ 92
SECTION 12.3 Opinion of Counsel................................................................... 93
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 13.1 Legal Defeasance and Covenant Defeasance of
the Notes......................................................................... 93
SECTION 13.2 Termination of Obligations upon Cancellation
of the Notes...................................................................... 96
SECTION 13.3 Survival of Certain Obligations...................................................... 96
SECTION 13.4 Acknowledgment of Discharge by Trustee............................................... 97
SECTION 13.5 Application of Trust Assets.......................................................... 97
SECTION 13.6 Repayment to the Company; Unclaimed Money............................................ 97
SECTION 13.7 Reinstatement........................................................................ 97
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 14.1 Incorporators, stockholders, officers and
directors of Company or any Guarantor
(other than the Company) exempt from
individual liability.............................................................. 98
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1 Successors and assigns of Company bound by
Indenture......................................................................... 99
SECTION 15.2 Acts of board, committee or officer of
successor corporation valid....................................................... 99
SECTION 15.3 Required notices or demand may be served by
mail; waiver...................................................................... 99
SECTION 15.4 Indenture and Notes to be construed in
accordance with the laws of the State of
New York..........................................................................100
SECTION 15.5 Evidence of compliance with conditions
precedent.........................................................................100
SECTION 15.6 Payments due on Saturdays, Sundays and
holidays..........................................................................101
SECTION 15.7 Provisions required by Trust Indenture Act
to control........................................................................101
SECTION 15.8 Provisions of this Indenture and Notes for
the sole benefit of the parties and
the Noteholders...................................................................101
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SECTION 15.9 Severability.........................................................................101
SECTION 15.10 Indenture may be executed in counterparts;
acceptance by Trustee.............................................................102
SECTION 15.11 Article and Section headings.........................................................102
EXHIBIT A-1 FORM OF INITIAL NOTE.................................................................A-1
EXHIBIT A-2 FORM OF EXCHANGE NOTE................................................................A-2
EXHIBIT B FORM OF LEGEND.......................................................................B-1
EXHIBIT C FORM OF CERTIFICATE..................................................................C-1
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<PAGE>
THIS INDENTURE, dated as of the 7th day of October, 1996,
between GENESIS HEALTH VENTURES, INC., a corporation duly organized and existing
under the laws of the Commonwealth of Pennsylvania (hereinafter referred to as
the "Company"), and First Union National Bank, a national banking association
(not in its individual capacity but solely as trustee hereunder, hereinafter
referred to as the "Trustee").
W I T N E S S E T H :
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized an issue of its 9 1/4% Senior Subordinated Notes due 2006
(hereinafter referred to as the "Initial Notes") and 9 1/4% Senior Subordinated
Notes due 2006 (the "Exchange Notes" and, together with the Initial Notes, the
"Notes") which Exchange Notes are to be issued in exchange for the Initial Notes
pursuant to the Registration Rights Agreement and containing terms identical in
all material respects to the Initial Notes (except that (i) the transfer
restrictions thereon shall be eliminated and (ii) there will be no provision for
the payment of interest rate increases); and, to provide the terms and
conditions upon which the Notes are to be authenticated, issued and delivered,
the Company has duly authorized the execution and delivery of this Indenture;
and
WHEREAS, all acts and things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee as in
this Indenture provided, the valid, binding and legal obligations of the
Company, and to constitute these presents a valid indenture and agreement
according to its terms, have been done and performed, and the execution and
delivery of this Indenture and the issue hereunder of the Notes have in all
respects been duly authorized, and the Company, in the exercise of the legal
right and power vested in it, executes and delivers this Indenture and proposes
to make, execute, issue and deliver the Notes;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which
the Notes are authenticated, issued, delivered and held, and in consideration of
the premises, of the purchase and acceptance of the Notes by the holders thereof
and of the sum of one dollar to it duly paid by the Trustee at the execution of
these presents, the receipt whereof is hereby acknowledged, the Company
covenants and agrees with the Trustee, for the equal and proportionate benefit
of the respective holders from time to time of the Notes, as follows:
<PAGE>
2
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain terms defined. The terms defined in this
Section 1.1 (except as herein otherwise expressly provided or unless the context
otherwise requires), for all purposes of this Indenture and of any indenture
supplemental hereto, shall have the respective meanings specified in this
Section 1.1.
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary or such acquisition. Acquired Indebtedness shall be
deemed to be incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.
"Affiliate" means with respect to any specified Person, (i)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person, (ii) any other
Person that owns, directly or indirectly, 5% or more of such specified Person's
Capital Stock, (iii) any officer or director of (A) any such specified Person,
(B) any Subsidiary of such specified Person or (C) any Person described in
clauses (i) or (ii) above or (iv) any other Person having a relationship with
any natural Person described in clauses (i), (ii) or (iii) above by blood,
marriage or adoption not more remote than first cousin or any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such other Person described in this clause (iv). For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease or other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (i) any
Capital Stock of any Subsidiary; (ii) all or substantially all of the properties
and assets of any division or line of business of the Company or its
Subsidiaries; or (iii) any other properties or assets of the Company or any
Subsidiary, other than in the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" shall not include (i) any transfer of
properties and assets that is governed by the provisions described under Article
XII, (ii) any transfer of
<PAGE>
3
properties or assets of the Company to any Wholly Owned Subsidiary, or of any
Subsidiary to the Company or any Wholly Owned Subsidiary in accordance with the
terms hereof or (iii) transfers of properties or assets in any twelve month
period (A) the Fair Market Value of which does not, in the aggregate, exceed
2.5% of the Company's Consolidated Total Assets and (B) the Consolidated EBITDA
related to such properties or assets does not, in the aggregate, exceed 2.5% of
the Company's Consolidated EBITDA.
"Attributable Debt" in respect of a sale-leaseback transaction
or an operating lease in respect of a healthcare facility means, at the time of
determination, the present value (discounted at the interest rate implicit in
the lease, compounded semi-annually) of the obligation of the lessee of the
property subject to such sale-leaseback transaction or operating lease in
respect of a healthcare facility for rental payments during the remaining term
of the lease included in such transaction including any period for which such
lease has been extended or may, at the option of the lessor, be extended or
until the earliest date on which the lessee may terminate such lease without
penalty or upon payment of penalty (in which case the rental payments shall
include such penalty), after excluding all amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water,
utilities and similar charges.
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Code, as
amended, or any similar United States Federal or State law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Board of Directors", when used with reference to the Company,
means the Board of Directors of the Company, or the executive committee of the
Board of Directors of the Company, or any other committee of the Board of
Directors of the Company lawfully empowered to take the action in connection
with which such term is used.
"Book-Entry Note" means a Note represented by a Global Note
and registered in the name of the nominee of the Depository.
"Business Day" means a day other than a Saturday, a Sunday or
a day which shall be in the City of New York, New York a day on which banking
institutions are authorized or obligated
<PAGE>
4
by law or required by executive order to be closed or a day other than a day on
which the Trustee or the Paying Agent is authorized or obligated by law or
required by executive order to be closed.
"Capital Lease Obligation" of any Person means any obligation
of such Person and its Subsidiaries on a Consolidated basis under any capital
lease of real or personal property which, in accordance with GAAP, has been
recorded on the balance sheet of such Person as a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock or equity interests.
"Cash Equivalent" means (i) any security, maturing not more
than six months after the date of acquisition, issued by the United States of
America, or an instrumentality or agency thereof and guaranteed fully as to
principal, premium, if any, and interest by the United States of America, (ii)
any certificate of deposit, time deposit, money market account or bankers'
acceptance, maturing not more than six months after the date of acquisition,
issued by any commercial banking institution that is a member of the Federal
Reserve System and that has combined capital and surplus and undivided profits
of not less than $500,000,000, whose debt has a rating, at the time as of which
any investment therein is made, of "P-1" (or higher) according to Moody's
Investors Service, Inc. or any successor rating agency, or "A-1" (or higher)
according to Standard and Poor's Corporation or any successor rating agency and
(iii) commercial paper, maturing not more than three months after the date of
acquisition, issued by any corporation (other than an Affiliate or Subsidiary of
the Company) organized and existing under the laws of the United States of
America with a rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's Investors Service, Inc. or any
successor rating agency, or "A-1" (or higher) according to Standard and Poor's
Corporation or any successor rating agency.
"Change in Control" means the occurrence of any of the
following events: (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), in a single transaction or through a series of
related transactions, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the
total Voting Stock of the Company; (ii) the Company consolidates or merges with
or into another corporation or conveys, transfers or leases all or substantially
all of its assets to any Person, or any corporation consolidates or merges with
or into the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
outstanding Voting Stock of the Company is changed into or exchanged for (x)
Voting Stock of the surviving corporation which
<PAGE>
5
is not Redeemable Capital Stock or (y) cash, securities or other property in an
amount which could be paid by the Company as a Restricted Payment as described
under Section 5.10 (and such amount shall be treated as a Restricted Payment
subject to the provisions of Section 5.10), and (B) the holders of the Voting
Stock of the Company immediately prior to such transaction own, directly or
indirectly, not less than 50% of the Voting Stock of the surviving corporation
immediately after such transaction; (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of at least 66-2/3% of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office; or (iv) the Company is liquidated or dissolved or adopts a plan of
liquidation.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the date hereof such Commission is not existing and performing the duties
now assigned to it under the Trust Indenture Act, then the body performing such
duties at such time.
"Company" means Genesis Health Ventures, Inc., a corporation
incorporated under the laws of Pennsylvania, until a successor Person shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person. To the extent necessary
to comply with the requirements of the provisions of Trust Indenture Act
Sections 310 through 317 as they are applicable to the Company, the term
"Company" shall include any other obligor with respect to the Notes for purposes
of complying with such provisions.
"Consolidated EBITDA" of any Person means with respect to any
determination date, Consolidated Net Income before extraordinary items and gains
or losses realized in connection with Asset Sales, plus (i) Consolidated Income
Tax Expense, plus (ii) consolidated depreciation expense, plus (iii)
consolidated amortization expense, plus (iv) Consolidated Interest Expense, plus
(v) all other non-cash items reducing Consolidated Net Income of such Person and
its Subsidiaries, determined on a Consolidated basis in accordance with GAAP,
and less all non-cash items increasing Consolidated Net Income of such Person
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP, in each case, for such Person's prior four full fiscal
<PAGE>
6
quarters for which financial results have been reported immediately preceding
the determination date.
"Consolidated Income Tax Expense" means for any period, as
applied to any Person, the provision for federal, state, local and foreign
income taxes of such Person and its Consolidated Subsidiaries for such period as
determined in accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without
duplication, for any period, as applied to any Person, the sum of (i) the
interest expense of such Person and its Consolidated Subsidiaries for such
period on a consolidated basis, including, without limitation, (a) amortization
of debt discount, (b) the net cost under interest rate contracts (including
amortization of discounts), (c) the interest portion of any deferred payment
obligation and (d) accrued interest, plus (ii) the interest component of the
Capital Lease Obligations paid, accrued and/or scheduled to be paid, or accrued
by such Person during such period, in each case as determined in accordance with
GAAP, plus (iii) Preferred Stock dividends in respect of Preferred Stock of the
Company or any Subsidiary held by Persons other than the Company or a Wholly
Owned Subsidiary. For purposes of clause (c) of the preceding sentence,
dividends shall be deemed to be an amount equal to the actual dividends paid
divided by one minus the applicable actual combined Federal, state, local and
foreign income tax rate of the Company and its Consolidated Subsidiaries
(expressed as a decimal).
"Consolidated Net Income (Loss)" of any Person means, for any
period, the Consolidated net income (or loss) of the Company and its
Consolidated Subsidiaries for such period as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (loss), by
excluding (i) all extraordinary gains or losses (less all fees and expenses
relating thereto), (ii) the portion of net income of the Company and its
Consolidated Subsidiaries allocable to investments in unconsolidated Persons to
the extent that cash dividends or distributions have not actually been received
by the Company or one of its Consolidated Subsidiaries, (iii) net income (or
loss) of any Person combined with the Company or any of its Subsidiaries in a
"pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss, net of taxes, realized upon the termination
of any employee pension benefit plan, (v) any gains or losses (less all fees and
expenses relating thereto) in respect of dispositions of assets other than in
the ordinary course of business, or (vi) the net income of any Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders.
<PAGE>
7
"Consolidated Net Worth" of any Person means the Consolidated
stockholders' equity (excluding Redeemable Capital Stock) of such Person and its
Consolidated Subsidiaries, as set forth on the most recent consolidated balance
sheet of such Person and its Consolidated Subsidiaries determined in accordance
with GAAP.
"Consolidated Rental Payments" of any Person means, for any
period, the aggregate rental obligations of such Person and its Consolidated
Subsidiaries (not including taxes, insurance, maintenance and similar expenses
that the lessee is obligated to pay under the terms of the relevant leases),
determined on a consolidated basis in conformity with GAAP, payable in respect
of such period under Attributable Debt or leases of real or personal property
not constituting Attributable Debt (net of income from subleases thereof, not
including taxes, insurance, maintenance and similar expenses that the sublessee
is obligated to pay under the terms of such sublease), whether or not such
obligations are reflected as liabilities or commitments on a consolidated
balance sheet of such Person and its Subsidiaries or in the notes thereto,
excluding, however, in any event, (i) that portion of Consolidated Interest
Expense of such Person representing payments by such Person or any of its
Consolidated Subsidiaries in respect of Capital Lease Obligations (net of
payments to such Person or any of its Consolidated Subsidiaries under subleases
qualifying as capitalized lease subleases to the extent that such payments would
be deducted in determining Consolidated Interest Expense) and (ii) the aggregate
amount of amortization of obligations of such Person and its Consolidated
Subsidiaries in respect of such Capital Lease Obligations for such period (net
of payments to such Person or any of its Consolidated Subsidiaries and subleases
qualifying as capitalized lease subleases to the extent that such payments would
be deducted in determining such amortization amount).
"Consolidated Total Assets" of any Person means the
Consolidated total assets of such Person and its Consolidated Subsidiaries, as
set forth on the most recent consolidated balance sheet of such Person and its
Consolidated Subsidiaries determined in accordance with GAAP.
"Consolidation" means, with respect to any Person, the
consolidation of the accounts of such Person and each of its subsidiaries if and
to the extent the accounts of such Person and each of its subsidiaries would
normally be consolidated with those of such Person, all in accordance with GAAP.
The term "Consolidated" shall have a similar meaning.
"Convertible Debentures" means the Company's 6%
Convertible Senior Subordinated Debentures due 2003.
"Credit Facility" means (i) the Credit Agreement, dated as of
November 22, 1993, among the Company, the other borrowers parties thereto, the
lenders parties thereto, Mellon Bank, N.A.
<PAGE>
8
as issuing bank and Mellon Bank, N.A. as agent for such lenders and such issuing
bank, as the same may be amended, restated, renewed, extended, restructured,
supplemented or otherwise modified from time to time and (ii) any Loan Documents
(as defined in the Credit Agreement as in effect from time to time) and any
other documents or Instruments executed by the Company pursuant to or in
connection with the Credit Agreement, and (iii) any credit agreement, loan
agreement, note purchase agreement, indenture or other agreement, document or
instrument refinancing, refunding or otherwise replacing the aforesaid Credit
Agreement or any other agreement deemed a Credit Facility under clause (i), (ii)
or (iii) hereof, whether or not with the same agent, trustee, representative,
lenders or holders, regardless of whether the aforesaid Credit Agreement or
Credit Facility or any portion thereof was outstanding or in effect at the time
of such restatement, renewal, extension, restructuring, supplement or
modification (including without limitation, the Second Amended and Restated
Credit Agreement, dated October 7, 1996, among the Company, the other borrowers
parties thereto, the lenders parties thereto, Mellon Bank, N.A. as issuing bank
and Mellon Bank, N.A. as agent for such lenders and the Amended and Restated
Participation Agreement, dated October 7, 1996, among Genesis ElderCare
Properties, Inc., Mellon Financial Services Corporation #4, the lenders parties
thereto and Mellon Bank, N.A. as agent for such lenders, as the same may be
amended, restated, renewed, extended, restructured, supplemented and otherwise
modified from time to time). Without limiting the generality of the foregoing,
the term "Credit Facility" shall include any amendment, restatement, renewal,
extension, restructuring, supplement or modification to any Credit Facility and
all refundings, refinancings and replacements of any Credit Facility, including
any agreement (a) extending the maturity of any Indebtedness incurred thereunder
or contemplated thereby, (b) adding or deleting borrowers or guarantors
thereunder, so long as such borrowers and guarantors include one or more of the
Company and its Subsidiaries and their respective successors and assigns,
provided that on the date thereof the addition of such borrower or guarantor
would not be prohibited by the definition of "Permitted Indebtedness" and the
provisions of Sections 5.14 and 5.16, (c) increasing the amount of Indebtedness
incurred thereunder or available to be borrowed thereunder provided such
increase is permitted to be incurred under the definition of "Permitted
Indebtedness" or is or will be permitted to be incurred under Section 5.9 or (d)
otherwise altering the terms and conditions thereof in a manner not prohibited
by the definition of "Permitted Indebtedness" and the provisions of Sections
5.14, 5.16 and 5.17 and as such agreement may be amended, renewed, extended,
substituted, refinanced, replaced or otherwise modified from time to time, and
includes any agreement extending the maturity of all or any portion of the
Indebtedness thereunder.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
<PAGE>
9
"Depository" shall mean The Depository Trust Company, New
York, New York, or its nominee or successors and assigns, or such other
depository institution hereinafter appointed by the Company.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness under or in respect of the Credit Facility and (ii) any other
Senior Indebtedness which, at the time of determination, has an aggregate
principal amount outstanding, together with any commitments to lend additional
amounts, of at least $30,000,000 and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Eligible Accounts Receivables" as of any date means the book
value of all accounts receivables of the Company and its Subsidiaries that would
be shown on a Consolidated balance sheet of the Company and its Subsidiaries
prepared on such date in accordance with GAAP, which are not more than 180 days
past their due date and were entered into on normal payment terms.
"Event of Default" means any event specified in Section 7.1,
continued for the period of time, if any, and after giving of notice, if any,
therein designated.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exchange Notes" has the meaning provided in the
preamble of this Indenture.
"Exchange Offer" means, subject to the terms of the
Registration Rights Agreement, the offer by the Company to the Noteholders of
the opportunity to exchange their Initial Notes for Exchange Notes pursuant to a
registration statement filed with the Commission.
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer.
"Fiscal Year" with respect to the Company shall mean the
fiscal year of the Company.
"Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (i) the sum of Consolidated Net Income, Consolidated
Interest Expense, Consolidated Income Tax Expense, and one-third of Consolidated
Rental Payments plus, without duplication, all depreciation, amortization and
all other non-
<PAGE>
10
cash charges (excluding any such non-cash charge constituting an extraordinary
item or loss or any non-cash charge which requires an accrual of or a reserve
for cash charges for any future period), in each case, for such period, of the
Company and its Subsidiaries on a Consolidated basis, as determined in
accordance with GAAP to (ii) the sum of (a) Consolidated Interest Expense for
such period and (b) one-third of Consolidated Rental Payments for such period;
provided that in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, consistently
applied, as in effect on the date hereof.
"Global Note" means a Note evidencing all or part of the Notes
to be issued as Book-Entry Notes, issued to the Depository in accordance with
this Indenture.
"Guarantee" means the guarantee by any Guarantor which
guarantees the Indenture Obligations pursuant to a guarantee given in accordance
with this Indenture.
"Guaranteed Debt" of any Person means, without duplication,
all Indebtedness of any other Person guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss,
(iii) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without requiring that
such property be received or such services be rendered), (iv) to maintain
working capital or equity capital of the debtor, or otherwise to maintain the
net worth, solvency or other financial condition of the debtor or (v) otherwise
to assure a creditor against loss; provided that the term "Guaranteed Debt"
shall not include endorsements for collection or deposit, in either case in the
ordinary course of business.
"Guarantor" means any Person which guarantees the Indenture
Obligations pursuant to this Indenture.
"Healthcare Related Business" means a business, the majority
of whose revenues result from healthcare, long-term care, or managed care
related businesses or facilities, including businesses which provide insurance
relating to the costs of healthcare, long-term care or managed care services.
<PAGE>
11
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit or
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities and in connection with any agreement to purchase,
redeem, exchange or otherwise acquire for value any Capital Stock of such
Person, or any warrants, rights or options to acquire such Capital Stock, now or
hereafter outstanding, (ii) all obligations of such Person evidenced by bonds,
notes, debentures or other similar instruments, (iii) every obligation of such
Person issued or contracted for as payment in consideration of the purchase by
such Person or an Affiliate of such Person of the Capital Stock or substantially
all of the assets of another Person or in consideration for the merger or
consolidation with respect to which such Person or an Affiliate of such Person
was a party (other than any obligation of such Person to pay an amount to
another Person based on income in respect of Capital Stock or assets which were
purchased or in respect of such merger to which such Person or an Affiliate was
a party except for such obligations which are required in accordance with GAAP
to be classified as a liability on the balance sheet of such Person), (iv) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade payables and other accrued current liabilities arising in the
ordinary course of business, (v) all obligations under Interest Rate Contracts
of such Person, (vi) all Capital Lease Obligations of such Person, (vii) all
indebtedness referred to in clauses (i) through (vi), (ix) and (x) of other
Persons and all dividends of other Persons, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien, upon any property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
(viii) all Guaranteed Debt of such Person, (ix) all Redeemable Capital Stock
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends and (x) all Attributable Debt of such
Person. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value to be determined
<PAGE>
12
in good faith by the Board of Directors of the issuer of such
Redeemable Capital Stock.
"Indenture" means this instrument as originally executed, or,
if amended or supplemented as herein provided, as so amended or supplemented.
"Indenture Obligations" means the obligations of the Company
and any other obligor hereunder or under the Notes, including any Guarantor, to
pay principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with this Indenture,
the Notes and the performance of all other obligations to the Trustee and the
holders under this Indenture and the Notes, according to the terms thereof.
"Initial Notes" has the meaning provided in the
preamble to this Indenture.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"Investments" means, with respect to any Person, directly or
indirectly, any advance, loan or other extension of credit (including any
guarantee) or capital contribution to (by means of any transfer of cash or other
property (tangible or intangible) to others, or any payment for property or
services for the account or use of others or otherwise), or any purchase,
acquisition or ownership by such Person of any Capital Stock, bonds, notes,
debentures or other securities (including, without limitation, any interests in
any partnership or joint venture) issued or owned by any other Person.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
"Maturity" when used with respect to any Note means the date
on which the principal of such Note becomes due and payable as therein provided
or as provided herein, whether at Stated Maturity, or any redemption date and
whether by declaration of acceleration, Offer in respect of Excess Proceeds,
Change in Control Offer in respect of a Change in Control, call for redemption
or otherwise.
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13
"Net Cash Proceeds" means, with respect to any Asset Sale by
any Person, the proceeds thereof in the form of cash or Cash Equivalents
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed for, cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Subsidiary) net of (i) brokerage commissions
and other reasonable fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Subsidiary) owning a beneficial
interest in the assets subject to the Asset Sale and (v) appropriate amounts to
be provided by the Company or any Subsidiary, as the case may be, as a reserve,
in accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by the Company or any Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as reflected in an Officers' Certificate delivered to the Trustee.
"Non-payment Default" means any default or event of default
under or in respect of any Designated Senior Indebtedness, other than a Payment
Default.
"Notes" has the meaning provided in the preamble to
this Indenture.
"Noteholder; Registered Holder; Holder; or Holder of Notes" or
other similar terms means any person who shall at the time be the registered
holder of any Note or Notes in the Note Register kept for that purpose in
accordance with the provisions of this Indenture.
"Note Register and Note Registrar" shall have the respective
meanings specified in Section 2.5.
"Officers' Certificate" means a certificate signed by the
Chief Executive Officer or the President or any Vice President and by the Chief
Financial Officer or Treasurer or the Secretary or an Assistant Secretary of the
Company. Each such certificate shall include the statements provided for in
Section 15.5.
"Opinion of Counsel" means an opinion in writing signed by
legal counsel of the Company. Each such opinion shall include the statements
provided for in Section 15.5.
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14
"outstanding", when used with reference to Notes, subject to
the provisions of Section 9.4, means, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except
(a) Notes theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Notes, or portions thereof, for the payment or redemption
of which moneys in the necessary amount shall have been deposited in
trust with the Trustee, provided that such Notes shall have reached
their stated maturity or, if such Notes are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been given as
provided in Article IV; and
(c) Notes in lieu of or in substitution for which other Notes
shall have been authenticated and delivered pursuant to the terms of
Section 2.7, unless the holder thereof demonstrates to the Trustee that
any such Notes are held by bona fide holders in due course.
"Payment Default" means any default in the payment when due
(at maturity, upon acceleration of maturity, upon mandatory prepayment or
otherwise) of any amount owing under or in respect of any Designated Senior
Indebtedness.
"Permitted Indebtedness" means:
(a) Indebtedness of up to $300,000,000 outstanding principal
amount under the Credit Facility;
(b) any guarantee by the Company or any Subsidiary under the
Credit Facility;
(c) Indebtedness (other than Indebtedness included in clause
(d) below) in existence on the date hereof;
(d) Indebtedness of the Company pursuant to the Convertible
Debentures;
(e) Indebtedness of the Company pursuant to the Notes;
(f) Indebtedness evidenced by letters of credit issued in the
ordinary course of business consistent with past practice to support
the Company's or any Subsidiary's insurance or self-insurance
obligations (including to secure workers' compensation and other
similar insurance coverages);
(g) Interest Rate Contracts, to the extent that the notional
principal amount of such obligations does not exceed the amount of
Indebtedness outstanding or committed
<PAGE>
15
to be incurred on the date such Interest Rate Contracts are
entered into;
(h) Indebtedness of the Company to a Wholly Owned Subsidiary
(provided that any Indebtedness of the Company owing to a Wholly Owned
Subsidiary is subject to the Intercompany Agreement) and Indebtedness
of a Subsidiary to the Company or another Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock
or any other event which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any other subsequent
transfer of any such Indebtedness (except to the Issuer or a Wholly
Owned Subsidiary) shall be deemed, in each case to be incurred and
shall be treated as an incurrence for purposes of Section 5.9 hereof at
the time the Wholly Owned Subsidiary in question ceased to be a Wholly
Owned Subsidiary;
(i) any guarantees of Indebtedness by a Subsidiary entered
into in accordance with Section 5.16;
(j) Indebtedness incurred by the Company or any Subsidiary
consisting of Purchase Money Obligations in an amount not to exceed
$15,000,000 at any one time outstanding;
(k) Indebtedness incurred by the Company or any Wholly Owned
Subsidiary consisting of Capital Lease Obligations in an amount not to
exceed $15,000,000 at any time outstanding;
(l) Indebtedness of the Company or any Wholly Owned
Subsidiary, in addition to that described in clauses (a) through (k) of
this definition of "Permitted Indebtedness," in an aggregate principal
amount outstanding at any given time not to exceed $40,000,000; and
(m) any renewals, extensions, substitutions, refundings,
refinancings or replacements of any Indebtedness described in clauses
(a) through (e) of this definition of "Permitted Indebtedness,"
including any successive renewals, extensions, substitutions,
refundings, refinancings or replacements, so long as (i) any such new
Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides
for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount
as of the date of determination) so refinanced, plus the amount of any
premium required to be paid under the terms of the instrument governing
such Indebtedness being refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing through means of a tender offer or privately negotiated
transactions and, in each case, actually paid, plus the amount of
expenses of the Company
<PAGE>
16
incurred in connection with such refinancing; (ii) in the case of any
refinancing of Subordinated Indebtedness, such new Indebtedness is made
subordinate to the Notes at least to the same extent as the
Indebtedness being refinanced; and (iii) any such new Subordinated
Indebtedness has an Average Life to Stated Maturity longer than the
Average Life to Stated Maturity of the Notes and a final Stated
Maturity later than the final Stated Maturity of the Notes.
"Permitted Investment" means (i) the Notes or any Guarantees;
(ii) Temporary Cash Investments; (iii) Indebtedness of the Company to a
Subsidiary (provided that any Indebtedness of the Company owing to a Wholly
Owned Subsidiary is subject to the Intercompany Agreement) and Indebtedness of a
Subsidiary to the Company or another Subsidiary; (iv) Investments in existence
on the date hereof; (v) Investments in any Wholly Owned Subsidiary by the
Company or any Wholly Owned Subsidiary or any Investment in the Company by any
Wholly Owned Subsidiary; (vi) receivables owing to the Company and its
Subsidiaries if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; (vii)
Investments in Permitted Joint Ventures; (viii) Investments in any Healthcare
Related Businesses, provided that the Company is able, at the time of such
Investment and immediately after giving pro forma effect thereto, to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 5.9; (ix) Investments acquired or retained from another
Person in connection with any sale, conveyance, transfer, lease or other
disposition of any properties or assets to such Person in accordance with
Section 5.13; and (x) in addition to Permitted Investments described in the
foregoing clauses (i) through (ix), Investments in the aggregate amount of
$20,000,000 at any one time outstanding.
"Permitted Joint Venture" means any Subsidiary which owns,
operates or services Healthcare Related Business.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock," as applied to any Person, means Capital
Stock of any class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such corporation,
over shares of Capital Stock of any other class of such corporation.
"Private Placement Legend" means the legend initially set
forth on the Notes in the form set forth on Exhibit A-1.
"Property" means, with respect to any Person, all types
of real, personal, tangible, intangible or mixed property owned
<PAGE>
17
by such Person whether or not included in the most recent consolidated balance
sheet of such Person.
"Purchase Money Obligations" means any Indebtedness of the
Company or any Subsidiary incurred to finance the acquisition or construction of
any Property or business (including Indebtedness incurred within 90 days
following such acquisition or construction), including Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or assumed by the Company
or a Subsidiary in connection with the acquisition of assets from such Person;
provided, however, that any Lien on such Indebtedness shall not extend to any
Property other than the Property so acquired or constructed.
"Qualified Capital Stock" of any Person means any and all
Capital Stock of such Person other than Redeemable Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"Redeemable Capital Stock" means any Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or otherwise, is, or upon the happening of an event or passage
of time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Notes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
"Redemption Date" when used with respect to any Note to be
redeemed pursuant to any provision in this Indenture means the date fixed for
such redemption by or pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties thereto, relating to the Exchange Offer as such agreement may be
amended, modified or supplemented from time to time.
"Responsible Officer", when used with respect to the Trustee,
means any officer including, without limitation, any Vice President, any
assistant secretary or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act; provided, that the Trustee shall be entitled
to request and rely upon an Opinion of Counsel with respect to whether any Note
is a Restricted Security.
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18
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Indebtedness" means all obligations of the Company or
any Subsidiary or Affiliate of the Company, now or hereafter existing, under or
in respect of the Credit Facility, whether for principal, interest (including
interest accruing after the filing of a petition by or against the Company under
any state or federal Bankruptcy Laws, whether or not such interest is allowed as
a claim after such filing in any proceeding under such law) or otherwise
(including obligations in respect of the lease financing facility of the Credit
Facility) and the principal of, premium, if any, and interest on all other
Indebtedness of the Company (other than the Notes), whether outstanding on the
date hereof or hereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness evidenced by the
Convertible Debentures, (iii) Indebtedness that is by its terms subordinate or
junior in right of payment to any Indebtedness of the Company, (iv) Indebtedness
which when incurred and without respect to any election under Section 1111(b) of
the Bankruptcy Law is without recourse to the Company, (v) Indebtedness which is
represented by Redeemable Capital Stock, (vi) Indebtedness for goods, materials
or services purchased in the ordinary course of business or Indebtedness
consisting of trade payables or other current liabilities (other than any
current liabilities owing under, or in respect of, the Credit Facility), (vii)
Indebtedness of or amounts owed by the Company for compensation to employees or
for services, (viii) any liability for federal, state, local or other taxes owed
or owing by the Company, (ix) Indebtedness of the Company to a Subsidiary of the
Company or any other Affiliate of the Company or any of such Affiliate's
subsidiaries, (x) that portion of any Indebtedness which at the time of issuance
is issued in violation of this Indenture, and (xi) amounts owing under leases
(other than Capital Lease Obligations and obligations in respect of the lease
financing facility of the Credit Facility).
"Stated Maturity" when used with respect to any Indebtedness
or any installment of interest thereon, means the dates specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the
Company subordinated in right of payment to the Notes.
"Subsidiary" means (i) a corporation (a) at least 50%
of the Voting Stock of which is at the time owned, directly or
<PAGE>
19
indirectly, by the Company and (b) of which the Company, directly or indirectly,
has the right to elect a majority of the members of the Board of Directors
either as a result of the ownership of a majority of the Voting Stock of such
corporation or pursuant to a shareholders or other voting agreement or (ii) any
partnership, joint venture, limited liability company or similar entity at least
50% of the total equity and voting interests of which (x) is at the time owned,
directly or indirectly, by the Company whether in the form of membership,
general, special or limited partnership, or otherwise and (y) the Company or any
Wholly Owned Subsidiary is a controlling general partner or otherwise controls
such entity.
"Temporary Cash Investments" means (i) any evidence of
Indebtedness, maturing not more than one year after the date of acquisition,
issued by the United States of America, or an instrumentality or agency thereof
and guaranteed fully as to principal, premium, if any, and interest by the
United States of America, (ii) any certificate of deposit, maturing not more
than one year after the date of acquisition, issued by, or time deposit of, a
commercial banking institution that is a member of the Federal Reserve System
and that has combined capital and surplus and undivided profits of not less than
$500,000,000, whose debt has a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's Investors Service,
Inc. or any successor rating agency, or "A-1" (or higher) according to Standard
and Poor's Corporation or any successor rating agency and (iii) commercial
paper, maturing not more than one year after the date of acquisition, issued by
a corporation (other than an Affiliate or Subsidiary of the Company) organized
and existing under the laws of the United States of America with a rating, at
the time as of which any investment therein is made, of "P-1" (or higher)
according to Moody's Investors Service, Inc. or any successor rating agency, or
"A-1" (or higher) according to Standard and Poor's Corporation or any successor
rating agency.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of
1939, as amended.
"U.S. Government Obligations" means securities which are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the
<PAGE>
20
issuer thereof, and shall also include a depository receipt issued by a bank or
trust Company as custodian with respect to any such U.S. Government Obligations
or a specific payment of interest on or principal of any such U.S. Government
Obligations held by such custodian for the account of the holder of a depository
receipt; provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligations or the specific payment of interest on or principal
of the U.S. Government Obligations evidenced by such depository receipt.
"Voting Stock" means stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
"Wholly Owned Subsidiary" means a Subsidiary all the Capital
Stock of which is owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.2 Other Definitions.
Defined in
Term Section
"Acquisition Survivor.................. 12.1(c)
"applicants"........................... 6.2(b)
"Certificated Notes"................... 2.2
"Change in Control Offer".............. 4.5(a)
"Change in Control Purchase Date"...... 4.5(c)
"Change in Control Purchase Price"..... 4.5(a)
"covenant defeasance................... 13.1(c)
"Deficiency"........................... 5.13(c)
"Excess Proceeds....................... 5.13(b)
"Initial Blockage Period".............. 3.3(b)
"legal defeasance"..................... 13.1(b)
"Note Amount".......................... 5.13(c)
"Offered Price"........................ 5.13(c)
"Payment Blockage Period".............. 3.3(b)
"Permitted Junior Notes"............... 3.2(a)
"Permitted Preferred Stock" ........... 5.11(a)
"record date".......................... 2.3
"Restricted Payments".................. 5.10(d)
"Senior Representative"................ 3.1
"Surviving Entity"..................... 12.1(a)
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21
SECTION 1.3 Incorporation by Reference of Trust
Indenture Act.
Whenever this Indenture refers to a provision of the Trust
Indenture Act, the provision is incorporated by reference in and made a part of
this Indenture.
The following Trust Indenture Act terms used in this Indenture
have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means
the Trustee; and
"obligor" on the Notes means the Company, any other obligor
upon the Notes or any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the
Trust Indenture Act, defined by Trust Indenture Act reference to another statute
or defined by Commission rule under the Trust Indenture Act have the meanings so
assigned to them.
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in
the plural include the singular;
(e) provisions apply to successive events and
transactions; and
(f) Unless the context otherwise requires, all references
herein to "Articles", "Sections" and other subdivisions refer to the
corresponding Articles, Sections and other subdivisions of this
Indenture, and the words "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision hereof.
<PAGE>
22
ARTICLE II
ISSUE, DESCRIPTION, REGISTRATION
AND EXCHANGE OF NOTES
SECTION 2.1 Designation, amount, authentication and delivery
of Notes. The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount of $125,000,000 and (ii) Exchange Notes from time
to time for issue, in the aggregate principal amount not to exceed $125,000,000
for issuance in exchange for a like principal amount of Initial Notes pursuant
to an exchange offer registration statement under the Securities Act, in each
case upon receipt of a written order of the Company signed by its Chief
Executive Officer, President or a Vice President without any further corporate
action by the Company. The Initial Notes shall be designated as 9 1/4% Senior
Subordinated Notes due 2006. Exchange Notes may have such distinctive series
designation as, and such changes in the form thereof, as are specified in the
written order referred to in the preceding sentence. Such written order with
respect to the Initial Notes or the Exchange Notes shall specify the amount of
Notes to be authenticated, the series and type of Notes and the date on which
the Notes are to be authenticated, whether the Notes are to be Initial Notes or
Exchange Notes, whether the Notes are to be Certificated Notes or a Global Note
and whether or not the Notes shall bear the Private Placement Legend, or such
other information as the Trustee may reasonably request (such specification can
be provided by attaching a form of Note consistent with the provisions hereof
containing such information). The aggregate principal amount of Notes
outstanding at any time may not exceed $125,000,000, except as provided in
Section 2.7.
Nothing contained in this Section 2.1 or elsewhere in this
Indenture, or in the Notes, is intended to or shall limit execution by the
Company or authentication or delivery by the Trustee of Notes under the
circumstances contemplated by Sections 2.5, 2.6, 2.7, 4.3 and 11.5.
SECTION 2.2 Form of Notes and Trustee's certificate. The
Initial Notes and the Exchange Notes and the Trustee's certificate of
authentication to be borne by the Notes shall be substantially in the form of
Exhibits A-1 and A-2, respectively, which exhibits are part of this Indenture.
The Notes may have such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or engraved
thereon as the officers executing the same may deem appropriate and as are not
inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the Notes may be listed,
or to conform to usage.
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23
Notes offered and sold in reliance on Rule 144A under the
Securities Act may be issued initially in the form of one or more Global Notes
in registered form, substantially in the form set forth in Exhibit A-1,
deposited with, or on behalf of, the Depository, and shall bear the legend set
forth on Exhibit B. The aggregate principal amount of any Global Note may from
time to time be increased or decreased by adjustments made on the records of the
Depository or the custodian for the Depository.
Notes offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described in the preceding
paragraph shall be issued, and Notes offered and sold in reliance on Rule 144A
under the Securities Act may be issued, in the form of certificated securities
in registered form in substantially the form set forth in Exhibit A-1 (the
"Certificated Notes"). The Trustee shall be conclusively entitled to rely on the
form of Notes (Global or Certificated Notes) as provided by the Company.
Likewise, the Trustee shall be conclusively entitled to rely upon statements
therein to the effect that they are being offered and sold in reliance on Rule
144A under the Securities Act, or upon another exemption from registration under
the Securities Act, as directed by the Company.
SECTION 2.3 Date of Notes and denominations. The Notes shall
bear interest at the rate per annum set forth in their title, payable
semi-annually on April 1 and October 1, beginning April 1, 1997, shall mature on
October 1, 2006 and shall be issuable as registered Notes without coupons in
denominations of $1,000 and any integral multiple thereof. The person in whose
name any Note is registered at the close of business on any record date (as
defined herein) with respect to any interest payment date shall be entitled to
receive the interest payable thereon on such interest payment date
notwithstanding the cancellation of such Note upon any registration of transfer
or exchange thereof subsequent to such record date and prior to such interest
payment date (subject to the provisions of Article IV in the case of any Note or
Notes, or portion thereof, called for redemption on a date subsequent to the
record date and prior to such interest payment date and in the case of any Note
or Notes, or portion thereof, with respect to which the holder has delivered a
written acceptance of a Change in Control Offer or an Offer pursuant to Section
5.13(c) on a date subsequent to such record date). The principal of and interest
on the Notes shall be payable at the office or agency to be maintained by the
Company in accordance with the provisions of Section 5.2 for such purpose;
provided, however, that payment of interest may be made at the option of the
Company by check mailed by first class mail to the address of the person
entitled thereto as such address shall appear in the Note Register. The term
"record date" as used in this Section 2.3 with respect to any interest payment
date shall mean the close of business on March 15 or September 15, as the case
may be, next preceding such
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24
interest payment date, whether or not such March 15 or September 15 is a
Business Day.
The Notes shall be dated the date of their authentication.
Interest shall accrue on the Notes as provided in the Notes.
Interest on the Notes shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
SECTION 2.4 Execution of Notes. The Notes shall be signed on
behalf of the Company, manually or in facsimile, by its Chief Executive Officer
or its President or a Vice President under its corporate seal (which may be in
facsimile) reproduced thereon and attested, manually or in facsimile, by its
Secretary or an Assistant Secretary or Treasurer or Assistant Treasurer. Only
such Notes as shall bear thereon a certificate of authentication substantially
in the form contained in Exhibits A-1 and A-2 hereto, signed manually by the
Trustee, shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
In case any officer of the Company whose signature appears on
any of the Notes, manually or in facsimile, shall cease to be such officer
before such Notes so signed shall have been authenticated and delivered by the
Trustee, such Notes nevertheless may be authenticated and delivered as though
the person whose signature appears on such Notes had not ceased to be such
officer of the Company; and any Note may be signed, and the corporate seal
reproduced thereon may be attested, on behalf of the Company, manually or in
facsimile, by persons as, at the actual date of the execution of such Note,
shall be the proper officers of the Company, although at the date of the
execution of this Indenture any such person was not such officer.
SECTION 2.5 Registration, Registration of Transfer and
Exchange of Notes. Subject to Sections 2.11 and 2.12, Notes may be exchanged for
a like aggregate principal amount of Notes of other authorized denominations.
The Notes to be exchanged shall be surrendered at the office or agency to be
maintained by the Company in accordance with the provisions of Section 5.2, and
the Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor the Note or Notes which the Noteholder making the exchange
shall be entitled to receive.
The Company shall keep or cause to be kept, at the office or
agency to be maintained by the Company in accordance with the provisions of
Section 5.2, a register or registers (the register maintained in such office and
in any other office or agency designated pursuant to Section 5.2 being herein
referred
<PAGE>
25
to as the "Note Register") in which, subject to such reasonable regulations as
it may prescribe, the Company shall register or provide for the registration of
Notes and shall register the transfer of Notes as in this Article II provided.
The Trustee is hereby appointed "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon surrender for registration
of transfer of any Note at such office or agency (including an exchange of
Initial Notes for Exchange Notes), the Company shall execute and the Trustee
shall authenticate and deliver in the name of the transferee or transferees a
new Note or Notes for a like aggregate principal amount; provided that no
exchange of Initial Notes for Exchange Notes shall occur until an Exchange Offer
Registration Statement shall have been declared effective by the Commission, the
Trustee shall have received an Officers' Certificate confirming that the
Exchange Offer Registration Statement has been declared effective by the
Commission and the Initial Notes to be exchanged for the Exchange Notes shall be
cancelled by the Trustee.
All Notes presented or surrendered for exchange, registration
of transfer, redemption, purchase or payment shall, if so required by the
Company or the Note Registrar, be accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Company, duly executed by
the registered holder or by his duly authorized attorney and, in every case,
each Note presented or surrendered for registration of transfer shall be
accompanied by the assignment form attached to the Notes, duly executed by the
registered holder or by his duly authorized attorney.
No service charge shall be made for any exchange or
registration of transfer of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
The Company shall not be required to issue, register the
transfer of or exchange any Notes for a period of 15 days next preceding any
date for the selection of Notes to be redeemed. The Company shall not be
required to register the transfer of or exchange any Note called or being called
for redemption except, in the case of any Note to be redeemed in part, the
portion thereof not to be so redeemed. The Company shall not be required to
register the transfer of or exchange any Note in respect of which a notice
relating to a Change in Control Offer or an Excess Proceeds Offer has been given
(unless such notice has been withdrawn in accordance with Sections 4.5 and 5.13)
except, in the case of any Note to be purchased in part, the portion thereof not
to be so purchased.
SECTION 2.6 Temporary Notes. Pending the preparation of
definitive Notes, the Company may execute and the Trustee shall authenticate and
deliver temporary Notes (printed, lithographed or typewritten) of any authorized
denomination and substantially in the form of the definitive Notes, but with or
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26
without a recital of specific redemption prices and with such omissions,
insertions and variations as may be appropriate for temporary Notes, all as may
be determined by the Board of Directors of the Company. Temporary Notes may
contain such reference to any provisions of this Indenture as may be
appropriate. Every such temporary Note shall be authenticated by the Trustee
upon the same conditions and in substantially the same manner, and with the same
effect, as the definitive Notes. Without unnecessary delay the Company will
execute and deliver to the Trustee definitive Notes and thereupon any or all
temporary Notes shall be surrendered in exchange therefor, at the office or
agency to be maintained by the Company in accordance with the provisions of
Section 5.2, and the Trustee shall authenticate and deliver in exchange for such
temporary Notes an equal aggregate principal amount of definitive Notes. Until
so exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes authenticated and delivered
hereunder.
SECTION 2.7 Mutilated, destroyed, lost or stolen Notes. In
case any temporary or definitive Note shall become mutilated or be destroyed,
lost or stolen, the Company, in the case of any mutilated Note shall, and in the
case of any destroyed, lost or stolen Note in its discretion may, execute, and
upon the Company's request the Trustee shall authenticate and deliver, a new
Note bearing a number, letter or other distinguishing symbol not
contemporaneously outstanding in exchange and substitution for the mutilated
Note, or in lieu of and in substitution for the Note so destroyed, lost or
stolen, or, instead of issuing a substituted Note if any such Note shall have
matured or shall be about to mature or shall have been selected for redemption
or if the Company shall have received a notice from Holders accepting a Change
in Control Offer or an Excess Proceeds Offer in respect of any such Note (unless
such notice has been withdrawn in accordance with Section 4.5 or 5.13), the
Company may pay the same without surrender thereof except in the case of a
mutilated Note. In every case the applicant for a substituted Note or for such
payment shall furnish to the Company and to the Trustee such security or
indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and to the Trustee evidence to their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof. The
Trustee shall authenticate any such substituted Note and deliver the same, or
the Trustee or any Paying Agent of the Company shall make any such payment, upon
the written request or authorization of any officer of the Company, and shall
incur no liability to anyone by reason of anything done or omitted to be done by
it in good faith under the provisions of this Section 2.7. Upon the issue of any
substituted Note, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith.
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27
Every substituted Note issued pursuant to the provisions of
this Section 2.7 in substitution for any destroyed, lost or stolen Note shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Notes duly issued hereunder.
All Notes shall be held and owned upon the express condition
that the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes, and shall preclude (to
the extent lawful) any and all other rights or remedies, notwithstanding any law
or statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 2.8 Cancellation of surrendered Notes. All
Notes surrendered for the purpose of payment, redemption, purchase by the
Company at the option of the holder, exchange, substitution or registration of
transfer, shall, if surrendered to the Company or any Paying Agent or registrar,
be delivered to the Trustee and the same, together with Notes surrendered to the
Trustee for cancellation, shall be cancelled by the Trustee and no Notes shall
be issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. The Trustee shall destroy cancelled Notes and shall deliver
certificates of destruction thereof to the Company. If the Company shall
purchase or otherwise acquire any of the Notes, however, such purchase or
acquisition shall not operate as a payment, redemption or satisfaction of the
indebtedness represented by such Notes unless and until the Company, at its
option, shall deliver or surrender the same to the Trustee for cancellation.
SECTION 2.9 Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest plus, to the extent lawful, interest payable
on the defaulted interest, to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day, in each case at the
rate provided in the Notes. The Company shall, by written notice to the Trustee,
fix each such special record date and payment date. At least 15 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to each Holder, with a copy to the Trustee, a
notice that states the subsequent special record date, the payment date and the
amount of defaulted interest, and interest payable on such defaulted interest,
if any, to be paid.
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28
SECTION 2.10 CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and
if so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes.
SECTION 2.11 Book-Entry Provisions for Global Note.
(a) One or more Global Notes initially shall (i) be registered
in the name of the Depository or the nominee of such Depository, (ii) be
delivered to the Trustee as custodian for such Depository and (iii) bear legends
contained in Exhibit B.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Note, and the Depository may be treated by the Company, the
Trustee, the Paying Agent and the Note Registrar and any agent of the same as
the absolute owner and Holder of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee, the Paying Agent and the Note Registrar or any agent of the same from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers
in whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Certificated Notes in accordance with the rules and procedures
of the Depository and the provisions of Section 2.12. In addition, Certificated
Notes shall be transferred to all beneficial owners in exchange for their
beneficial interests in the Global Note if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for the Global
Note and a successor depository is not appointed by the Company within 90 days
of such notice or (ii) an Event of Default has occurred and is continuing and
the Note Registrar has received a request from the Depository to issue
Certificated Notes.
(c) In connection with any transfer or exchange of a portion
of the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Note Registrar shall (if one or more Certificated Notes are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the
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29
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute and the Trustee shall authenticate
and deliver, one or more Certificated Notes of like tenor and amount.
(d) In connection with the transfer of the Global Note as an
entirety to beneficial owners pursuant to paragraph (b), the Global Note shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Note, an equal aggregate principal amount of Certificated
Notes of authorized denominations.
(e) Any Certificated Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph (b)
or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (z) of
Section 2.12, bear the legend regarding transfer restrictions applicable to the
Certificated Notes set forth in Exhibit A-1.
(f) The Holder of any Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.12 Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of a Note constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB:
(i) the Note Registrar shall register the transfer of
any Note constituting a Restricted Security, whether or not such Note
bears the Private Placement Legend, if (x) the requested transfer is
after the date which is three years after the initial issuance of the
Initial Notes, (y) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons),
the proposed transferee has delivered to the Note Registrar a
certificate substantially in the form of Exhibit C hereto or (z) the
Trustee and Note Registrar have received both an Opinion of Counsel and
an Officers' Certificate directing transfer without a Private Placement
Legend; and
(ii) if the proposed transferor is an Agent Member
holding a beneficial interest in a Global Note, upon, receipt by the
Note Registrar of (x) the certificate, if any, required by paragraph
(i) above and (y) instructions given in accordance with the
Depository's and the Note Registrar's procedures,
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30
whereupon (a) the Note Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Certificated
Notes) a decrease in the principal amount of a Global Note in an amount equal to
the principal amount of the beneficial interest in a Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate upon receipt of a written order of the Company signed by its Chief
Executive Officer, President or a Vice President and deliver one or more
Certificated Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a QIB:
(i) the Note Registrar shall register the transfer if
such transfer is being made by a proposed transferor who has checked
the box provided for on the form of Note stating, or has otherwise
advised the Company and the Note Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Note stating, or has otherwise advised the Company and the Note
Registrar in writing, that it is purchasing the Note for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within
the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that it
is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and
the Notes to be transferred consist of Certificated Notes which after
transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Note Registrar of instructions given in accordance with
the Depository's and the Note Registrar's procedures, the Note
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Note in an amount equal
to the principal amount of the Certificated Notes to be transferred,
and the Trustee shall cancel the Certificated Notes so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) the circumstances
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31
contemplated by paragraph (a)(i)(x) of this Section 2.12 exist, (ii) there is
delivered to the Note Registrar and the Trustee an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such Note
has been sold pursuant to an effective registration statement under the
Securities Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Note Registrar shall retain copies of all letters, notices
and other written communications received by it pursuant to Section 2.11 or this
Section 2.12. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Note Registrar.
The Trustee shall be entitled to obtain and conclusively rely
upon, in connection with any transfer of a Note, an opinion of counsel opining
as to whether such Note is a Restricted Security, and whether the transferee is
an Institutional Accredited Investor or a QIB.
ARTICLE III
SUBORDINATION OF NOTES
SECTION 3.1 Agreement to subordinate. The Company, for itself,
its successors and assigns, covenants and agrees, and each holder of Notes, by
his or her acceptance thereof, likewise covenants and agrees, that the payment
of the principal of and premium, if any, and interest on each and all of the
Notes is hereby expressly subordinated, to the extent and in the manner
hereinafter set forth, in right of payment to the prior payment in full, in cash
or Cash Equivalents of all Senior Indebtedness. This Article III constitutes a
continuing offer to all persons or entities who become holders of, or continue
to hold, Senior Indebtedness, each of whom is an obligee hereunder and is
entitled to enforce such holder's rights hereunder, subject to the provisions
hereof, without any act or notice of acceptance hereof or reliance hereon.
For the purposes of this Article III, (a) no Senior
Indebtedness shall be deemed to have been paid in full unless and until all
commitments or other obligations of the lenders thereunder to make advances or
otherwise extend credit shall have terminated and the holders thereof shall have
indefeasibly
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32
received payment in full in cash or Cash Equivalents, and (b) the term "Senior
Representative" shall mean the indenture trustee or other trustee, agent or
representative for any Senior Indebtedness.
SECTION 3.2 Distribution on dissolution, liquidation,
bankruptcy or reorganization. Upon any distribution of assets of the Company
upon any total or partial dissolution, winding up, liquidation or reorganization
of the Company, whether in bankruptcy, insolvency, reorganization or
receivership proceedings or upon an assignment for the benefit of creditors or
any other marshalling of the assets and liabilities of the Company or otherwise,
(a) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents or, as acceptable to each
holder of Senior Indebtedness, in any other manner, of all amounts due on or in
respect of all Senior Indebtedness before the Holders of the Notes are entitled
to receive any payment or distribution of any kind or character (excluding
securities of the Company provided for in a plan of reorganization with respect
to the Company approved by the bankruptcy court that are equity securities or
are subordinated in right of payment to all Senior Indebtedness to the same
extent as, or to a greater extent than, the Notes are so subordinated as
provided in this Article; such securities are hereinafter collectively referred
to as "Permitted Junior Notes") on account of principal of, premium, if any, or
interest on the Notes (including any payment or other distribution which may be
received from the holders of Subordinated Indebtedness as a result of any
payment on such Subordinated Indebtedness); and
(b) any payment or distribution of assets of the Company or
any Subsidiary of any kind or character, whether in cash, property or securities
(excluding Permitted Junior Notes), by set-off or otherwise, to which the
Holders or the Trustee would be entitled but for the provisions of this Article
(including any payment or other distribution which may be received from the
holders of Subordinated Indebtedness as a result of any payment on such
Subordinated Indebtedness) shall be paid by the liquidating trustee or agent or
other Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to the
holders of Senior Indebtedness or their Senior Representative or
Representatives, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, to the extent
necessary to make payment in full in cash, Cash Equivalents or in any other form
acceptable to each, of all Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing
provisions of this Section, the Trustee or the Holder of any
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33
Notes shall have received any payment or distribution of assets of the Company
or any Subsidiary of any kind or character, whether in cash, property or
securities (excluding Permitted Junior Notes), in respect of principal, premium,
if any, and interest on the Notes before all Senior Indebtedness is paid in
full, then and in such event, such payment or distribution (including any
payment or other distribution which may be received from the holders of
Subordinated Indebtedness as a result of any payment on such Subordinated
Indebtedness) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in cash, Cash Equivalents or,
as acceptable to each holder of Senior Indebtedness, any other manner, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness or deposited with a court of competent jurisdiction.
The consolidation of the Company with, or the merger of the
Company into, another corporation or the liquidation or dissolution of the
Company following the sale or conveyance of its property or assets as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article XII shall not be deemed a dissolution,
winding up, liquidation or reorganization of the Company for the purposes of
this Article III if such other corporation shall, as a part of such
consolidation, merger, sale or conveyance, comply with the conditions stated in
Article XII.
If the Trustee or any holder of Notes does not file a proper
claim or proof of debt in the form required in any proceeding referred to above
prior to 30 days before the expiration of the time to file such claim in such
proceeding, then the holder of any Senior Indebtedness (or its Representative)
is hereby authorized, and has the right, to file an appropriate claim or claims
for or on behalf of such holder of Notes.
SECTION 3.3 Suspension of Payment When Senior
Indebtedness in Default.
(a) Unless Section 3.2 shall be applicable, upon the
occurrence of a Payment Default, then no payment (other than any payments made
pursuant to Section 13.1 which have been deposited with the Trustee for at least
124 days) or distribution of any assets of the Company or any Subsidiary of any
kind or character (excluding Permitted Junior Notes) shall be made by the
Company or any Subsidiary or on behalf of or out of the property of the Company,
or received by the Trustee or any Noteholder on account of principal of,
premium, if any, or interest on, the Notes or on account of the purchase,
redemption, defeasance (whether under Section 13.1(b) or 13.1(c)) or other
acquisition of or in respect
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of the Notes unless and until such Payment Default shall have been cured or
waived in writing by the holders of the Designated Senior Indebtedness or shall
have ceased to exist or the Designated Senior Indebtedness shall have been paid
in full in cash, Cash Equivalents or in any other manner as acceptable to each
holder of such Senior Indebtedness, after which the Company shall resume making
any and all required payments in respect of the Notes, including any missed
payments.
(b) Unless Section 3.2 shall be applicable, upon (i) the
occurrence of a Non-payment Default and (ii) receipt by the Trustee and the
Company from a Senior Representative or the holder of any Designated Senior
Indebtedness of written notice of such occurrence, no payment (other than any
payments made pursuant to Section 13.1 which have been deposited with the
Trustee for at least 124 days) or distribution of any assets of the Company or
any Subsidiary of any kind or character (excluding Permitted Junior Notes) shall
be made by the Company or any Subsidiary or on behalf of or out of the property
of the Company, or received by the Trustee or any Noteholder on account of any
principal of, premium, if any, or interest on, the Notes or on account of the
purchase, redemption, defeasance (whether under Section 13.1(b) or 13.1(c)) or
other acquisition of or in respect of Notes for a period ("Payment Blockage
Period") commencing on the date of receipt by the Trustee of such notice unless
and until the earliest of (subject to any blockage of payments that may then or
thereafter be in effect under subsection (a) of this Section 3.3) (x) 179 days
after receipt of such written notice by the Trustee (provided any Designated
Senior Indebtedness as to which notice was given shall theretofore have not been
accelerated), (y) the date such Non-payment Default and all other Non-payment
Defaults as to which notice is also given after such period is initiated shall
have been cured or waived in writing by the holders of the Designated Senior
Indebtedness or shall have ceased to exist or the Senior Indebtedness related
thereto shall have been paid in full in cash or Cash Equivalents or (z) the date
such Payment Blockage Period and any Payment Blockage Periods initiated during
such period shall have been terminated by written notice to the Company or the
Trustee from the Senior Representative and the holders of the Designated Senior
Indebtedness that have given notice of a Non-payment Default at or after the
initiation of such Payment Blockage Period, after which in the case of clause
(x), (y) or (z), the Company shall resume making any and all required payments
in respect of the Notes including any missed payments. Notwithstanding any other
provision of this Indenture, in no event shall a Payment Blockage Period extend
beyond 179 days from the date of the receipt by the Company or the Trustee of
the notice referred to in clause (ii) of this paragraph (b) (the "Initial
Blockage Period"). Any number of notices of Non-payment Default may be given
during the Initial Blockage Period; provided that during any 365-day consecutive
period only one such period during which payment of principal of, or interest
on, the Notes may not be made may commence and the duration of such period may
not exceed 179 days.
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35
No Non-payment Default with respect to Designated Senior Indebtedness which
existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such default shall have been cured or waived for a
period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, the
Company or any Subsidiary shall make, or the Trustee or any Noteholder shall
receive, any payment to the Trustee or the Holder of any Notes prohibited by the
foregoing provisions of this Section, then and in such event such payment shall
be paid over and delivered forthwith to a Senior Representative of the holders
of the Designated Senior Indebtedness or as a court of competent jurisdiction
shall direct.
SECTION 3.4 Payment Permitted if No Default. Nothing contained
in this Article, elsewhere in this Indenture or in any of the Notes shall
prevent the Company, at any time except during the pendency of any case,
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshaling of assets and liabilities of the
Company referred to in Section 3.2 or under the conditions described in Section
3.3, from making payments at any time of principal of, premium, if any, or
interest on the Notes.
SECTION 3.5 Subrogation to Rights of Holders of Senior
Indebtedness. Subject to the payment in full of all Senior Indebtedness, the
Holders of the Notes shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any, and interest on the Notes shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness, and
the Holders of the Notes, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
SECTION 3.6 Provisions Solely to Define Relative Rights. The
provisions of this Article are intended solely for the purpose of defining the
relative rights of the Holders of the Notes on the one hand and the holders of
Senior Indebtedness on the other hand. Nothing contained in this Article or
elsewhere in this Indenture or in the Notes is intended to or shall (i) impair,
as among the Company, its creditors other than holders of Senior Indebtedness
and the Holders of the Notes, the obligation of the Company, which is absolute
and unconditional, to pay to
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36
the Holders of the Notes the principal of, premium, if any, and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms; or (ii) affect the relative rights against the Company of the Holders of
the Notes and creditors of the Company other than the holders of Senior
Indebtedness; or (iii) prevent the Trustee or the Holder of any Note from
exercising all remedies otherwise permitted by applicable law upon Default under
this Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness (A) in any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Company referred to in Section 3.2, to receive,
pursuant to and in accordance with such Section, cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder, or (B) under the
conditions specified in Section 3.3, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 3.3(c).
SECTION 3.7 Trustee to Effectuate Subordination.
Each Holder of a Note by his or her acceptance thereof
authorizes and directs the Trustee on his or her behalf to take such action as
may be necessary or appropriate to effectuate the subordination provided in this
Article and appoints the Trustee his or her attorney-in-fact for any and all
such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of the Company whether in bankruptcy, insolvency,
receivership proceedings, or otherwise, the timely filing of a claim for the
unpaid balance of the indebtedness of Company owing to such Holder in the form
required in such proceedings and the causing of such claim to be approved. If
the Trustee does not file a proper claim at least 30 days before the expiration
of the time to file such claim, then the holders of Senior Indebtedness, and
their agents, trustees or other representatives are authorized to do so for and
on behalf of the Holders of the Notes.
SECTION 3.8 No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing
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37
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Notes to the holders of Senior Indebtedness, do
any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, or waive compliance
with the terms of, Senior Indebtedness or any instrument evidencing the same or
any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the collection or payment of Senior Indebtedness; and (iv) exercise
or refrain from exercising any rights against the Company and any other Person;
provided, however, that in no event shall any such actions limit the right of
the Holders of the Notes to take any action to accelerate the maturity of the
Notes pursuant to Article VII of this Indenture or to pursue any rights or
remedies hereunder or under applicable laws if the taking of such action does
not otherwise violate the terms of this Article, subject to the rights, if any,
under this Article, of the holders, from time to time, of Senior Indebtedness to
receive the cash, property or securities receivable upon the exercise of such
rights or remedies.
SECTION 3.9 Notice to Trustee. (a) The Company shall give
prompt written notice to the Trustee of any fact known to the Company which
would prohibit the making of any payment to or by the Trustee in respect of the
Notes. Notwithstanding the provisions of this Article or any provision of this
Indenture, the Trustee or any Paying Agent shall not be charged with knowledge
of the existence of any facts which would prohibit the making of any payment to
or by the Trustee or any Paying Agent in respect of the Notes, unless and until
the Trustee shall have received written notice thereof from the Company or a
holder of Senior Indebtedness or from a Senior Representative or any trustee,
fiduciary or agent therefor; and, prior to the receipt of any such written
notice, the Trustee shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section at least three Business Days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of, premium, if
any, or interest on any Note), then, anything herein contained to the contrary
notwithstanding but without limiting the rights and remedies of the holders of
Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee
shall have full power and authority to receive such money and to apply the same
to the purpose for which such money was received and shall not be affected by
any notice to the contrary which may be received by it within three Business
Days prior to such date; nor shall the Trustee be charged with knowledge of the
elimination of the act or condition preventing any such payment unless and until
the Trustee shall have received an Officers' Certificate to such effect.
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38
(b) The Trustee shall be entitled to rely on the delivery to
it of a written notice to the Trustee and the Company by a Person representing
himself to be a Senior Representative or a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor) to establish that such notice has been
given by a Senior Representative or a holder of Senior Indebtedness (or a
trustee, fiduciary or agent thereof and the Trustee shall have no duty to
investigate the authenticity thereof or the authority of the person signing and
shall have no liability for relying thereon); provided, however, that failure to
give such notice to the Company shall not affect in any way the ability of the
Trustee to rely on such notice. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment or
the Trustee or the Paying Agent may deposit the funds in question with a court
of competent jurisdiction.
SECTION 3.10 Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the Company
referred to in this Article, the Trustee and the Holders of the Notes shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of Notes, for the purpose of ascertaining the Persons entitled to participate in
such payment or distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
of amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article, provided that the foregoing shall apply only if such court has
been fully apprised of the provisions of this Article.
SECTION 3.11 Rights of Trustee as a Holder of Senior
Indebtedness; Preservation of Trustee's Rights. The trustee in its individual
capacity shall be entitled to all the rights set forth in this Article with
respect to any Senior Indebtedness which may at any time be held by it, to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such
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39
holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 8.6.
SECTION 3.12 Article Applicable to Paying Agents. In case at
any time any Paying Agent other than the Trustee shall have been appointed by
the Company and be then acting under this Indenture, the term "Trustee" as used
in this Article shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within its meaning as
fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however, that
Section 3.11 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as Paying Agent.
SECTION 3.13 No Suspension of Remedies. Nothing contained in
this Article shall limit the right of the Trustee or the Holders of Notes to
take any action to accelerate the maturity of the Notes pursuant to Article VII
of this Indenture or to pursue any rights or remedies hereunder or under
applicable law, subject to the rights, if any, under this Article of the
holders, from time to time, of Senior Indebtedness to receive the cash, property
or securities receivable upon the exercise of such rights or remedies.
SECTION 3.14 Trustee's Relation to Senior Indebtedness. With
respect to the holders of Senior Indebtedness, the Trustee undertakes to perform
or to observe only such of its covenants and obligations as are specifically set
forth in this Article, and no implied covenants or obligations with respect to
the holders of Senior Indebtedness shall be read into this Article against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and the Trustee shall not be liable to any holder
of Senior Indebtedness if it shall, without gross negligence or wilful
misconduct, pay over or deliver to Holders, the Company or any other Person
(other than a court of competent jurisdiction) moneys or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
SECTION 3.15 Other Rights of Holders of Senior Indebtedness.
All rights and interests under this Indenture of the holders of Senior
Indebtedness, and all agreements and obligations of the Trustee, the Holders of
the Notes and the Company under this Article shall remain in full force and
effect irrespective of (i) any lack of validity or enforceability of the Credit
Facility, and promissory notes evidencing the Credit Facility or any other
agreement or instrument relating thereto or to any other Senior Indebtedness or
(ii) any other circumstance that might constitute a defense available to, or a
discharge of, a guarantor or surety (other than as a result of any payments
indefeasibly made on the Credit Facility or any other Senior Indebtedness).
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40
The holders of Senior Indebtedness are hereby authorized to
demand specific performance of this Article, whether or not the Company shall
have complied with any provisions of this Article applicable to it, at any time
when the Trustee or any Holder of the Notes shall have failed to comply with any
of these provisions.
The provisions of this Article shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the
Senior Indebtedness is rescinded or must otherwise be returned by any holder of
Senior Indebtedness upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, all as though such payment had not been made.
ARTICLE IV
REDEMPTION AND PURCHASES OF NOTES
SECTION 4.1 Redemption Prices. On or after October 1, 2001 the
Company may, at its option, redeem at any time all or from time to time any part
of the Notes, on any date prior to maturity at the redemption prices and subject
to the conditions specified in the Notes, together with interest accrued and
unpaid thereon to the date fixed for redemption at the following redemption
prices (expressed as a percentage of the principal amount) if redeemed during
the 12-month period beginning October 1 of the years indicated below:
Redemption
Year Price
2001 ......................104.625%
2002 ......................103.083%
2003 ......................101.542%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date.
SECTION 4.2 Notice of Redemption; Selection of Notes. In case
the Company shall desire to exercise such right to redeem all or, as the case
may be, any part of the Notes in accordance with the right reserved so to do,
the Company, or at the Company's written request, the Trustee in the name and at
the expense of the Company, shall give notice of such redemption to holders of
the Notes to be redeemed as hereinafter in this Section 4.2 provided.
Notice of redemption shall be given to the holders of Notes to
be redeemed as a whole or in part by mailing by first-class mail a notice of
such redemption not less than 30 nor more than 60 days prior to the date fixed
for redemption to their last addresses as they shall appear in the Note
Register, but failure
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41
to give such notice by mailing to the holder of any Note designated for
redemption as a whole or in part, or any defect therein, shall not affect the
validity of the proceedings for the redemption of any other Notes.
Any notice which is mailed in the manner herein provided shall
be conclusively presumed to have been duly given, whether or not the holder
receives the notice.
Each such notice of redemption shall specify the total
principal amount to be redeemed, the date fixed for redemption and the
redemption price at which Notes are to be redeemed, and shall state that payment
of the redemption price of the Notes to be redeemed will be made at the office
or agency to be maintained by the Company in accordance with the provisions of
Section 5.2, upon presentation and surrender of such Notes, that interest
accrued to the date fixed for redemption will be paid as specified in said
notice, and that on and after said date interest thereon will cease to accrue.
If less than all the Notes are to be redeemed, the notice of redemption to each
holder shall state the aggregate principal amount of the Notes to be redeemed
and shall identify the Notes of such holders to be redeemed. In case any Note is
to be redeemed in part only, the notice which relates to such Note shall state
the portion of the principal amount thereof to be redeemed (which shall be
$1,000 or an integral multiple thereof), and shall state that on and after the
date fixed for redemption, upon surrender of such Note, the holder will receive
the redemption price together with accrued interest in respect of the principal
amount thereof called for redemption and, without charge, a new Note or Notes of
authorized denominations for the principal amount thereof remaining unredeemed.
On or prior to the date fixed for redemption specified in the
notice of redemption given as provided in this Section 4.2, the Company will
deposit with the Trustee or with one or more Paying Agents (or, if the Company
is acting as its own Paying Agent, set aside, segregate and hold in trust as
provided in Section 5.4(c)) immediately available funds sufficient to redeem on
the date fixed for redemption all the Notes or portions of Notes so called for
redemption at the appropriate redemption price, together with accrued interest
to the date fixed for redemption.
If less than all the Notes are to be redeemed, the Company
shall give the Trustee, not less than 45 nor more than 60 days (or such shorter
period acceptable to the Trustee) in advance of the date fixed for redemption,
notice of the aggregate principal amount of Notes to be redeemed, and thereupon
the Trustee shall select the Notes or portions thereof to be redeemed by lot or
such other method as the Trustee shall deem fair and appropriate and shall
thereafter promptly notify the Company of the Notes or portions thereof to be
redeemed.
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42
SECTION 4.3 When Notes called for redemption become due and
payable. If the giving of notice of redemption shall have been completed as
above provided, the Notes or portions of Notes specified in such notice (and not
theretofore purchased pursuant to Sections 4.5 and 5.13) shall become due and
payable on the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued to the date fixed for
redemption, and on and after such date fixed for redemption (unless the Company
shall default in the payment of such Notes at the redemption price, together
with interest accrued to the date fixed for redemption) interest on the Notes or
portions of Notes so called for redemption shall cease to accrue. On
presentation and surrender of such Notes at said place of payment in said notice
specified, on or after the date fixed for redemption the said Notes shall be
paid and redeemed by the Company at the applicable redemption price, together
with interest accrued to the date fixed for redemption. Upon presentation of any
Note which is redeemed in part only, the Company shall execute and register and
the Trustee shall authenticate and deliver at the expense of the Company, a new
Note or Notes in principal amount equal to the unredeemed portion of the Note so
presented.
SECTION 4.4 Cancellation of Redeemed Notes. All Notes
surrendered to the Trustee, upon redemption pursuant to the provisions of this
Article IV, shall be forthwith cancelled by it.
SECTION 4.5 Purchase of Notes Upon Change in Control.
(a) Upon the occurrence of a Change in Control, each
Holder shall have the right to require that the Company repurchase such Holder's
Notes pursuant to an offer described in subsection (c) of this Section (a
"Change in Control Offer") in whole or in part in integral multiples of $1,000,
at a purchase price (the "Change in Control Purchase Price") in cash in an
amount equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase, in accordance with the procedures set
forth in Subsections (b), (c), (d) and (e) of this Section.
(b) Within 30 days following a Change in Control and prior to
the mailing of the notice relating to the Change in Control Offer to Holders
provided for in paragraph (c) below, the Company covenants to (i) notify the
lenders under the Credit Facility that a Change in Control has occurred and (ii)
either (1) repay in full all Indebtedness under the Credit Facility and
permanently reduce to zero the commitments of the lenders thereunder or offer to
repay in full all such Indebtedness and permanently reduce such commitments and
repay the Indebtedness and permanently reduce to zero the commitment of each
lender who has accepted such offer or (2) obtain the requisite consent under the
Credit Facility to permit the repurchase of the Notes as provided for in this
Section 4.5. The Company shall first comply with this subsection (b) before it
shall be required to
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43
repurchase the Notes pursuant to this Section 4.5, and any failure to comply
with this subsection (b) shall constitute a Default of this covenant for
purposes of Section 7.1(c)(iv).
(c) Within 30 days following any Change in Control, the
Company shall send by first-class mail, postage prepaid, to the Trustee and to
each Holder of the Notes, at his address appearing in the Note Register, a
notice specifying, among other things:
(1) that a Change in Control has occurred, the date of such
event, and that such Holder has the right to require the Company to
repurchase such Holder's Notes in whole or in part at the Change in
Control Purchase Price in cash;
(2) the circumstances and relevant facts regarding such Change
in Control (including but not limited to information with respect to
pro forma historical income, cash flow and capitalization after giving
effect to such Change in Control, if any);
(3) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q, as
applicable, and any Current Report on Form 8-K of the Company filed
subsequent to such Quarterly Report (or in the event the Company is not
required to prepare any of the foregoing Forms, the comparable
information required to be prepared by the Company and any Guarantor
pursuant to Section 5.18), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such
reports and (iii) such other information, if any, concerning the
business of the Company which the Company in good faith believes will
enable such Holders to make an informed investment decision;
(4) that the Change in Control Offer is being made pursuant to
this Section 4.5 and that all Notes properly tendered pursuant to such
Change in Control Offer will be accepted for payment at the Change in
Control Offer Purchase Price;
(5) the purchase date (the "Change in Control Purchase Date")
which shall be a Business Day no earlier than 30 days nor later than 60
days from the date such notice is mailed;
(6) the Change in Control Purchase Price;
(7) that the tender is revocable and instructions determined
by the Company that a Holder must follow in order to have Notes
purchased (including, but not limited to, the place at which Notes
shall be presented and surrendered for
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44
purchase) and materials necessary to comply with applicable
tender rules;
(8) that the Change in Control Purchase Price for any Note
which has been properly tendered and not withdrawn will be paid
promptly following the Change in Control Offer Purchase Date; and
(9) the procedures for withdrawing a tender.
(d) Upon receipt by the Company of the proper tender of Notes
the Holder of the Note in respect of which such proper tender was made shall
(unless the tender of such Note is properly withdrawn) thereafter be entitled to
receive solely the Change in Control Purchase Price with respect to such Note.
Upon surrender of any such Note for purchase in accordance with the foregoing
provisions, such Note shall be paid by the Company at the Change in Control
Purchase Price; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Change in Control Purchase Date shall be payable
to the Holders of such Notes, registered as such on the record dates according
to the terms and the provisions of Section 2.3. If any Note tendered for
purchase shall not be so paid upon surrender thereof, the principal thereof (and
premium, if any, thereon) shall, until paid, bear interest from the Change in
Control Purchase Date at the rate borne by such Note. Holders electing to have
Notes purchased will be required to give notice and surrender such Notes to the
Company at the address specified in the Company's aforementioned notice at least
two Business Days prior to the Change in Control Purchase Date. Any Note that is
to be purchased only in part shall be surrendered to the Company or its agent at
the address specified in the Company's aforementioned notice (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereto or such Holder's attorney duly authorized in writing),
and the Company shall execute and the Trustee shall authenticate and deliver to
the Holder of such Note, without service charge, one or more new Notes of any
authorized denominations as requested by such Holder in an aggregate principal
amount equal to, and in exchange for, the portion of the principal amount of the
Note so surrendered that is not purchased.
(e) Not later than the Change in Control Purchase Date, the
Company shall (i) accept for payment Notes or portions thereof tendered pursuant
to the Change in Control Offer, (ii) in the event the Company is not acting as
its own Paying Agent, no later than 11 a.m. (New York time) on the Business Day
prior to the Change in Control Purchase Date, deposit with the Paying Agent an
amount of cash sufficient to pay the aggregate Change in Control Purchase Price
of all the Notes or portions thereof that are to be purchased as of the Change
in Control Purchase Date and (iii) deliver to the Paying Agent an Officers'
Certificate
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45
stating the Notes or portions thereof accepted for payment by the Company. The
Paying Agent shall promptly mail or deliver to Holders of Notes so accepted
payment in an amount equal to the Change in Control Purchase Price of the Notes
purchased from each such Holder, and the Company shall execute and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Note equal
in principal amount to any unpurchased portion of the Note surrendered. Any
Notes not so accepted shall be promptly mailed or delivered by the Paying Agent
at the Company's expense to the Holder thereof. The Company will publicly
announce the results of the Change in Control Offer on the Change in Control
Purchase Date. For purposes of this Section 4.5, the Company shall choose a
Paying Agent which shall not be the Company.
(f) Any acceptances by Holders of the Change in Control Offer
may be withdrawn before or after delivery of Notes by the Holder to the Company,
by means of a written notice of withdrawal delivered by the Holder to the
Company or its agent at the address specified in the Company's aforementioned
notice at any time prior to the close of business on two Business Days prior to
the Change in Control Purchase Date specifying, as applicable:
(1) the certificate number of the Note in respect of which
such notice of withdrawal is being submitted,
(2) the principal amount of the Note (which shall be $1,000 or
an integral multiple thereof) with respect to which such notice of
withdrawal is being submitted, and
(3) the principal amount, if any, of such Note (which shall be
$1,000 or an integral multiple thereof) that remains subject to the
Change in Control Offer and that has been or will be delivered to the
Company or its agent for purchase by the Company.
(g) The Trustee and the Paying Agent shall return to the
Company any cash that remains unclaimed, together with interest or dividends, if
any, thereon, held by them for the payment of the Change in Control Purchase
Price; provided, however, that, to the extent that the aggregate amount of cash
deposited by the Company pursuant to clause (e)(ii) exceeds the aggregate Change
in Control Purchase Price of the Notes or portions thereof to be purchased, then
the Trustee shall hold such excess for the Company and promptly after the
Business Day following the Change in Control Purchase Date the Trustee shall
upon demand return any such excess to the Company together with interest or
dividends, if any, thereon.
(h) The Company shall comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, in connection with a Change
in Control Offer.
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46
ARTICLE V
COVENANTS
SECTION 5.1 Payment of principal of and premium, if any, and
interest on Notes. The Company will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on the Notes at the time and
place and in the manner provided in the Notes and this Indenture.
SECTION 5.2 Maintenance of office or agency for registration
of transfer, exchange and payment of Notes. So long as any of the Notes shall
remain outstanding, the Company will maintain an office or agency in the Borough
of Manhattan, the City of New York, State of New York, where the Notes may be
surrendered for exchange or registration of transfer as in this Indenture
provided, and where notices and demands to or upon the Company in respect to the
Notes may be served, and where the Notes may be presented or surrendered for
payment. The Company may also from time to time designate one or more other
offices or agencies where Notes may be presented or surrendered for any and all
such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, State of New York for such purposes. The
Company will give to the Trustee prompt written notice of the location of any
such office or agency and of any change of location thereof. The Company
initially appoints the Trustee its office or agency for each of said purposes.
In case the Company shall fail to maintain any such office or agency or shall
fail to give such notice of the location or of any change in the location
thereof, such surrenders, presentations and demands may be made and notices may
be served at the office of the Trustee in the City of Wilmington, State of
Delaware, and the Company hereby appoints the Trustee its agent to receive at
the aforesaid office all such surrenders, presentations, notices and demands.
The Trustee will give the Company prompt notice of any change in location of the
Trustee's principal office.
SECTION 5.3 Appointment to fill a vacancy in the office of
Trustee. The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 8.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 5.4 Provision as to Paying Agent. (a) If the Company
shall appoint a paying agent other than the Trustee, it will cause such Paying
Agent to execute and deliver to the Trustee an instrument in which such agent
shall undertake, subject to the provisions of this Section 5.4,
(i) that it will hold all sums held by it as such agent for
the payment of the principal of, premium, if any,
<PAGE>
47
or interest on the Notes whether such sums have been paid to it by the
Company (or by any other obligor on the Notes) in trust for the benefit
of the holders of the Notes and will notify the Trustee of the receipt
of sums to be so held,
(ii) that it will give the Trustee notice of any failure by
the Company (or by any other obligor on the Notes) to make any payment
of the principal of, premium, if any, or interest on the Notes when the
same shall be due and payable,
(iii) that it will at any time during the continuance of any
Event of Default specified in subsection (a) or (b) of Section 7.1,
upon the written request of the Trustee, deliver to the Trustee all
sums so held in trust by it, and
(iv) acknowledge, accept and agree to comply in all aspects
with the provisions of this Indenture relating to the duties, rights
and liabilities of such Paying Agent, including, without limitation,
the provision of Article III hereof.
(b) If the Company shall not act as its own Paying Agent, it
will, by 11 a.m. on the Business Day prior to each due date of the principal of
or premium, if any, or interest on any Notes, deposit with such Paying Agent a
sum in same day funds sufficient to pay the principal of, premium, if any, or
interest so becoming due, such sum to be held in trust for the benefit of the
holders of Notes entitled to such principal of or premium, if any, or interest,
and (unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of its failure so to act.
(c) If the Company shall act as its own Paying Agent, it will,
on or before each due date of the principal of or premium, if any, or interest
on the Notes, set aside, segregate and hold in trust for the benefit of the
persons entitled thereto, a sum sufficient to pay such principal or premium or
interest so becoming due and will notify the Trustee of any failure to take such
action.
(d) Anything in this Section 5.4 to the contrary
notwithstanding, the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge of this Indenture, or for any other reason, pay or
cause to be paid to the Trustee all sums held in trust by it, or any Paying
Agent hereunder, as required by this Section 5.4, such sums to be held by the
Trustee upon the trusts herein contained.
(e) Anything in this Section 5.4 to the contrary
notwithstanding, the agreement to hold sums in trust as provided in this Section
5.4 is subject to the provisions of Sections 13.6 and 13.7.
<PAGE>
48
SECTION 5.5 Maintenance of Corporate Existence. So long as any
of the Notes shall remain outstanding, the Company will at all times (except as
otherwise provided or permitted in this Section 5.5 or elsewhere in this
Indenture) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and franchises and the corporate
existence and franchises of each Subsidiary; provided that nothing herein shall
require the Company to continue the corporate existence or franchises of any
Subsidiary if in the judgment of the Company it shall be necessary, advisable or
in the interest of the Company to discontinue the same.
SECTION 5.6 Payment of Taxes and Other Claims. The Company
will pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, the failure to pay or discharge of
which would have a material adverse effect on the condition (financial or
otherwise), earnings or business affairs of the Company and its Subsidiaries
taken as one enterprise; provided, however, that the Company shall not be
required to pay or cause to be paid or discharged any such tax, assessment or
governmental charge whose amount, applicability or validity is being contested
in good faith by appropriate proceedings properly instituted and diligently
conducted and in respect of which appropriate reserves (in the good faith
judgment of management of the Company) are being maintained in accordance with
GAAP consistently applied.
SECTION 5.7 Maintenance of Properties. The Company will cause
all properties owned or leased by the Company or any Subsidiary or used or held
for use in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition and repair as in the judgment of the
Company may be necessary so that the business carried on in connection therewith
may be properly conducted at all times; provided, however, that nothing in this
Section shall prevent the Company from (i) discontinuing the use, operation or
maintenance of any of such properties if such discontinuance is, in the judgment
of the Board of Directors of the Company or the Subsidiary concerned, or of any
officer (or other agent employed by the Company or any Subsidiary) having
managerial responsibility for such property, desirable in the conduct of its
business or the business of any Subsidiary or (ii) selling any properties;
provided that the proceeds of such sale shall be applied in accordance with
Section 5.13, if applicable.
SECTION 5.8 Insurance. The Company shall provide or cause to
be provided for itself and any Subsidiaries of the Company insurance (including
appropriate self-insurance) with insurers, believed by the Company to be
responsible, against loss or damage of the kinds customarily insured against by
Persons similarly situated and owning like properties in the same general areas
in which the Company or such Subsidiaries operate, unless
<PAGE>
49
such failure to provide or cause to be provided such insurance would not have a
material adverse effect on the condition (financial or otherwise), earnings or
business affairs of the Company and its Subsidiaries taken as one enterprise.
SECTION 5.9 Limitation on Indebtedness. The Company will not,
and will not permit any of its Subsidiaries to, create, incur, assume, or
directly or indirectly guarantee or in any other manner become directly or
indirectly liable for the payment of, any Indebtedness (including any Acquired
Indebtedness but excluding Permitted Indebtedness) unless at the time of such
event and after giving effect thereto on a pro forma basis the Company's Fixed
Charge Coverage Ratio for the four full fiscal quarters immediately preceding
such event, taken as one period, calculated on the assumption that (i) such
Indebtedness had been incurred on the first day of such four-quarter period and
(ii) any acquisition or disposition by the Company and its Subsidiaries of any
assets out of the ordinary course of business, or any company or business
facility, in each case since the first day of its last four completed fiscal
quarters, had been consummated on such first day of such four-quarter period,
would have been at least 2.00 to 1.00.
SECTION 5.10 Limitation on Restricted Payments. The Company
will not, and will not permit any Subsidiary to, directly or indirectly:
(a) declare or pay any dividend on, or make any
distribution to holders of, any Capital Stock of the Company
(other than dividends or distributions payable solely in
shares of Qualified Capital Stock of the Company or in
options, warrants or other rights to acquire Qualified Capital
Stock of the Company);
(b) purchase, redeem, defease or otherwise acquire or
retire for value any Capital Stock of the Company or any
Affiliate thereof (other than any Wholly Owned Subsidiary of
the Company) or any option, warrant or other right to acquire
such Capital Stock of the Company or any Affiliate thereof;
(c) make any principal payment on, or redeem,
repurchase, defease or otherwise acquire or retire for value
in each case, prior to any scheduled repayment, or maturity,
any Subordinated Indebtedness; or
(d) make any Investment in any Person (other than any
Permitted Investment) unless the Person thereby becomes a
Wholly Owned Subsidiary;
(such payments described in (a) through (d) collectively, "Restricted Payments")
unless at the time of and after giving effect to the proposed Restricted Payment
(the amount of any such Restricted Payment, if other than cash, as determined by
the
<PAGE>
50
Board of Directors, whose determination shall be conclusive and evidenced by a
Board Resolution), (1) no Default or Event of Default shall have occurred and be
continuing; and such Restricted Payment shall not be an event which is, or after
notice or lapse of time or both, would be, an "event of default" under the terms
of any Indebtedness of the Company or any Subsidiary; (2) immediately before and
immediately after giving effect to such transaction on a pro forma basis, the
Company could incur $1.00 of additional Indebtedness under Section 5.9 (other
than Permitted Indebtedness); and (3) the aggregate amount of all Restricted
Payments (plus, without duplication, dividends and distributions paid to any
Person other than the Company, a Wholly Owned Subsidiary or a Permitted Joint
Venture as permitted by Section 5.11 and any Restricted Payments made pursuant
to clauses (i), (iv), (v) and (vi) of the succeeding paragraph) declared or made
after the date hereof shall not exceed the sum of
(A) 50% of the Consolidated Net Income of the Company accrued
on a cumulative basis during the period beginning on the date hereof
and ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a loss, minus
100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date
hereof by the Company as capital contributions to the Company;
(C) the aggregate Net Cash Proceeds received after the date
hereof by the Company from the issuance or sale (other than to any of
its Subsidiaries) of shares of Capital Stock (other than Redeemable
Capital Stock) of the Company or any options or warrants to purchase
such shares (other than issuances in respect of clause (ii) of the
subsequent paragraph) of Capital Stock (other than Redeemable Capital
Stock) of the Company;
(D) the aggregate Net Cash Proceeds received after the date
hereof by the Company (other than from any of its Subsidiaries) upon
the exercise of any options or warrants to purchase shares of Capital
Stock of the Company;
(E) the aggregate Net Cash Proceeds received after the date
hereof by the Company for debt securities that have been converted into
or exchanged for Qualified Capital Stock of the Company to the extent
such debt securities are originally sold for cash plus the aggregate
cash received by the Company at the time of such conversion or
exchange; and
(F) other Restricted Payments in an aggregate amount not to
exceed $10,000,000.
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51
None of the foregoing provisions shall be deemed to prohibit
the following Restricted Payments so long as in the case of clauses (ii), (iii),
(v) and (vi) there is no Default or Event of Default continuing:
(i) dividends paid within 60 days after the date of
declaration if at the date of declaration, such payment would be
permitted by the provisions of the preceding paragraph and such payment
shall be deemed to have been paid on such date of declaration for
purposes of the calculation required by the provisions of the foregoing
paragraph;
(ii) the redemption, repurchase or other acquisition or
retirement of any shares of any class of Capital Stock of the Company
or Subordinated Indebtedness in exchange for, or out of the net
proceeds of, a substantially concurrent issue and sale (other than to a
Subsidiary) of shares of Qualified Capital Stock of the Company;
provided that any net proceeds from the issue and sale of such
Qualified Capital Stock are excluded from clause 3(C) of the foregoing
paragraph;
(iii) the redemption, repurchase, or other acquisition or
retirement of Subordinated Indebtedness of the Company (other than
Redeemable Capital Stock) made by exchange for, or out of the proceeds
of the substantially concurrent sale of, new Indebtedness of the
Company so long as (A) the principal amount of such new Indebtedness
does not exceed the principal amount of the Indebtedness being so
redeemed, repurchased, acquired or retired for value (plus the amount
of any premium required to be paid under the terms of the instrument
governing the Indebtedness being so redeemed, repurchased, acquired or
retired), (B) such Indebtedness is subordinated to Senior Indebtedness
and the Notes at least to the same extent as such Subordinated
Indebtedness so purchased, exchanged, redeemed, repurchased, acquired
or retired for value, (C) such Indebtedness has a Stated Maturity for
its final scheduled principal payment later than the Stated Maturity
for the final scheduled principal payment of the Notes and (D) such
Indebtedness has an Average Life to Stated Maturity equal to or greater
than the remaining Average Life to Stated Maturity of the Notes;
(iv) any purchase, redemption or other acquisition of
Capital Stock of a Permitted Joint Venture from a physician or other
healthcare provider which is required to be purchased, redeemed or
otherwise acquired by applicable law;
(v) in addition to the transactions covered by clause
(iv) of this paragraph, any purchase, redemption or other acquisition
of Capital Stock of a Permitted Joint Venture; or
(vi) the making of any payment pursuant to any guarantee
of Indebtedness of a Permitted Joint Venture.
<PAGE>
52
SECTION 5.11 Restrictions on Preferred Stock of Subsidiaries
and Subsidiary Distributions. (a) The Company will not permit any Subsidiary to
issue any Preferred Stock (other than Preferred Stock issued (i) prior to the
date hereof or (ii) to the Company or a Wholly Owned Subsidiary (collectively,
"Permitted Preferred Stock")), or permit any Person (other than the Company or a
Wholly Owned Subsidiary) to own or hold any interest in any Preferred Stock of
any Subsidiary, other than with respect to any Preferred Stock issued prior to
the date hereof, unless a Subsidiary would be entitled to create, incur or
assume Indebtedness pursuant to Section 5.9 in the aggregate principal amount
equal to the aggregate liquidation value of the Preferred Stock to be issued.
(b) The Company will not, and will not permit any Subsidiary
to, declare or pay dividends or distributions on any Capital Stock of such
Subsidiary to any Person (other than to the Company or any Wholly Owned
Subsidiary or any lender in its capacity as a pledgee of Capital Stock of any
Subsidiary under the Credit Facility); provided, that the foregoing shall not
prohibit (i)(A) the Company or any Subsidiary from making any payment of
dividends or distributions on the Capital Stock of any Subsidiary in the
aggregate up to the amount of Restricted Payments that the Company could make at
any time pursuant to Section 5.10; (B) the purchase, redemption, or other
acquisition of the Capital Stock of a Permitted Joint Venture from a physician
or other healthcare provider which is required to be purchased, redeemed or
otherwise acquired by applicable law; or (C) the payment of pro rata dividends
or distributions to holders of minority interests in the Capital Stock of a
Subsidiary made in accordance with the terms of the agreement pursuant to which
such payment is made; or (ii) in addition to the transactions covered by clause
(i)(B) of this paragraph, in the event no Default or Event of Default has
occurred and is continuing, the purchase, redemption, or other acquisition of
the Capital Stock of a Permitted Joint Venture.
SECTION 5.12 Limitation on Transactions with Affiliates. The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the Company (other
than a Wholly Owned Subsidiary or a Permitted Joint Venture) unless (i) such
transaction or series of related transactions is on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party and (ii) with respect to a transaction or series of related
transactions involving payments in excess of $5,000,000 in the aggregate, the
Company delivers an Officers' Certificate to the Trustee certifying that (x)
such transaction complies with clause (i) above and (y) such transaction or
series of related transactions shall have been
<PAGE>
53
approved by a majority of the independent directors of the Board of Directors of
the Company; provided, however, that the foregoing restriction shall not apply
to (a) any transaction or series of related transactions entered into prior to
the date hereof, (b) the payment of reasonable and customary regular fees to
directors of the Company or any of its Subsidiaries who are not employees of the
Company or any Affiliate or (c) the Company's employee compensation and other
benefit arrangements.
SECTION 5.13 Disposition of Proceeds of Asset Sales. (a) The
Company will not, and will not permit any Subsidiary to, make any Asset Sale
unless (i) the Company or such Subsidiary receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the shares or assets
subject to such Asset Sale (as determined by the Board of Directors of the
Company and evidenced in a board resolution whose determination shall be
conclusive) and (ii) at least 75% of the proceeds from such Asset Sale when
received consists of cash or Cash Equivalents; provided, however, any Asset Sale
which constitutes a Permitted Investment under clause (vii) or (viii) of the
definition of Permitted Investment shall not be subject to the condition set
forth in clause (ii) of this sentence.
(b) If all or a portion of the Net Cash Proceeds of any Asset
Sale are not required to be applied to repay permanently any outstanding Senior
Indebtedness as required by the terms thereof, or, if not so required to be
applied, the Company determines not to apply such Net Cash Proceeds to the
prepayment of such Senior Indebtedness or if no such Senior Indebtedness is
outstanding, then the Company may within one year of the Asset Sale, invest (or
enter into a legally binding agreement to invest) the Net Cash Proceeds in
properties and assets that (as determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) replace
the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in the businesses of the Company, its
Wholly Owned Subsidiaries or its Permitted Joint Ventures existing on the date
hereof or in any Healthcare Related Business. If any such legally binding
agreement to invest any Net Cash Proceeds is terminated, then the Company may
invest such Net Cash Proceeds, prior to the end of such one-year period or six
months from such termination, whichever is later, in the business of the
Company, its Wholly Owned Subsidiaries or Permitted Joint Ventures or in any
Healthcare Related Business as provided above. The amount of such Net Cash
Proceeds neither used to repay or prepay Senior Indebtedness nor used or
invested as set forth in this paragraph (after the periods specified in this
paragraph) constitutes "Excess Proceeds."
(c) Subject to paragraph (f) below, when the aggregate amount
of Excess Proceeds equals $10,000,000 or more, the Company shall apply the
Excess Proceeds to the repayment of the Notes as follows: the Company shall make
an offer to purchase (an
<PAGE>
54
"Offer") from all holders of the Notes in accordance with the procedures set
forth herein in the maximum principal amount (expressed as a multiple of $1,000)
of Notes that may be purchased out of an amount (the "Note Amount") equal to the
product of such Excess Proceeds multiplied by a fraction, the numerator of which
is the outstanding principal amount of the Notes, and the denominator of which
is the sum of the outstanding principal amount of the Notes (subject to
proration in the event such amount is less than the aggregate Offered Price (as
defined herein) of all Notes tendered). The offer price shall be payable in cash
in an amount equal to 100% of the principal amount of the Notes plus accrued and
unpaid interest, if any, to the date such Offer is consummated (the "Offered
Price"), in accordance with the procedures set forth herein. To the extent that
the aggregate Offered Price of the Notes tendered pursuant to an Offer is less
than the Note Amount relating thereto (such shortfall constituting a
"Deficiency"), the Company may use such Deficiency, or a portion thereof, in the
business of the Company, its Wholly Owned Subsidiaries or its Permitted Joint
Ventures or any Healthcare Related Business. Upon completion of the purchase of
all the Notes tendered pursuant to an Offer, the amount of Excess Proceeds shall
be reset at zero.
(d) Whenever the Excess Proceeds received by the Company
exceed $10,000,000, such Excess Proceeds shall be set aside by the Company in a
separate account pending (i) deposit with the Trustee or a Paying Agent of the
amount required to purchase the Notes tendered in an Offer, (ii) delivery by the
Company of the Offered Price to the holders of the Notes tendered in an Offer
and (iii) application, as set forth above, of Excess Proceeds for general
corporate purposes. Such Excess Proceeds may be invested in Temporary Cash
Investments, provided that the maturity date of any investment made after the
amount of Excess Proceeds exceeds $10,000,000 shall not be later than the Offer
Date. The Company shall be entitled to any interest or dividends accrued, earned
or paid on such Temporary Cash Investments.
(e) If the Company becomes obligated to make an Offer pursuant
to clause (c) above, the Notes shall be purchased by the Company, at the option
of the holder thereof, in whole or in part in integral multiples of $1,000, on a
date that is not earlier than 30 days and not later than 60 days from the date
the notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the amount of Excess Proceeds is less than the aggregate
Offered Price of all Notes tendered and to satisfaction by or on behalf of the
holder of the requirements set forth in clause (f) below.
(f) In the event that the Company shall be unable to purchase
Notes from holders thereof in an Offer because of the provisions (i) of
applicable law, (ii) of the Company's loan agreements, indentures or other
contracts in existence on the date hereof, (iii) permitted to exist or become
effective by
<PAGE>
55
subparagraph (h)(ii) below or (iv) of the Credit Facility, the Company need not
make an Offer. The Company shall then be obligated to (i) invest the Excess
Proceeds in properties and assets to replace the properties and assets that were
the subject of the Asset Sale or in properties and assets that (as determined by
the Board of Directors, whose determination shall be conclusive and evidenced by
a Board Resolution) will be used in the businesses of the Company, its Wholly
Owned Subsidiaries or its Permitted Joint Ventures existing on the date hereof
or in any Healthcare Related Business or (ii) apply the Excess Proceeds to repay
Senior Indebtedness.
(g) The Company shall comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, in connection with an Offer.
(h) The Company will not, and will not permit any Subsidiary
to, create or permit to exist or become effective any restriction (other than
restrictions existing under (i) Indebtedness as in effect on the date hereof or
(ii) any Senior Indebtedness existing on the date hereof or thereafter) that
would materially impair the ability of the Company to make an Offer to purchase
the Notes upon an Asset Sale or, if such Offer is made, to pay for the Notes
tendered for purchase.
(i) Subject to paragraph (f) above, within 30 days after the
date on which the amount of Excess Proceeds equals or exceeds $10,000,000, the
Company shall send by first-class mail, postage prepaid, to the Trustee and to
each Holder of the Notes, at his or her address appearing in the Note Register,
a notice specifying, among other things:
(1) that the Holder has the right to require the Company to
repurchase, subject to proration, such Holder's Notes at the Offered
Price;
(2) the Purchase Date;
(3) the instructions a Holder must follow in order to have its
Notes purchased in accordance with paragraph (c) of this Section; and
(4) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q and
any Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Sales
otherwise described in the offering materials (or corresponding
successor reports) (or in the event the Company is not required to
prepare any of the foregoing Forms, the comparable information required
pursuant to Section 5.18), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such
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56
Reports, (iii) if material, appropriate pro forma financial
information, and (iv) such other information, if any, concerning the
business of the Company which the Company in good faith believes will
enable such Holders to make an informed investment decision.
(j) Holders electing to have Notes purchased will be required
to give notice and surrender such Notes to the Company at the address specified
in the notice at least two Business Days prior to the Purchase Date. An election
may be withdrawn before or after delivery by the Holder to the Company or its
agent at the address specified in writing by the Company, by means of a written
notice of withdrawal delivered by the Holder to the Company or its agent at any
time prior to the close of business on two Business Days prior to the Purchase
Date specifying, as applicable:
(1) the certificate number of the Note in respect of
which such notice of withdrawal is being submitted;
(2) the principal amount of the Note (which shall be $1,000 or
an integral multiple thereof) with respect to which such notice of
withdrawal is being submitted; and
(3) the principal amount, if any, of such Note (which shall be
$1,000 or an integral multiple thereof) that remains subject to the
original notice of the Offer and that has been or will be delivered to
the Company or its agent for purchase by the Company.
Holders will be entitled to withdraw their election if the Company receives, not
later than two Business Days prior to the Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Notes delivered for purpose by the Holder as to which
his election is to be withdrawn and a statement that such Holder is withdrawing
his election to have such Notes purchased.
(k) Not later than the Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Offer,
(ii) by 11 a.m. on the Business Day prior to the Purchase Date, deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 5.4(c)) an amount of
money in same day funds (or New York Clearing House funds if such deposit is
made prior to the Purchase Date) sufficient to pay the aggregate Offered Price
of all the Notes or portions thereof which are to be purchased on that date
(iii) deliver to the Paying Agent an Officers' Certificate stating the
securities or portions thereof accepted for payment by the Company.
The Trustee and the Paying Agent shall return to the Company
any cash that remains unclaimed, together with interest
<PAGE>
57
or dividends, if any, thereon, held by them for the payment of the Offered
Price; provided, however, that, to the extent that the aggregate amount of cash
deposited by the Company with the Trustee in respect of an offer exceeds the
aggregate Offered Price of the Notes or portions thereof to be purchased, then
the Trustee shall hold such excess for the Company and promptly after the
Business Day following the Purchase Date the Trustee shall upon demand return
any such excess to the Company together with interest or dividends, if any,
thereon.
(l) Notes to be purchased shall, on the Purchase Date, become
due and payable at the Offered Price and from and after such date (unless the
Company shall default in the payment of the Offered Price) such Notes shall
cease to bear interest. Such Offered Price shall be paid to such Holder promptly
following the later of the Business Day following the Purchase Date and the time
of delivery of such Note to the relevant Paying Agent at the office of such
Paying Agent by the Holder thereof in the manner required. Upon surrender of any
such Note for purchase in accordance with the foregoing provisions, such Note
shall be paid by the Company at the Offered Price; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Purchase
Date shall be payable to the Holders of such Notes, registered as such on the
record dates according to the terms and the provisions of Section 2.3; provided
further that Notes to be purchased are subject to proration in the event the
Notes Amount is less than the aggregate Offered Price of all Notes tendered for
purchase, with such adjustments as may be appropriate by the Trustee so that
only Notes in denominations of $1,000 or integral multiples thereof, shall be
purchased. If any Note tendered for purchase shall not be so paid upon surrender
thereof, the principal thereto (and premium, if any, thereon) shall, until paid,
bear interest from the Purchase Date at the rate borne by such Note. Any Note
that is to be purchased only in part shall be surrendered to a Paying Agent at
the office of such Paying Agent (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or such Holder's attorney duly authorized in writing), and the Company shall
execute and the Trustee shall authenticate and deliver to the Holder of such
Note, without service charge, one or more new Notes of any authorized
denomination as requested by such Holder in an aggregate principal amount equal
to, and in exchange for, the portion of the principal amount of the Note so
surrendered that is not purchased.
SECTION 5.14 Limitation on Liens Securing Subordinated
Indebtedness. The Company will not, and will not permit any Subsidiary to,
create, incur, assume or suffer to exist any Liens of any kind upon any of their
respective assets or properties now owned or acquired after the date hereof or
any income or profits therefrom securing (i) any Indebtedness of the Company
which is expressly by its terms subordinate or junior in right of payment
<PAGE>
58
to any other Indebtedness of the Company, unless the Notes are equally and
ratably secured; provided that, if such Indebtedness which is expressly by its
terms subordinate or junior in right of payment to any other Indebtedness of the
Company is expressly subordinate to the Notes, the Lien securing such
subordinated or junior Indebtedness shall be subordinate and junior to the Lien
securing the Notes with the same relative priority as such subordinated or
junior Indebtedness shall have with respect to the Notes; provided, further,
that this clause (i) shall not be applicable to any Liens securing any such
Indebtedness which became Indebtedness of the Company pursuant to a transaction
permitted under Article XII or Liens securing Acquired Indebtedness and, in each
case, which Liens were in existence at the time of such transaction or
incurrence of such Acquired Indebtedness (unless such Indebtedness was incurred
in connection with, or in contemplation of, such transaction or incurrence of
such Acquired Indebtedness), so long as such Liens do not extend to or cover any
property or assets of the Company or any Subsidiary other than property or
assets acquired in such transaction or securing such Acquired Indebtedness, or
(ii) any assumption, guarantee or other liability of any Subsidiary in respect
of any Indebtedness of the Company which is expressly by its terms subordinate
or junior in right of payment to any other Indebtedness of the Company, unless
the substantially similar assumption, guarantee or other liability of such
Subsidiary in respect of the Notes is equally and ratably secured; provided
that, if such subordinated Indebtedness is expressly by its terms subordinate or
junior to the Notes, then the Lien securing the assumption, guarantee or other
liability of such Subsidiary in respect of such subordinated or junior
Indebtedness shall be subordinate and junior to the Lien securing the
assumption, guarantee or other liability of such Subsidiary in respect of the
Notes with the same relative priority as such subordinated or junior
Indebtedness shall have with respect to the Notes; provided, further, that this
clause (ii) shall not be applicable to Liens securing any such assumption,
guarantee or other liability which existed at the time such Subsidiary became a
Subsidiary and which Liens were in existence at the time of such transaction
(unless such assumption, guarantee or other liability was incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary), so long as
such Liens do not extend to or cover any property or assets of the Company or
any Subsidiary other than the property or assets of such Person.
SECTION 5.15 Limitation on Other Senior Subordinated
Indebtedness. The Company will not create, incur, assume, guarantee or in any
other manner become liable with respect to any Indebtedness, other than the
Notes, that is subordinate in right of payment to any Senior Indebtedness,
unless such Indebtedness is also pari passu with, or subordinate in right of
payment to, the Notes pursuant to subordination provisions substantially similar
to those contained herein.
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SECTION 5.16 Limitation on Issuance of Guarantees of
Subordinated Indebtedness. (a) The Company will not permit any Subsidiary,
directly or indirectly, to assume, guarantee or in any other manner become
liable with respect to any Indebtedness of the Company which is expressly by its
terms subordinate or junior in right of payment to any other Indebtedness of the
Company unless (i) such Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a guarantee of payment of
the Notes by such Subsidiary and (A) if any such assumption, guarantee or other
liability is subordinated, the guarantee under the supplemental indenture shall
be subordinated to the same extent as the Notes are subordinated to Senior
Indebtedness of the Company under this Indenture and (B) if such subordinated or
junior Indebtedness is by its terms expressly subordinated to the Notes, any
such assumption, guarantee or other liability of such Subsidiary with respect to
such subordinated or junior Indebtedness shall be subordinated to such
Subsidiary's assumption, guarantee or other liability with respect to the Notes
to the same extent as such subordinated or junior Indebtedness is subordinated
or junior to the Notes under this Indenture; and (ii) such Subsidiary waives and
will not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Subsidiary as a result of any payment by such
Subsidiary under its Guarantee.
(b) Each guarantee created pursuant to the provisions
described in the foregoing paragraph is referred to as a "Guarantee" and the
issuer of each such Guarantee is referred to as a "Guarantor." Notwithstanding
the foregoing, any Guarantee by a Subsidiary of the Notes shall provide by its
terms that it (together with any Liens arising from such Guarantee) shall be
automatically and unconditionally released and discharged upon (i) any sale,
exchange or transfer, to any Person not an affiliate of the Company, of all of
the Company's Capital Stock in, or all or substantially all the assets of, such
Subsidiary, which is in compliance with this Indenture or (ii) the release or
discharge of the assumption, guarantee or other liability which resulted in the
creation of such Guarantee.
SECTION 5.17 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries. The Company will not, and will not permit
any Subsidiary to, create or otherwise cause or suffer to exist or become
effective any restriction of any kind, on the ability of any Subsidiary to (i)
pay dividends or make any other distribution on its Capital Stock to the Company
or any other Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Subsidiary, (iii) make any Investment in the Company or any other
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Subsidiary, except (a) any encumbrance or restriction existing under or by
reasons of applicable law; (b) any encumbrance or restriction existing under or
by reason of customary non-assignment provisions of any lease
IND
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governing a leasehold interest of the Company, or any Subsidiary; (c) any
restriction pursuant to an agreement in effect at or entered into on the date
hereof as set forth in Schedule I hereto; (d) any restriction existing under the
Credit Facility as in effect on the date hereof; (e) any restriction, with
respect to a Subsidiary that is not a Subsidiary on the date hereof, in
existence at the time such Person becomes a Subsidiary or created on the date it
becomes a Subsidiary and not incurred in connection with, or in contemplation
of, such Person becoming a Subsidiary; and (f) any restriction existing under
any agreement that extends, renews, refinances or replaces the agreements
containing the restrictions in the foregoing clauses (c) through (e), provided
that the terms and conditions of any such restrictions are not materially less
favorable to the holders of the Notes than those under or pursuant to the
agreement evidencing the Indebtedness so extended, renewed, refinanced or
replaced (in the opinion of the Board of Directors of the Company whose
determination shall be conclusive). Notwithstanding the foregoing, nothing in
this Section 5.17 shall prohibit or restrict the creation, incurrence,
assumption, suffering to exist or becoming effect of any Indebtedness or Liens
upon any of the assets of the Company and its Subsidiaries, the pledge by the
Company or any Subsidiary of any Capital Stock of any Subsidiary, the guarantee
of any Indebtedness by an Subsidiary, in each case, in accordance with the other
terms of this Indenture, or any action taken to exercise any remedy in respect
of any such Indebtedness, Lien or pledge or to enforce such guarantee.
SECTION 5.18 Provision of Financial Statements. As long as any
of the Notes remain outstanding hereunder, The Company and any Guarantor will be
required to file with the Commission the annual reports, quarterly reports and
other information which the Company and the Guarantors, if any, are required to
be filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the
Exchange Act, whether or not the Company or any Guarantor has a class of
securities registered under the Exchange Act. The Company and any Guarantor will
supply without cost to each Holder of the Notes and file with the Trustee within
fifteen days after the Company and the Guarantors, if any, copies of such annual
reports, quarterly reports and any other such information.
SECTION 5.19 Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, on or before a
date not more than 60 days after the end of each fiscal quarter and not more
than 120 days after the end of each Fiscal Year of the Company ending after the
date hereof, a written statement signed by two executive officers of the
Company, one of whom shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company, stating
whether or not, after a review of the activities of the Company during such year
or such quarter and of the Company's performance under this Indenture, to the
best knowledge, based on
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such review, of the signers thereof, the Company has fulfilled all its
obligations and is in compliance with all conditions and covenants under this
Indenture throughout such year or quarter, as the case may be, and, if there has
been a Default specifying each Default and the nature and status thereof.
(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or the trustee for or the holder or
any other evidence of Indebtedness of the Company or any Subsidiary gives any
notice or takes any other action with respect to a claimed default (other than
with respect to Indebtedness in the principal amount of less than $1,000,000),
the Company shall deliver to the Trustee by registered or certified mail or by
telegram, telex or facsimile transmission followed by hard copy an Officers'
Certificate specifying such Default, Event of Default, notice or other action
within five Business Days of its occurrence.
SECTION 5.20 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Sections 5.6 through 5.12 and 5.15
through 5.19, if, before or after the time for such compliance, the Holders of
not less than a majority in aggregate principal amount of the Notes at the time
outstanding waive such compliance in such instance with such covenant or
condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the Trustee
in respect of any such covenant or condition shall remain in full force and
effect
SECTION 5.21 Further assurance. From time to time whenever
reasonably demanded by the Trustee the Company will make, execute and deliver or
cause to be made, executed and delivered any and all such further and other
instruments and assurances as may be reasonably necessary or proper to carry out
the intention of or to facilitate the performance of the terms of this Indenture
or to secure the rights and remedies hereunder of the holders of the Notes.
ARTICLE VI
NOTEHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 6.1 Company to furnish Trustee information as to names
and addresses of Noteholders. The Company will furnish or cause to be furnished
to the Trustee:
(a) semi-annually, not more than 15 days after each record
date for the payment of interest, a list of the names and addresses of
the Noteholders as of such record date;
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(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished; and
(c) after the consummation of the Exchange Offer, any other
information as may be required from time to time in accordance with
Section 312(a) of the Trust Indenture Act;
provided, however, that so long as the Trustee is the Note Registrar, no such
list shall be required to be furnished.
SECTION 6.2 Preservation and disclosure of lists. (a) The
Trustee shall preserve, in as current a form as is reasonably practicable, all
information as to the names and addresses of the holders of Notes (i) contained
in the most recent list furnished to it as provided in Section 6.1 and (ii)
received by it in the capacity of the paying agent (if so acting) and Note
Registrar.
The Trustee may destroy any list furnished to it as provided
in Section 6.1 upon receipt of a new list so furnished.
(b) In case three or more holders of Notes (hereinafter
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Note for a period
of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other holders
of Notes with respect to their rights under this Indenture or under the Notes,
and is accompanied by a copy of the form of proxy or other communication which
such applicants propose to transmit, then the Trustee shall, within five
Business Days after the receipt of such application, at its election either
(i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 6.2; or
(ii) inform such applicants as to the approximate number of
holders of Notes whose names and addresses appear in the information
preserved at the time by the Trustee in accordance with the provisions
of subsection (a) of this Section 6.2, and as to the approximate cost
of mailing to such Noteholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants
access to such information, the Trustee shall, upon the written request of such
applicants, mail to each Noteholder whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 6.2, a copy of the form of proxy
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or other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Commission, together with a copy of the material to
be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the holders of
Notes or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. After opportunity for hearing upon the
objections specified in the written statement so filed, the Commission may enter
an order either sustaining one or more of such objections or refusing to sustain
any of them. If the Commission, shall enter an order refusing to sustain any of
such objections or if, after the entry of an order sustaining one or more of
such objections, said Commission shall find, after notice and opportunity for
hearing, that all the objections so sustained have been met and shall enter an
order so declaring, the Trustee shall mail copies of such material to all such
Noteholders with reasonable promptness after the entry of such order and the
renewal of such tender, otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every holder of the Notes, by receiving and
holding the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any Paying Agent nor the Note Registrar shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the holders of Notes in accordance with the provisions of
subsection (b) of this Section 6.2, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under said subsection
(b).
SECTION 6.3 Reports by the Trustee. (a) On October 1 of each
year, beginning in 1997, so long as there are any Notes outstanding hereunder,
the Trustee shall transmit by mail to all Noteholders a brief report dated as of
such reporting date with respect to any of the following events which may have
occurred during the twelve months preceding the date of such report (but if no
such event has occurred within such period, no report need be transmitted):
(1) any change to its eligibility under Section 8.9
and its qualification under Section 8.8;
(2) the creation of or any material change to a relationship
specified in Section 310(b)(1) through Section 310(b)(10) of the Trust
Indenture Act;
(3) the character and amount of any advances (and if
the Trustee elects so to state, the circumstances
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surrounding the making thereof) made by the Trustee (as such) which
remain unpaid on the date of such report, and for the reimbursement of
which it claims or may claim a lien or charge, prior to that of the
Notes, on any property or funds held or collected by it as Trustee,
except that the Trustee shall not be required (but may elect) to state
such advances if such advances so remaining unpaid aggregate not more
than 0.5 percent of the principal amount of the Notes outstanding on
the date of such report;
(4) the amount, interest rate, and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Notes) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in paragraph (2), (3), (4)
or (6) of subsection (b) of Section 311 of the Trust Indenture Act;
(5) any change to the property and funds, if any, physically
in the possession of the Trustee (as such) on the date of such report;
(6) any additional issue of Notes which the Trustee has not
previously reported; and
(7) any action taken by the Trustee in the performance of its
duties under this Indenture which it has not previously reported and
which in its opinion materially affects the Notes, except action in
respect of a Default, notice of which has been or is to be withheld by
it in accordance with the provisions of Section 8.14.
(b) The Trustee shall transmit to the Noteholders, as
hereinafter provided, a brief report with respect to the character and amount of
any advances made by the Trustee (as such) since the date of the last report
transmitted pursuant to the provisions of subsection (a) of this Section 6.3 (or
if no such report has yet been so transmitted, since the date of execution of
this Indenture), for the reimbursement of which it claims or may claim a lien or
charge prior to that of the Notes on property or funds held or collected by it
as Trustee, and which it has not previously reported pursuant to this subsection
(b), except that the Trustee shall not be required to report such advances if
such advances remaining unpaid at any time aggregate 10% or less of the
principal amount of Notes outstanding at such time, such report to be
transmitted within 90 days after such time.
(c) Reports pursuant to this Section 6.3 shall be transmitted
by mail to all holders of Notes, as the names and addresses of such holders
appear in the Note Register.
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(d) A copy of each such report shall, at the time of such
transmission to Noteholders, be furnished to the Company and be filed by the
Trustee with each stock exchange upon which the Notes are listed and also with
the Commission. The Company will notify the Trustee when and as the Notes become
listed on any stock exchange.
(e) Notwithstanding the foregoing provisions of this Section
6.3, the foregoing provisions of this Section 6.3 shall not be operative as a
part of this Indenture until this Indenture is qualified under the Trust
Indenture Act, and, until such qualification, this Indenture shall be construed
as if this Section 6.3 were not contained herein.
SECTION 6.4 Reports by the Company.
(a) The Company will, for so long as any Notes remain
outstanding, furnish to the Noteholders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(b) Such reports shall be delivered to the Note Registrar and
the Note Registrar will mail them at the Company's expense to the Noteholders at
their addresses appearing in the Note Register maintained by the Note Registrar.
(e) Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of Trust Indenture Act ss. 314(a).
ARTICLE VII
REMEDIES
SECTION 7.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of Article
III or be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) there shall be a default in the payment of any interest on
any Note when it becomes due and payable, and such default shall
continue for a period of 30 days;
(b) there shall be a default in the payment of the principal
of (or premium, if any, on) any Note at its Stated Maturity;
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(c) (i) there shall be a default in the performance, or
breach, of any covenant or agreement of the Company or of any Guarantor
under this Indenture (other than a default in the performance or breach
of a covenant or agreement which is specifically dealt with elsewhere
in this Indenture) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified
mail, (x) to the Company by the Trustee or (y) to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of
the outstanding Notes; (ii) there shall be a default in the performance
or breach of the provisions of Article XII; (iii) the Company shall
have failed to make or consummate an Offer in accordance with Section
5.13; or (iv) the Company shall have failed to make or consummate a
Change in Control Offer in accordance with Section 4.5;
(d) one or more defaults shall have occurred under any
agreements, indentures or instruments under which the Company or any
Subsidiary then has outstanding Indebtedness in excess of $5,000,000 in
the aggregate and, if not already matured at its final maturity in
accordance with its terms, such Indebtedness shall have been
accelerated;
(e) one or more judgments, orders or decrees for the payment
of money in excess of $5,000,000, either individually or in the
aggregate, shall be entered against the Company or any Subsidiary or
any of their respective properties which is not fully covered by
insurance, bond, surety or similar instrument and shall not be
discharged and there shall have been a period of 60 days during which a
stay of enforcement of such judgment or order, by reason of an appeal
or otherwise, shall not be in effect;
(f) the entry of a decree or order by a court having
jurisdiction in the premises (i) for relief in respect of the Company
or any Subsidiary in an involuntary case or proceeding under any
Bankruptcy Law or (ii) adjudging the Company or any Subsidiary a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any
Subsidiary under any Bankruptcy Law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Subsidiary or of any substantial part
of any of their properties, or ordering the winding up or liquidation
of any of their affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(g) the institution by the Company or any Subsidiary of a
voluntary case or proceeding under any Bankruptcy Law or any other case
or proceedings to be adjudicated a bankrupt or insolvent, or the
consent by the Company or any Subsidiary to the entry of a decree or
order for relief in
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respect of the Company or any Subsidiary in any involuntary case or
proceeding under any Bankruptcy Law or to the institution of bankruptcy
or any insolvency proceedings against the Company or any Subsidiary, or
the filing by the Company or any Subsidiary of a petition or answer or
consent seeking reorganization or relief under any Bankruptcy Law, or
the consent by it to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of any of the Company or any Subsidiary or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due or taking of corporate action by
the Company or any Subsidiary in furtherance of any such action.
The Company shall deliver to the Trustee within five days
after the occurrence thereof, written notice, in the form of an Officers'
Certificate, of any Default, its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 7.2 Acceleration of Maturity; Rescission and
Annulment. If an Event of Default (other than an Event of Default specified in
Sections 7.1(f) and (g)) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Notes outstanding may,
and the Trustee upon the request of the Holders of not less than 25% in
aggregate principal amount of the Notes outstanding shall, declare the principal
of all the Notes to be due and payable immediately in an amount equal to the
principal amount of the Notes, together with accrued and unpaid interest to the
date the Notes become due and payable, by a notice in writing to the Company
(and to the Trustee, if given by the Holders and, if the Credit Facility is in
effect, to the Senior Representative with respect thereto), and upon any such
declaration such principal shall become immediately due and payable. If an Event
of Default specified in Sections 7.1(f) and (g) occurs and is continuing, then
the principal of all the Notes shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder.
At any time after such declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in aggregate principal amount of the Notes outstanding, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if:
(a) the Company has paid or deposited with the Trustee
a sum sufficient to pay
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(i) all sums paid or advanced by the Trustee
under Section 8.6 and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel,
(ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on
any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
borne by the Notes, and
(iv) to the extent that payment of such interest
is lawful, interest upon overdue interest at the rate borne by
the Notes; and
(b) all Events of Default, other than the non-payment of
principal of Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 7.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon provided in Section 7.13.
SECTION 7.3 Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company and any Guarantor covenant that if
(a) default is made in the payment of any interest on any Note
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(b) default is made in the payment of the principal of or
premium, if any, on any Note at the stated maturity thereof,
(c) the Company and any such Guarantor will, upon demand of
the Trustee, pay to it, for the benefit of the Holders of such Notes, subject to
Article III, the whole amount then due and payable on such Notes for principal
and premium, if any, and interest, with interest upon the overdue principal and
premium, if any, and, to the extent that payment of such interest shall be
legally enforceable, upon overdue installments of interest, at the rate borne by
the Notes; and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company or any Guarantor, as the case may be, fails to
pay such amounts forthwith upon such demand, the Trustee, in its own name and as
trustee of an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid and may prosecute such proceeding to
judgment or
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final decree, and may enforce the same against the Company or any Guarantor or
any other obligor upon the Notes and collect the moneys adjudged or decreed to
be payable in the manner provided by law out of the property of the Company or
any Guarantor or any other obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders under this Indenture or the Guarantees by such appropriate
private or judicial proceedings as the Trustee shall deem most effectual to
protect and enforce such rights, including, seeking recourse against any
Guarantor pursuant to the terms of any Guarantee, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein or therein, or to enforce any other proper
remedy, including, without limitation, seeking recourse against any Guarantor
pursuant to the terms of a Guarantee, or to enforce any other proper remedy,
subject however to Section 7.12.
SECTION 7.4 Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor, including each
Guarantor, upon the Notes or the property of the Company or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of
principal, and premium, if any, and interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) subject to Article III, to collect and receive any moneys
or other property payable or deliverable on any such claims and claims and to
distribute the same;
and any custodian, in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 8.6.
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Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 7.5 Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name and as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes in respect to which such judgment has been recovered.
SECTION 7.6 Application of Money Collected. Any money
collected by the Trustee pursuant to this Article or otherwise on behalf of the
Holders or the Trustee pursuant to this Article or through any proceeding or any
arrangement or restructuring in anticipation or in lieu of any proceeding
contemplated by this Article shall be applied, subject to applicable law, in the
following order, at the date or dates taxed by the Trustee and, in case of the
distribution of such money on account of principal, premium, if any, or
interest, upon presentation of the Notes and the notation thereon of the payment
if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 8.6;
SECOND: Subject to Article III, to the payment of the amounts
then due and unpaid upon the Notes for principal, premium, if any, and
interest, in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any
kind, according to the amounts due and payable on such Notes for
principal, premium, if any, and interest; and
THIRD: Subject to Article III, the balance, if any, to the
Person or Persons entitled thereto, including the Company, provided
that all sums due and owing to the Holders and the Trustee have been
paid in full as required by this Indenture.
SECTION 7.7 Limitation on Suits. Subject to Section 7.8, no
Holder of any Notes shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless
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(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of
the outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee an
indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Guarantee to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner provided in this Indenture or any Guarantee and for the equal and ratable
benefit of all the Holders.
SECTION 7.8 Unconditional Right of Holders to Receive
Principal, Premium and Interest. Notwithstanding any other provision in this
Indenture, the Holder of any Note shall have the right on the terms stated
herein, which is absolute and unconditional, to receive payment of the principal
of, premium, if any, and (subject to Section 2.3) interest on such Note on the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on the Redemption Date, or, in the case of a Change in Control
Offer, on the Change in Control Purchase Date, or, in the case of an Excess
Proceeds Offer, on the Purchase Date) and to institute suit for the enforcement
of any such payment, and such rights shall not be impaired without the consent
of such Holder, subject to Article III.
SECTION 7.9 Restoration of Rights and Remedies. If the Trustee
or any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture or the Guarantees and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case the Company, each of the Guarantors,
the Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter
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all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 7.10 Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 7.11 Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Note to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 7.12 Control by Holders. The Holders of not less than
a majority in aggregate principal amount of the outstanding Notes shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, provided that
(a) such direction shall not be in conflict with any rule of
law or with this Indenture or any Guarantee or expose the Trustee to personal
liability; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 7.13 Waiver of Past Defaults. The Holders of not less
than a majority in aggregate principal amount of the outstanding Notes may on
behalf of the Holders of all the Notes waive any past Default hereunder and its
consequences, except a Default
(a) in the payment of the principal of, premium, if any, or
interest on any Note, or
(b) in respect of a covenant or provision hereof which under
Article XI cannot be modified or amended without the consent of the Holder of
each outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no
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such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 7.14 Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by his or her acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the outstanding Notes, or to any suit instituted
by any Holder for the enforcement of the payment of the principal of, premium,
if any, or interest on any Note on or after the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on or after the
Redemption Date).
SECTION 7.15 Waiver of Stay, Extension or Usury Laws.
Each of the Company and any Guarantor covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any Guarantor
from paying all or any portion of the principal of, premium, if any, or interest
on the Notes contemplated herein or in the Notes or which may affect the
covenants or the performance of this Indenture; and each of the Company and any
Guarantor (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1 Duties and responsibilities of Trustee.
(a) Except during the continuance of an Event of
Default:
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(i) the Trustee undertakes to perform such duties and
only such duties and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a
duty to examine the same to determine whether or not they conform to
the requirements of this Indenture.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(c) Except as specifically set forth in Section 3.14 herein,
no provision of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that
(i) this subsection shall not be construed to
limit the effect of subsection (a) of this Section 8.1;
(ii) the Trustee shall not be liable for any
error of judgment made in good faith by a responsible officer or
officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of the holders of not less
than a majority or, in the case of any direction delivered pursuant to
Section 7.2, 25% in principal amount of the Notes at the time
outstanding (determined as provided in Section 9.3, 9.4 or 9.5)
relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(iv) no provision contained in this Indenture
shall require the Trustee to expend or risk its own funds or otherwise
incur personal financial liability in the performance of any of its
duties hereunder or in the
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exercise of any of its rights or powers, if the Trustee reasonably
believes that the repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) The Trustee shall not be required to take notice or to be
deemed to have notice of any Default or Event of Default hereunder except (i)
upon the failure by the Company to pay (or cause to be paid) any payments to be
made to the Trustee required to be made to the Trustee pursuant to the
provisions of this Indenture and (ii) if the Trustee is serving as Paying Agent,
upon the failure by the Company to pay (or cause to be paid) any payments to be
made to the Paying Agent required to be made to the Paying Agent pursuant to the
terms of this Indenture, unless the Trustee is specifically notified in writing
of such Default or Event of Default by the Company or the Holders of at least
25% in aggregate principal amount of outstanding Notes.
(e) Whether or not expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section and, upon qualification of this Indenture under the Trust Indenture Act,
the Trust Indenture Act.
SECTION 8.2 Reliance on document, opinions, etc. Subject to
the provisions of Section 8.1:
(a) The Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
(b) Any request, direction, order or demand of the
Company mentioned herein shall be sufficiently evidenced by an
instrument signed in the name of the Company by (i) the Chief Executive
Officer, the President or any Vice President and (ii) the Secretary or
any Assistant Secretary or the Treasurer or any Assistant Treasurer
(unless other evidence in respect thereof be herein specifically
prescribed); and any resolution of the Board of Directors of the
Company may be evidenced to the Trustee by a copy thereof certified by
the Secretary or any Assistant Secretary of the Company;
(c) The Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
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(d) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by or pursuant to
this Indenture at the request, order or direction of any of the
Noteholders, pursuant to the provisions of this Indenture, unless such
Noteholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; but nothing herein contained shall,
however, relieve the Trustee of the obligation, upon the occurrence of
an Event of Default (which has not been cured or waived), to exercise
such of the rights and powers vested in it by this Indenture, and to
use the same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the conduct of his
own affairs;
(e) The Trustee shall not be liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture;
(f) Prior to the occurrence of an Event of Default
hereunder and after the curing or waiving of all Events of Default, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond,
debenture, note, other evidence of indebtedness or other paper or
document, unless requested in writing so to do by the holders of not
less than a majority in aggregate principal amount of the Notes then
outstanding (determined as provided in Section 9.4 or 9.5); provided,
however, that if the payment within a reasonable time to the Trustee of
the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liability as a condition to so proceeding. The
reasonable expense of every such examination shall be paid by the
Company or, if paid by the Trustee, shall be repaid by the Company upon
demand; and
(g) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys. The Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
SECTION 8.3 No responsibility for recitals, etc. The recitals
contained herein and in the Notes (other than the certificate of authentication
on the Notes) shall be taken as the statements of the Company, and the Trustee
assumes no
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responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be accountable for the use or application by the
Company of any of the Notes or of the proceeds of such Notes, or for the use or
application of any moneys paid over by the Trustee in accordance with any
provision of this Indenture, or for the use or application of any moneys
received by any Paying Agent other than the Trustee. The Trustee shall not be
responsible for (or accountable for) determining whether transferees are QIBs or
Institutional Accredited Investors, and the Trustee shall be entitled to
conclusively rely upon Officers' Certificates, certificates of transferees and
Opinions of Counsel relating to the same and whether the Notes are Restricted
Securities.
SECTION 8.4 Trustee, Paying Agent or Note Registrar may own
Notes. The Trustee, any Paying Agent or Note Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes with the same rights it
would have if it were not Trustee, Paying Agent or Note Registrar.
SECTION 8.5 Moneys received by Trustee to be held in trust
without interest. Subject to the provisions of Section 13.6 and Article III, all
moneys received by the Trustee shall, until used or applied as herein provided,
be held in trust for the purposes for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any moneys received by it hereunder
except such as it may agree with the Company to pay thereon.
SECTION 8.6 Compensation and expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation, and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee (including as the
Paying Agent and the Note Registrar) in connection with the acceptance or
administration of its trust under this Indenture (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith. The Company also
covenants to indemnify the Trustee and any director, officer, employee or agent
of the Trustee for any loss, liability or expense (including without limitation
costs and expenses of litigation, and of investigation, counsel fees, damages,
judgments and amounts paid in settlement) incurred in connection with any act or
omission on the part of the Trustee with respect to this Indenture or the Notes
(other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence of the Trustee in the performance of its
duties hereunder). The obligations of the Company under this Section 8.6 to
compensate the Trustee and to pay or reimburse the Trustee
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for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture. Such additional indebtedness shall be secured by a lien prior to that
of the Notes upon all property and funds held or collected by the Trustee as
such, except funds held in trust by the Trustee pursuant to Article XIII for the
payment of principal of or premium, if any, or interest on particular Notes.
SECTION 8.7 Right of Trustee to rely on Officers' Certificate
where no other evidence specifically prescribed. Subject to the provisions of
Section 8.1, whenever in the administration of the provisions of this Indenture,
the Trustee shall deem it necessary or desirable that a matter to be proved or
established prior to taking, suffering or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or bad faith on the part of the
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Trustee, and such Certificate, in the absence of
negligence or bad faith on the part of the Trustee, shall be full warrant to the
Trustee for any action taken, suffered or omitted by it under the provisions of
this Indenture upon the faith thereof.
SECTION 8.8 Conflicting interest of Trustee. The Trustee
shall be subject to the provisions of Section 310(b) of the Trust Indenture Act
notwithstanding that this Indenture may not be qualified under the Trust
Indenture Act. If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. Nothing herein
shall prevent the Trustee from filing with the Commission the application
referred to in the second to last paragraph of Section 310(b) of the Trust
Indenture Act.
SECTION 8.9 Requirements for eligibility of Trustee. The
Trustee hereunder shall at all times be a corporation organized and doing
business under the laws of the United States of America or any state or
territory thereof or of the District of Columbia authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus (computed
in accordance with Section 310(a)(2) of the Trust Indenture Act) of at least
$50,000,000, subject to supervision or examination by Federal, state,
territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 8.9, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. This Indenture shall always have a Trustee who
satisfies the
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requirements of Sections 310(a)(1) and (5) of the Trust Indenture Act. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 8.9, the Trustee shall resign immediately in the manner and with
the effect specified in this Article.
SECTION 8.10 Resignation or removal of Trustee. (a) No
resignation or removal of the Trustee and no appointment of a successor trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 8.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by the holders of a
majority in principal amount of the outstanding Notes by written notice,
delivered to the Trustee and to the Company.
(d If at any time:
(1) the Trustee shall fail to comply with Section
310(b) of the Trust Indenture Act with respect to the Notes after
written request therefor by the Company or by any Noteholder who has
been a bona fide holder of a Note or Notes for at least six months, or
(2) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.9 and shall fail to resign
after written request therefor by the Company or by any such
Noteholder, or
(3) the Trustee shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee
or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 7.14, any Noteholder who has been a bona
fide holder of a Note or Notes for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the removal of the Trustee
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and the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, remove the trustee and
appoint a successor trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Company shall promptly appoint a successor trustee. If,
within one year after such resignation, removal or incapacity, or the occurrence
of such vacancy, a successor trustee shall be appointed by the holders of a
majority in principal amount of the Notes outstanding by written notice
delivered to the Company and the retiring trustee, the successor trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor trustee and supersede the successor trustee appointed by the Company.
If no successor trustee shall have been so appointed by the Company or the
Noteholders and accepted appointment in the manner hereinafter provided, subject
to Section 7.14, any Noteholder who has been a bona fide holder of a Note for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Noteholders as their names and addresses appear in the Note Register. Each
notice shall include the name of the successor trustee and the address of its
principal Corporate Trust Office.
SECTION 8.11 Acceptance by successor to Trustee; notice of
succession of a Trustee. Any successor trustee appointed as provided in Section
8.10 shall execute, acknowledge and deliver to the Company and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties, trusts and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee herein; but, nevertheless, on the written request of the
Company or of the successor trustee, the trustee ceasing to act shall, upon
payment of any amounts then due it pursuant to the provisions of Section 8.6,
execute and deliver an instrument transferring to such successor trustee all the
rights and powers of the trustee so ceasing to act. Upon request of any such
successor trustee, the Company shall execute any and all instruments in writing
for more fully and certainly vesting in and confirming to such successor trustee
all such rights and powers. Any trustee ceasing to act shall, nevertheless,
retain a lien upon all property of funds held or collected by such Trustee to
secure any amounts then due it pursuant to the provisions of Section 8.6.
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No successor trustee shall accept appointment as provided in
this Section 8.11 unless at the time of such acceptance such successor trustee
shall be qualified under the provisions of Section 8.8 and eligible under the
provisions of Section 8.9.
Upon acceptance of appointment by a successor trustee as
provided in this Section 8.11, the Company shall mail to the Noteholders by
first-class mail notice thereof. If the Company fails to mail such notice within
30 days after acceptance of appointment by the successor trustee, the successor
trustee shall, in its discretion, cause such notice to be mailed at the expense
of the Company.
SECTION 8.12 Successor to Trustee by merger, consolidation or
succession to business. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger or conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be qualified under the provisions of Section 8.8 and eligible
under the provisions of Section 8.9, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall
succeed to the trusts created by this Indenture any of the Notes shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such Notes
so authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor
trustee; provided, however, that the right to adopt the certificate of
authentication of any predecessor trustee or authenticate Notes in the name of
any predecessor trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
SECTION 8.13 Limitations on rights of Trustee as a creditor.
If and when the Trustee shall be or become a creditor of the Company (or any
other obligor upon the Notes), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor).
SECTION 8.14 Notice of Defaults. If a Default occurs and is
continuing, the Trustee shall mail to Noteholders a notice of the Default within
90 days after it occurs. Except in the case of a Default in payment on any Note
(including the failure to make a mandatory redemption, if any, pursuant
thereto), the Trustee may withhold the notice if and so long as a committee of
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its Responsible Officers in good faith determines that withholding the notice is
in the interests of Holders.
ARTICLE IX
CONCERNING THE NOTEHOLDERS
SECTION 9.1 Evidence of action by Noteholders. Whenever in
this Indenture it is provided that the holders of a specified percentage in
aggregate principal amount of the Notes may take any action (including the
making of any demand or request, the giving of any notice, consent, or waiver or
the taking of any other action), the fact that the holders of such specified
percentage, determined as of the time such action was taken or, if a record date
was set with respect thereto pursuant to Section 9.5, as of such record date,
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by Noteholders in person or by agent or
proxy appointed in writing, or (b) by the record of the holders of Notes voting
in favor thereof at any meeting of Noteholders duly called and held in
accordance with the provisions of Article X, or (c) by a combination of such
instrument or instruments and any such record of such a meeting of Noteholders.
SECTION 9.2 Proof of execution of instruments and of holding
of Notes. Subject to the provisions of Sections 8.1, 8.2 and 10.5, proof of the
execution of any instrument by a Noteholder or his agent or proxy shall be
sufficient if made in accordance with the provisions set forth herein.
The ownership of Notes shall be proved by the Note Register,
or by a certificate of the registrar thereof.
The record of any Noteholders' meeting shall be proved in the
manner provided in Section 10.5.
SECTION 9.3 Who may be deemed owners of Note. Prior to due
presentation for registration of transfer, the Company, the Trustee, any Paying
Agent, and any Note Registrar may deem and treat the person in whose name any
Note shall be registered in the Note Register as the absolute owner of such Note
(whether or not such Note shall be overdue and notwithstanding any notation of
ownership or other writing thereon) for the purposes of receiving payment of or
on account of the principal of and premium, if any, and interest on such Note,
for all purposes; and neither the Company nor the Trustee nor any Paying Agent
nor any Note Registrar shall be affected by any notice to the contrary. All such
payments so made to, or upon the order of, any such holder, shall be valid and,
to the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Note.
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SECTION 9.4 Notes owned by Company or controlled by
controlling persons disregarded for certain purposes. In determining whether the
holders of the requisite aggregate principal amount of Notes have concurred in
any demand, direction, request, notice, consent, waiver or other action under
this Indenture, Notes which are owned by the Company or any other obligor on the
Notes or by any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company or any other obligor on
the Notes shall be disregarded and deemed not to be outstanding for the purpose
of any such determination, provided that for the purposes of determining whether
the Trustee shall be protected in relying on any such demand, direction,
request, notice, consent or waiver, only Notes which the Note Register states
are so owned shall be so disregarded. Notes so owned which have been pledged in
good faith may be regarded as outstanding for the purposes of this Section 9.4,
if, subject to Section 8.2, any pledgee shall demonstrate to the Trustee the
pledgee's right to vote such Notes and that the pledgee is not a person directly
or indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In case of a dispute as to
such right, any decision by the Trustee taken upon the advice of counsel shall
be full protection to the Trustee.
SECTION 9.5 Record date for action by Noteholders. Whenever in
this Indenture it is provided that holders of a specified percentage in
aggregate principal amount of the Notes may take any action (including the
making of any demand or request, the giving of any direction, notice, consent or
waiver or the taking of any other action), other than any action taken at a
meeting of Noteholders called pursuant to Article X, the Company, pursuant to a
resolution of its Board of Directors, or the holders of at least ten percent in
aggregate principal amount of the Notes then outstanding, may fix the record
date by mailing notice thereof (the record date so fixed to be a Business Day
not less than 15 nor more than 20 days after the date on which such written
notice shall be given) to the Trustee. If a record date is fixed according to
this Section 9.5, only persons shown as Noteholders in the Note Register at the
close of business on the record date so fixed shall be entitled to take the
requested action and the taking of any such action by the holders on the record
date of the required percentage of the aggregate principal amount of the Notes
shall be binding on all Noteholders, provided that the taking of the requested
action by the holders on the record date of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action shall have been evidenced to the Trustee, as provided in Section
9.1, not later than 180 days after such record date.
SECTION 9.6 Instruments executed by Noteholders bind future
holders. At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 9.1, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Notes specified in this
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Indenture in connection with such action, any holder of a Note which is shown by
the evidence to be included in the Notes the holders of which have consented to
such action may, by filing written notice with the Trustee at its principal
office and upon proof of holding as provided in Section 9.2, revoke such action
so far as concerns such Note. Except as aforesaid any such action taken by the
holder of any Note and any direction, demand, request, waiver, consent, vote or
other action of the holder of any Note which by any provisions of this Indenture
is required or permitted to be given shall be conclusive and binding upon such
holder and upon all future holders and owners of such Note, and of any Note
issued in lieu thereof, irrespective of whether or not any notation in regard
thereto is made upon such Note. Any action taken by the holders of the
percentage in aggregate principal amount of the Notes specified in this
Indenture in connection with such action shall be conclusively binding upon the
holders of all the Notes.
ARTICLE X
NOTEHOLDERS MEETINGS
SECTION 10.1 Purposes for which meetings may be called. A
meeting of Noteholders may be called at any time and from time to time pursuant
to the provisions of this Article X for any of the following purposes:
(i) to give any notice to the Company or to the
Trustee, or to give any directions to the Trustee, or to consent to the
waiving of any default hereunder and its consequences, or to take any
other action authorized to be taken by Noteholders pursuant to any of
the provisions of Article VII;
(ii) to remove the Trustee and appoint a successor
trustee pursuant to the provisions of Article VIII;
(iii) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
Section 11.2; or
(iv) to take any other action authorized to be taken by
or on behalf of the holders of any specified aggregate principal amount
of the Notes under any other provisions of this Indenture or under
applicable law.
SECTION 10.2 Manner of calling meetings; record date. The
Trustee may at any time call a meeting of Noteholders to take any action
specified in Section 10.1, to be held at such time and at such place in the City
of Wilmington, State of Delaware, as the Trustee shall determine. Notice of
every meeting of the Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such
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meeting, shall be mailed not less than 30 nor more than 60 days prior to the
date fixed for the meeting to such Noteholders at their addresses as such
addresses appear in the Note Register. For the purpose of determining
Noteholders entitled to notice of any meeting of Noteholders, the Trustee shall
fix in advance a date as the record date for such determination, such date to be
a business day not more than ten days prior to the date of the mailing of such
notice as hereinabove provided. Only persons in whose name any Note shall be
registered in the Note Register at the close of business on a record date fixed
by the Trustee as aforesaid, or by the Company or the Noteholders as in Section
10.3 provided, shall be entitled to notice of the meeting of Noteholders with
respect to which such record date was so fixed.
SECTION 10.3 Call of meeting by Company or Noteholders. In
case at any time the Company, pursuant to a resolution of its Board of Directors
or the holders of at least ten percent in aggregate principal amount of the
Notes then outstanding, shall have requested the Trustee to call a meeting of
Noteholders to take any action authorized in Section 10.1 by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have mailed notice of such meeting within 20
days after receipt of such request, then the Company or the holders of Notes in
the amount above specified, as the case may be, may fix the record date with
respect to, and determine the time and the place in said City of Wilmington for,
such meeting and may call such meeting to take any action authorized in Section
10.1, by mailing notice thereof as provided in Section 10.2. The record date
fixed as provided in the preceding sentence shall be set forth in a written
notice to the Trustee and shall be a business day not less than 15 nor more than
20 days after the date on which such notice is sent to the Trustee.
SECTION 10.4 Who may attend and vote at meetings. Only persons
entitled to receive notice of a meeting of Noteholders and their respective
proxies duly appointed by an instrument in writing shall be entitled to vote at
such meeting. The only persons who shall be entitled to be present or to speak
at any meeting of Noteholders shall be the persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel. When a determination of
Noteholders entitled to vote at any meeting of Noteholders has been made as
provided in this Section, such determination shall apply to any adjournments
thereof.
SECTION 10.5 Manner of voting at meetings and record to be
kept. The vote upon any resolution submitted to any meeting of Noteholders shall
be by written ballots on each of which shall be subscribed the signature of the
Noteholder or proxy casting such ballot and the identifying number or numbers of
the Notes held or represented in respect of which such ballot is cast. The
permanent chairman of the meeting shall appoint two
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inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of the meeting
their verified written reports in duplicate of all votes cast at the meeting. A
record in duplicate of the proceedings of each meeting of Noteholders shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was mailed as provided in Section 10.2. The record shall show the
identifying numbers of the Notes voting in favor of or against any resolution.
Each counterpart of such record shall be signed and verified by the affidavits
of the permanent chairman and secretary of the meeting and one of the
counterparts shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee.
Any counterpart record so signed and verified shall be
conclusive evidence of the matters therein stated and shall be the record
referred to in clause (b) of Section 9.1.
SECTION 10.6 Exercise of rights of Trustee and Noteholders not
to be hindered or delayed. Nothing in this Article X contained shall be deemed
or construed to authorize or permit, by reason of any call of a meeting of
Noteholders or any rights expressly or impliedly conferred hereunder to make
such call, any hinderance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Noteholders under any of the
provisions of this Indenture or of the Notes.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.1 Purposes for which supplemental Indentures may be
entered into without consent of Noteholders. The Company, when authorized by a
resolution of the Board of Directors, and the Trustee may from time to time and
at any time, without notice to or the consent of any Noteholders, enter into an
indenture or indentures supplemental hereto (which shall comply with the
provisions of the Trust Indenture Act as then in effect) for one or more of the
following purposes:
(a) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
herein and in the Notes pursuant to Article XII;
(b) to add to the covenants of the Company such further
covenants, restrictions or conditions as its Board
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of Directors shall consider to be for the protection of the holders of
Notes, and to make the occurrence, or the occurrence and continuance,
of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement
of all or any of the several remedies provided in this Indenture as
herein set forth; provided, however, that in respect of any such
additional covenant, restriction or condition such supplemental
indenture may provide for a particular period of grace after default
(which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such
default or may limit the remedies available to the Trustee upon such
default;
(c) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture or any
supplemental indenture, provided that such actions shall not be
materially inconsistent with the terms of this Indenture and shall not
adversely affect the interests of the holders of the Notes;
(d) to provide for the issuance under this Indenture of Notes,
whether or not then outstanding, in coupon form (including signatures
registrable as to principal only) and to provide for exchangeability of
such Notes with Notes issued hereunder in fully registered form and to
make all appropriate changes for such purpose;
(e) to comply with requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust
Indenture Act;
(f) to provide for the issuance of the Exchange Notes (which
will have terms identical in all material respects to the Initial Notes
except that the transfer restrictions contained in the Initial Notes
will be modified or eliminated, as appropriate, and the Exchange Notes
will not have provisions with respect to interest rate increases as
provided in the Registration Rights Agreement), and which will be
treated together with any outstanding Initial Notes as a single class
of Notes under the Indenture.
The Trustee is hereby authorized to join with the Company in
the execution and delivery of any such supplemental indenture, to make any
further appropriate agreement and stipulations which may be therein contained
and to accept the conveyance, transfer, mortgage, pledge or assignment of any
property thereunder, provided that if any such supplemental indenture affects
the Trustee's own rights, duties or immunities
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under this Indenture or otherwise, the Trustee may in its discretion, but shall
not be obligated to, enter into such supplemental indenture.
Any supplemental indenture authorized by the provisions of
this Section 11.1 may be executed by the Company and the Trustee without notice
to or the consent of the holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 11.2.
SECTION 11.2 Modification of Indenture with consent of holders
of 51 percent in principal amount of Notes. With the consent (evidenced as
provided in Section 9.1) of the holders of not less than 51 percent in aggregate
principal amount of the Notes at the time outstanding (determined as provided in
Section 9.4), or, if a record date is set with respect to such consent in
accordance with Section 9.5, as of such record date, the Company, when
authorized by a resolution of its Board of Directors, and the Trustee may from
time to time and at any time enter into an indenture or indentures supplemental
hereto (which shall comply with the provisions of the Trust Indenture Act as
then in effect) for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided, however, that without the consent of the holder of each
outstanding Note, no such supplemental indenture shall (i) extend the stated
maturity of any Note, reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof or reduce any premium payable
upon the redemption thereof or the amount payable thereon in the event of a
Change in Control or acceleration of the amount thereof payable in bankruptcy,
or (ii) reduce the aforesaid percentage of aggregate principal amount of Notes,
the consent of the holders of which is required for any such supplemental
indenture.
Upon the request of the Company, accompanied by a copy of a
resolution of its Board of Directors certified by the Secretary or an Assistant
Secretary of the Company authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Noteholders as aforesaid, the Trustee shall join with the Company in the
execution and delivery of such supplemental indenture, provided that if such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, the Trustee may in its discretion, but shall
not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Noteholders
under this Section 11.2 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
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Promptly after the execution and delivery by the Company and
the Trustee of any supplemental indenture pursuant to the provisions of this
Section 11.2, the Company shall mail a notice to the Noteholders, setting forth
in general terms the substance of such supplemental indenture. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture. Copies
of any supplemental indenture shall be available for inspection by any
Noteholder at the principal corporate trust office of the Trustee.
SECTION 11.3 Effect of supplemental indentures. Upon the
execution and delivery of any supplemental indenture pursuant to the provisions
of this Article XI, this Indenture shall be and be deemed to be modified and
amended in accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 11.4 Conformity with Trust Indenture Act. From the
date this Indenture is qualified under the Trust Indenture Act, every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 11.5 Notes may bear notation of changes by
supplemental indentures. Notes authenticated and delivered after the execution
and delivery of any supplemental indenture pursuant to the provisions of this
Article XI, or after any action taken at a Noteholders' meeting pursuant to
Article X, may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture or as to any action taken at any
such meeting. If the Company or the Trustee shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Board of Directors
of the Company, to any modification of this Indenture contained in any such
supplemental indenture may be prepared by the Company, authenticated by the
Trustee and delivered in exchange for the Notes then outstanding. Failure to
make the appropriate notation or issue a new Note shall not affect the validity
and effect of such supplemental indenture or Noteholders' meeting.
SECTION 11.6 Officers' Certificate and Opinion of Counsel. In
connection with the execution of any supplemental indenture, the Trustee shall
receive and, subject to the provisions of Sections 8.1 and 8.2, shall be fully
protected in relying upon an Officers' Certificate and an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized and
permitted by this Indenture (including, without
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limitation, Section 11.7) as conclusive evidence that any such supplemental
indenture complies with the provisions of this Article XI.
SECTION 11.7 Modification of Indenture with consent of holders
of Senior Indebtedness. No amendment, supplement or other modification may be
made to any provision of this Indenture (including any definition included in
Article I or elsewhere herein) that adversely affects the rights under Article
III or under any other provision of this Indenture of any holder of Senior
Indebtedness unless the holders of Senior Indebtedness expressly consent in
writing thereto.
ARTICLE XII
CONSOLIDATION, MERGER AND SALE
SECTION 12.1 Merger and Sale of Assets, etc. (a) The Company
shall not, in a single transaction or through a series of related transactions,
consolidate with or merge with or into any other Person or sell, assign, convey,
transfer or lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to any Person or group of affiliated
Persons, or permit any of its Subsidiaries to enter into any such transaction or
transactions if such transaction or transactions, in the aggregate, would result
in a sale, assignment, transfer, lease or disposal of all or substantially all
of the properties and assets of the Company and its Subsidiaries on a
consolidated basis to any other Person or group of affiliated Persons, unless at
the time and after giving effect thereto:
(i) either (A) the Company shall be the continuing
corporation, or (B) the Person (if other than the Company) formed by
such consolidation or into which the Company is merged or the Person
which acquires by conveyance, transfer, lease or disposition the
properties and assets of the Company, substantially as an entirety (the
"Surviving Entity") shall be a corporation duly organized and validly
existing under the laws of the United States of America, any state
thereof or the District of Columbia and shall, in either case,
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and hereunder, and this
Indenture shall remain in full force and effect;
(ii) immediately before and immediately after giving
effect to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or a
Subsidiary which becomes the obligation of the Company or any of its
Subsidiaries in connection with or as a result of such transaction as
having been incurred at
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the time of such transaction), no Default or Event of Default shall
have occurred and be continuing;
(iii) immediately after giving effect to such transaction
on a pro forma basis, the Consolidated Net Worth of the Company (or the
Surviving Entity if the Company is not the continuing obligor
hereunder) is at least equal to the Consolidated Net Worth of the
Company immediately before such transaction;
(iv) immediately before and immediately after giving
effect to such transaction on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company or a
Subsidiary which becomes the obligation of the Company or any of its
Subsidiaries in connection with or as a result of such transaction as
having been incurred at the time of such transaction), the Company (or
the Surviving Entity if the Company is not the continuing obligor
hereunder) could incur $1.00 of additional Indebtedness under Section
5.9 (other than Permitted Indebtedness);
(v) each Guarantor, if any, unless it is the other
party to the transactions described above, shall have by supplemental
indenture confirmed that its Guarantee of the Notes shall apply to such
person's obligations hereunder and the Notes; and
(vi) the Company or the Surviving Entity shall have
delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that such consolidation, merger, transfer, lease
or disposition and such supplemental indenture comply with the terms of
this Indenture.
(b) Each Guarantor, if any (other than any Subsidiary whose
Guarantee is being released pursuant to Section 5.16 as a result of such
transaction), shall not, and the Company will not permit a Guarantor to, in a
single transaction or through a series of related transactions, merge or
consolidate with or into any other corporation or other entity (other than the
Company or any Guarantor), or sell, assign, convey, transfer, lease or otherwise
dispose of its properties and assets on a consolidated basis substantially as an
entirety to any entity unless
(i) either (A) such Guarantor shall be the continuing
corporation or partnership or (B) the entity (if other than such
Guarantor) formed by such consolidation or into which such Guarantor is
merged or the entity which acquires by sale, assignment, conveyance,
transfer, lease or disposition the properties and assets of such
Guarantor substantially as an entirety shall be a corporation or
partnership organized and validly existing under the laws of the United
States, any state thereof or the District of Columbia and shall
expressly assume by an indenture supplemental to this Indenture,
executed and delivered to
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the Trustee, in form satisfactory to the Trustee, all the
obligations of such Guarantor under the Notes and hereunder;
(ii) immediately before and immediately thereafter (and
treating any Indebtedness not previously an obligation of the Company
or a Subsidiary which becomes the obligation of the Company or any of
its Subsidiaries in connection with or as a result of such transaction
as having been incurred at the time of such transaction), no Default or
Event of Default shall have occurred and be continuing; and
(iii) such Guarantor shall have delivered to the Trustee
an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger, sale, assignment, conveyance, transfer,
lease or disposition and such supplemental indenture comply with this
Indenture, and thereafter all obligations of the predecessor shall
terminate.
(c) Notwithstanding the foregoing, any Wholly Owned Subsidiary
may (i) merge or consolidate with or into any other Wholly Owned Subsidiary or
the Company or (ii) sell, assign, convey, transfer, lease, or otherwise dispose
of all or substantially all of its properties and assets to any other Wholly
Owned Subsidiary or the Company; provided, that (x) any Person surviving any
such merger or consolidation with a Guarantor or which acquires substantially
all of the assets of any Guarantor (the "Acquisition Survivor") shall expressly
assume by a supplemental indenture or guarantee executed and delivered to the
Trustee, in form satisfactory to the Trustee, any obligations of such Subsidiary
to guarantee the obligations owing hereunder; and (y) the Acquisition Survivor
shall have delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that the transaction and the supplemental guarantee or
indenture executed in connection therewith comply with this provision and that
all conditions precedent provided for herein relating to such transaction have
been complied with.
SECTION 12.2 Successor Substituted. Upon any consolidation or
merger, or any sale, assignment, conveyance, transfer, lease or disposition of
all or substantially all of the properties and assets of the Company or any
Guarantor in accordance with the immediately preceding paragraphs, the successor
Person formed by such consolidation or into which the Company or such Guarantor,
as the case may be, is merged or the successor Person to which such sale,
assignment, conveyance, transfer, lease or disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
or such Guarantor, as the case may be, under this Indenture and/or the
Guarantees, as the case may be, with the same effect as if such successor had
been named as the Company or such Guarantor, as the case may be, herein and/or
in the Guarantees, as the case may be. When a successor assumes all the
obligations of its predecessor under this Indenture, the Notes or
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a Guarantee, as the case may be, the predecessor shall be released from those
obligations; provided that in the case of a transfer by lease, the predecessor
shall not be released from the payment of principal and interest on the Notes or
a Guarantee, as the case may be.
SECTION 12.3 Opinion of Counsel. The Trustee, subject to the
provisions of Sections 8.1 and 8.2, may receive and rely on an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance, and any such assumption, complies with the provisions of this
Article XII.
ARTICLE XIII
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 13.1 Legal Defeasance and Covenant Defeasance of the
Notes.
(a) The Company may, at its option by Board
resolution, at any time, with respect to the Notes, elect to have either
paragraph (b) or paragraph (c) below be applied to the outstanding Notes upon
compliance with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (b), the Company and any Guarantor
shall be deemed to have been released and discharged from its obligations with
respect to the outstanding Notes on the date the conditions set forth below are
satisfied (hereinafter, "legal defeasance"). For this purpose, such legal
defeasance means that the Company shall be deemed to have paid and discharged
the entire indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of the Sections
of and matters under this Indenture referred to in (i) and (ii) below, and to
have satisfied all its other obligations under such Notes and this Indenture
insofar as such Notes are concerned, except for the following which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
paragraph (d) below and as more fully set forth in such paragraph, payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due and (ii) obligations listed in Section 13.3.
(c) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (c), the Company and any Guarantor
shall be released and discharged from its obligations under any covenant
contained in Article XII and in Sections 4.5 and 5.3 through 5.22 with respect
to the outstanding Notes on and after the date the conditions set forth below
are
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satisfied (hereinafter, "covenant defeasance"), and the Notes shall thereafter
be deemed to be not "outstanding" for the purpose of any direction, waiver,
consent or declaration or act of Holders (and the consequences of any thereof)
in connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the outstanding Notes, the Company (each Guarantor,
if any) may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 7.1(c), nor shall any event
referred to in Section 7.1(d) or 7.1(e) thereafter constitute a Default or an
Event of Default thereunder but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby.
(d) The following shall be the conditions to
application of either paragraph (b) or paragraph (c) above to the
outstanding Notes:
(i) The Company shall have irrevocably deposited in
trust with the Trustee, pursuant to an irrevocable trust and security
agreement in form and substance satisfactory to the Trustee, cash or
U.S. Government Obligations maturing as to principal and interest at
such times, or a combination thereof, in such amounts as are
sufficient, without consideration of the reinvestment of such interest
and after payment of all Federal, state and local taxes or other
charges or assessments in respect thereof payable by the Trustee, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof (in form and
substance reasonably satisfactory to the Trustee) delivered to the
Trustee, to pay the principal of, premium, if any, and interest on the
outstanding Notes on the dates on which any such payments are due and
payable in accordance with the terms of this Indenture and of the
Notes;
(ii) (A) No Event of Default shall have occurred or be
continuing on the date of such deposit, and (B) no Default or Event of
Default under Section 7.1(f) or 7.1(g) shall occur on or before the
123rd day after the date of such deposit;
(iii) Such deposit will not result in a Default under
this Indenture or a breach or violation of, or constitute a default
under, any other instrument or agreement to which the Company or any
Guarantor is a party or by which it or its property is bound;
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(iv) In the case of a legal defeasance under paragraph (b)
above, the Company has delivered to the Trustee an Opinion of Counsel
stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (B) since the
date of this Indenture there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amounts and in the same manner and at
the same times as would have been the case if such deposit, defeasance
and discharge had not occurred; and, in the case of a covenant
defeasance under paragraph (c) above, the Company shall deliver to the
Trustee an Officers' Certificate and an Opinion of Counsel, in form and
substance reasonably satisfactory to the Trustee, to the effect that
Holders of the Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred;
(iv) The Holders shall have a perfected security
interest under applicable law in the cash or U.S. Government
Obligations deposited pursuant to Section 13(d)(i) above;
(v) The Company shall have delivered to the Trustee an
Opinion of Counsel, in form and substance reasonably satisfactory to
the Trustee, to the effect that, after the passage of 123 days
following the deposit, the trust funds will not be subject to any
applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally;
(vi) such defeasance shall not cause the Trustee to
have a conflicting interest with respect to any securities
of the Company or any Guarantor; and
(vii) The Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent specified herein relating to the defeasance
contemplated by this Section 13.1 have been complied with; provided,
however, that no deposit under clause (d)(i) above shall be effective
to terminate the obligations of the Company or any Subsidiary Guarantor
under the Notes or this Indenture prior to 123 days following any such
deposit.
In connection with the issuance of debt securities the
proceeds of which will be used to redeem all the Notes then outstanding, none of
Sections 5.9, 5.10 and 5.14 shall be
<PAGE>
96
violated by the issuance of such debt securities to the extent the Company
complies with all of the provisions of this Section 13.1(d) other than Section
13.1(d)(ii)(B).
SECTION 13.2 Termination of Obligations upon Cancellation of
the Notes. In addition to the Company's rights under Section 13.1, the Company
may terminate all of its obligations under this Indenture (subject to Section
13.3) when:
(a) (i) all Notes theretofore authenticated and delivered
(other than Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.7) have been
delivered to the Trustee for cancellation;
(ii) the Company has paid or caused to be paid all
other sums payable hereunder and under the Notes by the
Company; and
(iii) the Company has delivered to the Trustee an
Officers' Certificate, stating that all conditions precedent specified
herein relating to the satisfaction and discharge of this Indenture
have been complied with; or
(b) (i) the Notes not previously delivered to the Trustee for
cancellation will have become due and payable or are by their terms to
become due and payable within one year or are to be called for
redemption under arrangements satisfactory to the Trustee upon delivery
of notice; (ii) the Company will have irrevocably deposited with the
Trustee, as trust funds, cash, in an amount sufficient to pay principal
of and interest on the outstanding Notes, to maturity or redemption, as
the case may be; (iii) such deposit will not result in a breach or
violation of, or constitute a default under, any agreement or
instrument pursuant to which the Company or any Subsidiary is a party
or by which it or its property is bound; and (iv) and the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions related to such defeasance
have been complied with.
SECTION 13.3 Survival of Certain Obligations. Notwithstanding
the satisfaction and discharge of this Indenture and of the Notes referred to in
Section 13.1 or 13.2, the respective obligations of the Company, and the Trustee
under Sections 2.4, 2.5, 2.7, 2.8, 2.9, 2.10, 2.11, 5.2, 6.1, 7.8, 7.14, 8.6,
8.10, 13.5, 13.6 and 13.7 and shall survive until the Notes are no longer
outstanding, and thereafter the obligations of the Company and the Trustee under
Sections 7.14, 8.6, 13.5, 13.6 and 13.7 shall survive. Nothing contained in this
Article XIII shall abrogate any of the obligations or duties of the Trustee
under this Indenture.
<PAGE>
97
SECTION 13.4 Acknowledgment of Discharge by Trustee.
Subject to Section 13.7, after (i) the conditions of
Section 13.1 or 13.2 have been satisfied, (ii) the Company has paid or caused to
be paid all other sums payable hereunder by the Company and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that all conditions precedent referred to in clause (i) above
relating to the satisfaction and discharge of this Indenture have been complied
with, the Trustee upon written request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture except for those
surviving obligations specified in Section 13.3.
SECTION 13.5 Application of Trust Assets. The Trustee shall
hold any cash or U.S. Government Obligations deposited with it in the
irrevocable trust established pursuant to Section 13.1 or 13.2, as the case may
be. The Trustee shall apply the deposited cash or the U.S. Government
Obligations, together with earnings thereon, through the Paying Agent, in
accordance with this Indenture and the terms of the irrevocable trust agreement
established pursuant to Section 13.1 or 13.2, as the case may be, to the payment
of principal of, premium, if any, and interest on the Notes. The cash or U.S.
Government Obligations so held in trust and deposited with the Trustee in
compliance with Section 13.1 or 13.2, as the case may be, shall not be part of
the trust estate under this Indenture, but shall constitute a separate trust
fund for the benefit of all Holders entitled thereto.
SECTION 13.6 Repayment to the Company; Unclaimed Money. Upon
termination of the trust established pursuant to Section 13.1 or 13.2, as the
case may be, the Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess cash or U.S. Government Obligations held by them.
Additionally, if money for the payment of principal, premium, if any, or
interest remains unclaimed for six years, the Trustee and the Paying Agents will
pay the money back to the Company forthwith. After that, all liability of the
Trustee and such Paying Agents with respect to such money shall cease.
The Trustee and the Paying Agent shall pay to the Company upon
request, and, if applicable, in accordance with the irrevocable trust
established pursuant to Section 13.1 or 13.2, any cash or U.S. Government
Obligations held by them for the payment of principal of, premium, if any, or
interest on the Notes that remain unclaimed for six years after the date on
which such payment shall have become due. After payment to the Company, Holders
entitled to such payment must look to the Company for such payment as general
creditors unless an applicable abandoned property law designates another person.
SECTION 13.7 Reinstatement. If the Trustee or Paying Agent is
unable to apply any cash or U.S. Government Obligations in accordance with
Section 13.1 or 13.2 by reason of any legal proceeding or by reason of any order
or judgment of any court or
<PAGE>
98
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
13.1 or 13.2 until such time as the Trustee or Paying Agent is permitted to
apply all such cash or U.S. Government Obligations in accordance with Section
13.1 or 13.2, as the case may be; provided that if the Company makes any payment
of principal of, premium, if any, or interest on any Notes following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or the Paying Agent.
ARTICLE XIV
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 14.1 Incorporators, stockholders, officers and
directors of Company or any Guarantor (other than the Company) exempt from
individual liability. No recourse under or upon any obligation, covenant or
agreement of this Indenture or any indenture supplemental hereto or of any Note,
or for any claim based thereon or otherwise in respect thereof, shall be had
against any incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or any Guarantor (other than the Company) or
of any successor corporation, either directly or through the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, the incorporators, stockholders,
officers or directors, as such, of the Company or any Guarantor (other than the
Company) or of any successor corporation, or any of them, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or in any of
the Notes or implied therefrom; and that any and all such personal liability of
every name and nature, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, stockholder, officer or director, as such, because of the creation
of the indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Notes or
implied therefrom are hereby expressly waived and released as a condition of,
and as a consideration for, the execution of this Indenture and the issue of
such Notes.
<PAGE>
99
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1 Successors and assigns of Company bound by
Indenture. All the covenants, stipulations, promises and agreements in this
Indenture contained by or on behalf of the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 15.2 Acts of board, committee or officer of successor
corporation valid. Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall at
the time be the lawful sole successor of the Company.
SECTION 15.3 Required notices or demand may be served by mail;
waiver. Any notice or demand which by any provisions of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Notes to or on the Company may be given or served by being deposited postage
prepaid (except as provided in Section 7.1(c)) by first class mail in a post
office letter box addressed (until another address is filed by the Company with
the Trustee for such purpose), as follows: Genesis Health Ventures, Inc., 148
West State Street, Kennett Square, Pennsylvania 19348, Attention: Michael R.
Walker, Chairman and Chief Executive Officer. Any notice, direction, request or
demand by any Noteholder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made at the office of
the Trustee, One Rodney Square, 920 King Street, 1st Floor, Wilmington, DE 19801
to the attention of Corporate Trust Administration (or at such other address as
the Trustee shall notify the Company pursuant to Section 5.2).
Any notice to be given by the Trustee to any Senior
Representative shall be sent to such address as such Senior Representative may
from time to time designate to the Trustee in writing.
Any notice or communication to a Noteholder shall be mailed by
first-class mail to his address shown in the Note Register. Failure to mail a
notice or communication to a Noteholder or any defect in it shall not affect its
sufficiency with respect to other Noteholders. If a notice or communication is
mailed in the manner so provided within the time prescribed, it is duly given,
whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the person entitled to receive such notice,
either before or after the event or action relating thereto, and such waiver
shall be equivalent of such notice. Waivers of notice by Noteholders shall be
filed with the
<PAGE>
100
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 15.4 Indenture and Notes to be construed in accordance
with the laws of the State of New York. This Indenture and each Note shall be
deemed to be a contract made under the laws of the State of New York, and for
all purposes shall be governed by and construed in accordance with the laws of
said State.
SECTION 15.5 Evidence of compliance with conditions
precedent. Upon any request or application by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such document is specifically required by any provision of this
Indenture relating to such particular application or demand, such statement of
compliance may be added to the more specifically required document, in which
case no additional certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the
Company may be based, insofar as it relates to legal matters, upon a certificate
or opinion of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of counsel may be based, insofar as it
relates to factual matters information with respect to which is in the
possession of the Company, upon the certificate, statement or opinion of or
representations by an officer or officers of the Company, unless such counsel
knows that the certificate, statement or opinion or
<PAGE>
101
representations with respect to the matters upon which his certificate,
statements or opinion may be based as aforesaid are erroneous, or in the
exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the
Company or of counsel may be based, insofar as it relates to accounting matters,
upon a certificate or opinion of or representations by an accountant or firm of
accountants unless such officer or counsel, as the case may be, knows that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous. Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm is
independent.
SECTION 15.6 Payments due on Saturdays, Sundays and holidays.
In any case where the date of payment of interest on or principal of the Notes
or the date fixed for redemption or purchase of any Note shall not be a Business
Day, then payment of interest or principal and premium, if any, need not be made
on such date, but may be made on the next succeeding business day with the same
force and effect as if made on the date of payment or the date fixed for
redemption or purchase, and no interest shall accrue for the period after such
original date of payment or such original date fixed for redemption or purchase.
SECTION 15.7 Provisions required by Trust Indenture Act to
control. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included in this Indenture by any of Sections 310 to 317,
inclusive, of the Trust Indenture Act, such required provision shall control.
SECTION 15.8 Provisions of this Indenture and Notes for the
sole benefit of the parties and the Noteholders. Nothing in this Indenture or in
the Notes, expressed or implied, shall give or be construed to give any person,
firm or corporation, other than the parties hereto and the holders of the Notes
and of the Senior Indebtedness, any legal or equitable right, remedy or claim
under or in respect of this Indenture, or under any covenant, condition or
provision herein contained, all its covenants, conditions and provisions being
for the sole benefit of the parties hereto and of the holders of the Notes and
of the Senior Indebtedness.
SECTION 15.9 Severability. In case any one or more of the
provisions contained in this Indenture or in the Notes shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Indenture or of such Notes, but this Indenture and such Notes shall be construed
as if
<PAGE>
102
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 15.10 Indenture may be executed in counterparts;
acceptance by Trustee. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument. First Union National Bank
hereby accepts the trusts in this Indenture declared and provided, upon the
terms and conditions hereinabove set forth.
SECTION 15.11 Article and Section headings. The Article and
Section references herein and in the Table of Contents are for convenience of
reference only and shall not affect the construction hereof.
<PAGE>
103
IN WITNESS WHEREOF, GENESIS HEALTH VENTURES, INC. has caused
this Indenture to be signed and acknowledged by its Chief Executive Officer, its
President or one of its vice presidents, and its corporate seal to be affixed
hereunto, and the same to be attested by its Secretary or an Assistant
Secretary; and First Union National Bank has caused this Indenture to be signed
and acknowledged by one of its authorized officers, has caused its corporate
seal to be affixed hereunto, and the same to be attested by one of its Assistant
Secretaries, all as of the day and year first written above.
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
--------------------------------
[Corporate Seal] Name: Michael R. Walker
-------------------------
Title: Chairman and CEO
------------------------
Attest: /s/ Ira C. Gubernick
---------------------------
FIRST UNION NATIONAL BANK
By: /s/ Thomas J. Brett
--------------------------------
Name:__________________________
Title:_________________________
Attest: /s/ Stephen J. Kaba
----------------------------
<PAGE>
EXHIBIT A-1
[FORM OF FACE OF NOTE]
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION, THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL,
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE
COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144") TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL,
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (2),
(3) or (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH
OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
A-1-1
<PAGE>
No._________________ $___________
GENESIS HEALTH VENTURES, INC.
9 1/4% Senior Subordinated Note due 2006
GENESIS HEALTH VENTURES, INC., a corporation duly organized
and validly existing under the laws of the Commonwealth of Pennsylvania (herein
called the "Company", which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received hereby promises
to pay to CEDE & CO., or registered assigns, the principal sum of
______________________________ United States dollars on October 1, 2006 at the
office or agency of the Company maintained for that purpose in New York, New
York, and to pay interest thereon at the rate per annum specified on this Note.
The Company will pay interest semi-annually on April 1 and October 1 of each
year (the "Interest Payment Date"). Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from October 7, 1996; provided that the first interest payment date shall
be April 1, 1997.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to the Person in whose name this Note is registered at the close of business on
the Record Date for such interest, which shall be March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Notes, to the extent lawful, shall forthwith cease to be payable to the
Holder on such Record Date, and may be paid to the Person in whose name this
Note is registered at the close of business on a special record date which date
shall be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest or the next succeeding Business Day if such date
is not a Business Day. The Company shall, by written notice to the Trustee, fix
each such special record date and payment date. At least 15 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to each Holder, with a copy to the Trustee, a
notice that states the subsequent special record date, the payment date and the
amount of defaulted interest, and interest payable on such defaulted interest,
if any, to be paid.
If this Note is a Global Note, all payments in respect of this
Note will be made to the Depository or its nominee in immediately available
funds in accordance with customary procedures established from time to time by
the Depository. If this Note is not a Global Note, payment of the principal of,
A-1-2
<PAGE>
premium, if any, and interest on this Note will be made at the office or agency
of the Company maintained for that purpose in the City of New York, or at such
other office or agency of the Company as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the address of the Person entitled thereto as such address shall appear on the
Note Register. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal of and premium if any, and interest on
the Notes to all Senior Indebtedness, and provisions giving the holder of this
Note the right to require the Company to repurchase this Note upon any Change in
Control, in each case on the terms and subject to the limitations referred to on
the reverse hereof and as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF SAID STATE.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been signed by
the Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, GENESIS HEALTH VENTURES, INC. has
caused this instrument to be duly executed under its corporate
seal.
Dated:
GENESIS HEALTH VENTURES, INC.
By:_________________________
Chief Executive Officer
[Corporate Seal]
Attest:
_______________________
Secretary
A-1-3
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Notes described in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By___________________________
Authorized Officer
A-1-4
<PAGE>
[FORM OF REVERSE OF NOTE]
GENESIS HEALTH VENTURES, INC.
9 1/4% SENIOR SUBORDINATED NOTE DUE 2006
This Note is one of a duly authorized issue of Notes of the
Company known as its 9 1/4% Senior Subordinated Notes due 2006 (the "Initial
Notes"), limited to the aggregate principal amount of $125,000,000, all issued
or to be issued under and pursuant to an indenture, dated as of October 7, 1996
(herein referred to as the "Indenture"), duly executed and delivered between the
Company and First Union National Bank, trustee (herein referred to as the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a description of the respective rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Notes. The Notes include the Initial Notes and
the Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture. The Initial Notes and the Exchange Notes are treated as a single
class of securities under the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness on the Notes and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture), whether outstanding on the date of the Indenture or thereafter,
and this Note is issued subject to such provisions. Each Holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose;
provided, however, that the indebtedness evidenced by this Note shall cease to
be so subordinate and subject in right of payment upon any defeasance of this
Note referred to in clause (a) or (b) of the next preceding paragraph.
The Notes are subject to redemption, as a whole or in part, at
any time on or after October 1, 2001 at the option of the Company upon not less
than 30 nor more than 60 days' prior notice by first-class mail, at the election
of the Company, in amounts of $1,000 or an integral multiple of $1,000 at the
following redemption prices (expressed as a percentage of the
A-1-5
<PAGE>
principal amount) if redeemed during the 12-month period beginning October 1 of
the years indicated below:
Redemption
Year Price
---- ----------
2001 ......................104.625%
2002 ......................103.083%
2003 ......................101.542%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date. If less than all of
the Notes are to be redeemed, such portion of the Notes shall be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Upon the occurrence of a Change in Control, each Holder may
require the Company to repurchase all or a portion of such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof, together
with accrued and unpaid interest to the date of repurchase.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from any Asset Sale, which is not used to
prepay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company, exceeds $10,000,000, the Company will be required to
apply such proceeds to the repayment of the Notes.
In the case of any redemption of Notes, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Notes of record at the close of business on the relevant
Record Date referred to on the face hereof. Notes (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the date of redemption.
In the event of redemption of this Note in part only, a new
Note or Notes for the unredeemed portion hereof shall be issued in the name of
the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal amount of all the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including
certain amendments permitted without the consent of any Holders) as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture at
any time by the
A-1-6
<PAGE>
Company and the Trustee with the consent of the Holders of a specified
percentage in aggregate principal amount of the Notes at the time outstanding.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of the Indenture and certain past Defaults under the
Indenture and their consequences. Any such consent or waiver by or on behalf of
the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company or
any Guarantor (in the event such Guarantor is obligated to make payments in
respect of the Notes), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note at the times, place, and rate,
and in the coin or currency, herein prescribed, subject to the subordination
provisions of the Indenture.
In addition to the rights provided to Noteholders under the
Indenture, Holders of Initial Notes shall have all the rights set forth in the
Registration Rights Agreement among the Company and the Initial Purchasers on
behalf of Holders of the Initial Notes. Pursuant to the Registration Rights
Agreement, the Company will be obligated to consummate an exchange offer
pursuant to which the holder of this Note shall have the right to exchange this
Note for the Company's 9 1/4% Senior Subordinated Notes due 2006 (the "Exchange
Notes"), which have been registered under the Securities Act, in like principal
amount and having terms identical in all material respects as the Initial Notes
(except for terms with respect to transfer restrictions or interest rate
increases). The Holders of the Initial Notes shall be entitled to receive
certain additional interest payments in the event such exchange offer is not
consummated and upon certain other conditions, all pursuant to and in accordance
with the terms of the Registration Rights Agreement. Additional interest which
may be payable pursuant to the Registration Rights Agreement shall be payable in
the same manner as set forth herein with respect to the stated interest. The
provision of the Registration Rights Agreement relating to such additional
interest are incorporated herein by reference and made a part hereof as if set
forth herein in full.
The Company will furnish to any Noteholder upon written
request and without charge a copy of the Indenture and/or the Registration
Rights Agreement. Requests may be made to:
A-1-7
<PAGE>
Genesis Health Venture, Inc.
148 West State Street
Kennett Square
Pennsylvania 19348
Attention: General Counsel
A Noteholder shall register the transfer or exchange of Notes
in accordance with the Indenture. No service charge shall be made for any
registration of transfer or exchange or redemption of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to and at the time of due presentment of this Note for
registration of transfer, the Company, the Trustee, the Paying Agent and any
agent of the Company or the Trustee may treat the Person in whose name this Note
is registered as the owner hereof for all purposes, whether or not this Note is
overdue, and neither the Company, the Trustee nor any agent shall be affected by
notice to the contrary.
All terms used in this Note which are defined in the Indenture
and not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
A-1-8
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to
- --------------------------------------------------------------
- --------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________ agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the date which is three years after the initial issuance of
the Notes, the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the
Noteholder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.12 of the Indenture shall have
been satisfied.
Dated:__________________ Signed: ________________________
(Sign exactly as name
appears on the other side
of this Note)
A-1-9
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A under
the Securities Act and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A
under the Securities Act or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A under the Securities Act.
Dated: _______________________ _____________________________
NOTICE: To be executed by
an executive officer
A-1-10
<PAGE>
EXHIBIT A-2
[FORM OF FACE OF EXCHANGE NOTE]
No.___________________ $_____________
GENESIS HEALTH VENTURES, INC.
9 1/4% Senior Subordinated Note due 2006
GENESIS HEALTH VENTURES, INC., a corporation duly organized
and validly existing under the laws of the Commonwealth of Pennsylvania (herein
called the "Company", which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received hereby promises
to pay to CEDE & CO., or registered assigns, the principal sum of
_________________________________ United States dollars on October 1, 2006 at
the office or agency of the Company maintained for that purpose in New York, New
York, and to pay interest thereon at the rate per annum specified on this Note.
The Company will pay interest semi-annually on April 1 and October 1 of each
year (the "Interest Payment Date"). Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from October 7, 1996; provided that the first interest payment date shall
be April 1, 1997.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to the Person in whose name this Note is registered at the close of business on
the Record Date for such interest, which shall be March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Notes, to the extent lawful, shall forthwith cease to be payable to the
Noteholder on such Record Date, and may be paid to the Person in whose name this
Note is registered at the close of business on a special record date which date
shall be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest or the next succeeding Business Day if such date
is not a Business Day. The Company shall, by written notice to the Trustee, fix
each such special record date and payment date. At least 15 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to each Noteholder, with a copy to the
Trustee, a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
A-2-1
<PAGE>
If this Note is a Global Note, all payments in respect of this
Note will be made to the Depository or its nominee in immediately available
funds in accordance with customary procedures established from time to time by
the Depository. If this Note is not a Global Note, payment of the principal of,
premium, if any, and interest on this Note will be made at the office or agency
of the Company maintained for that purpose in the City of New York, or at such
other office or agency of the Company as may be maintained for such purpose, in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the address of the Person entitled thereto as such address shall appear on the
Note Register. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, including, without limitation, provisions
subordinating the payment of principal of and premium if any, and interest on
the Notes to all Senior Indebtedness, and provisions giving the holder of this
Note the right to require the Company to repurchase this Note upon any Change in
Control, in each case on the terms and subject to the limitations referred to on
the reverse hereof and as more fully specified in the Indenture. Such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS
OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF SAID STATE.
This Note shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall
A-2-2
<PAGE>
have been signed by the Trustee under the Indenture referred to
on the reverse hereof.
IN WITNESS WHEREOF, GENESIS HEALTH VENTURES, INC. has
caused this instrument to be duly executed under its corporate
seal.
Dated:
GENESIS HEALTH VENTURES, INC.
By:__________________________
Chief Executive Officer
[Corporate Seal]
Attest:
_____________________
Secretary
A-2-3
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Notes described in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK,
as Trustee
By______________________________
Authorized Officer
A-2-4
<PAGE>
[FORM OF REVERSE OF EXCHANGE NOTE]
GENESIS HEALTH VENTURES, INC.
9 1/4% SENIOR SUBORDINATED NOTE DUE 2006
This Note is one of a duly authorized issue of Notes of the
Company known as its 9 1/4% Senior Subordinated Notes due 2006 (herein referred
to as the "Notes"), limited to the aggregate principal amount of $125,000,000,
all issued or to be issued under and pursuant to an indenture, dated as of
October 7, 1996 (herein referred to as the "Indenture"), duly executed and
delivered between the Company and First Union National Bank, trustee (herein
referred to as the "Trustee"), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the
respective rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the holders of the Notes.
The Indenture contains provisions for defeasance at any time
of (a) the entire Indebtedness on the Notes and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture), whether outstanding on the date of the Indenture or thereafter,
and this Note is issued subject to such provisions. Each Holder of this Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose;
provided, however, that the indebtedness evidenced by this Note shall cease to
be so subordinate and subject in right of payment upon any defeasance of this
Note referred to in clause (a) or (b) of the next preceding paragraph.
The Notes are subject to redemption, as a whole or in part, at
any time on or after October 1, 2001 at the option of the Company upon not less
than 30 nor more than 60 days' prior notice by first-class mail, at the election
of the Company, in amounts of $1,000 or an integral multiple of $1,000 at the
following redemption prices (expressed as a percentage of the
A-2-5
<PAGE>
principal amount) if redeemed during the 12-month period beginning October 1 of
the years indicated below:
Redemption
Year Price
---- ----------
2001 ......................104.625%
2002 ......................103.083%
2003 ......................101.542%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date. If less than all of
the Notes are to be redeemed, such portion of the Notes shall be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Upon the occurrence of a Change in Control, each Noteholder
may require the Company to repurchase all or a portion of such Holder's Notes at
a purchase price in cash equal to 101% of the principal amount thereof, together
with accrued and unpaid interest to the date of repurchase.
Under certain circumstances, in the event the Net Cash
Proceeds received by the Company from any Asset Sale, which is not used to
prepay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company, exceeds $10,000,000, the Company will be required to
apply such proceeds to the repayment of the Notes.
In the case of any redemption of Notes, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Notes of record at the close of business on the relevant
Record Date referred to on the face hereof. Notes (or portions thereof) for
whose redemption and payment provision is made in accordance with the Indenture
shall cease to bear interest from and after the date of redemption.
In the event of redemption of this Note in part only, a new
Note or Notes for the unredeemed portion hereof shall be issued in the name of
the Noteholder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal amount of all the Notes may be declared due and payable in the manner
and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including
certain amendments permitted without the consent of any Noteholders) as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Noteholders under the Indenture
at any time by
A-2-6
<PAGE>
the Company and the Trustee with the consent of the Noteholders of a specified
percentage in aggregate principal amount of the Notes at the time outstanding.
The Indenture also contains provisions permitting the Noteholders of specified
percentages in aggregate principal amount of the Notes at the time outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of the Indenture and certain past Defaults under the
Indenture and their consequences. Any such consent or waiver by or on behalf of
the Holder of this Note shall be conclusive and binding upon such Noteholder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company or
any Guarantor (in the event such Guarantor is obligated to make payments in
respect of the Notes), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Note at the times, place, and rate,
and in the coin or currency, herein prescribed, subject to the subordination
provisions of the Indenture.
A Noteholder shall register the transfer or exchange of Notes
in accordance with the Indenture. No service charge shall be made for any
registration of transfer or exchange or redemption of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to and at the time of due presentment of this Note for
registration of transfer, the Company, the Trustee, the Paying Agent and any
agent of the Company or the Trustee may treat the Person in whose name this Note
is registered as the owner hereof for all purposes, whether or not this Note is
overdue, and neither the Company, the Trustee nor any agent shall be affected by
notice to the contrary.
All terms used in this Note which are defined in the Indenture
and not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
A-2-7
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Note to
- ----------------------------------------------------------------
- ----------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- ----------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________________________
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Dated: ____________________ Signed: __________________________
(Sign exactly as name
appears on the other side
of this Note)
A-2-8
<PAGE>
EXHIBIT B
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS
NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A
TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR
ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT AND SUCH CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO., OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL, SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
B-1
<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
________________________, ______
Re: GENESIS HEALTH VENTURES, INC.
9 1/4% Senior Subordinated Notes
due October 1, 2006
Ladies and Gentlemen:
In connection with our proposed purchase of 9 1/4% Senior
Subordinated Notes due 2006 (the "Notes") of Genesis Health
Ventures, Inc. (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated October __, 1996, relating to the Notes and such
other information as we deem necessary in order to make our investment decision.
We acknowledge that we have read the matters under the caption "Notices to
Investors".
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Notes, we will do so only (A) to the Company,
or any of its subsidiaries, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (C) to
an institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee and the Note Registrar (each as defined in the Indenture relating to
the Notes), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes (the form of which letter
can be obtained from the Trustee and the Note Registrar), (D) outside the United
States in accordance with Rule
C-1
<PAGE>
904 of Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
4. We understand that, on any proposed resale of Notes, we
will be required to furnish to the Trustee, the Note Registrar and the Company,
such certification, legal opinions and other information as the Trustee, the
Note Registrar and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further understand
that the Notes purchased by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or their investment, as the case may be.
6. We are acquiring the Notes purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Company, and the Initial Purchasers are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
By:_____________________________
Name:
Title:
C-2
<PAGE>
Registration Rights Agreement
Dated as of October 7, 1996
among
Genesis Health Ventures, Inc.
and
Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
CS First Boston Corporation,
Donaldson Lufkin & Jenrette Securities Corporation,
Alex. Brown & Sons Incorporated,
BT Securities Corporation,
and
Montgomery Securities
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of October 7, 1996, by and among Genesis Health Ventures,
Inc., a Pennsylvania corporation (the "Company"), and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), CS First
Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, Alex.
Brown & Sons Incorporated, BT Securities Corporation and Montgomery Securities
(collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated October 1, 1996 among the Company and the Initial Purchasers (the
"Purchase Agreement"), which provides for the sale by the Company to the Initial
Purchasers of $125,000,000 aggregate principal amount of the Company's 9 1/4%
Senior Subordinated Notes due 2006 (the "Notes"). In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide to the Initial Purchasers and their direct and indirect transferees and
assigns the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated thereunder.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble of
this Agreement and also includes the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Company, provided, however, that any
such depositary must have an address in the Borough of Manhattan, in
the City of New York.
"Exchange Notes" shall mean 9 1/4% Senior Subordinated Notes
due 2006 issued by the Company under the Indenture containing terms
identical to the Notes (except that (i) interest thereon shall accrue
from the last date on which interest was paid on the Notes or, if no
such interest has
<PAGE>
2
been paid, from October 7, 1996, (ii) the transfer restrictions thereon
shall be eliminated and (iii) certain provisions relating to an
increase in the stated rate of interest thereon shall be eliminated) to
be offered to Holders of Notes in exchange for Notes pursuant to the
Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Company
of Registrable Notes for Exchange Notes pursuant to Section 2(a)
hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Holders" shall mean the Initial Purchasers, for so long as
they own any Registrable Notes, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Notes under the Indenture.
"Indenture" shall mean the Indenture relating to the Notes
dated as of October 7, 1996 among the Company and First Union National
Bank, National Association, as trustee, as the same may be amended from
time to time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth
in the preamble of this Agreement.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided,
that whenever the consent or approval of Holders of a specified
percentage of Registrable Notes is required hereunder, Registrable
Notes held by the Company or any of its affiliates (as such term is
defined in Rule 405 under the 1933 Act) (other than the Initial
Purchasers or subsequent holders of Registrable Notes if such
subsequent holders are deemed to be such affiliates solely by reason of
their holding of such Registrable Notes) shall be disregarded in
determining whether such consent or approval was given by the Holders
of such required percentage or amount.
"Person" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
<PAGE>
3
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Notes covered by a
Shelf Registration Statement, and by all other amendments and
supplements to a prospectus, including post-effective amendments, and
in each case including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth
in the preamble of this Agreement.
"Registrable Notes" shall mean the Notes; provided, however,
that the Notes shall cease to be Registrable Notes when (i) a
Registration Statement with respect to such Notes shall have been
declared effective under the 1933 Act and such Notes shall have been
disposed of pursuant to such Registration Statement, (ii) such Notes
shall have been sold to the public pursuant to Rule 144 (or any similar
provision then in force, but not Rule 144A) under the 1933 Act, (iii)
such Notes shall have ceased to be outstanding or (iv) such Notes have
been exchanged for Exchange Notes upon consummation of the Exchange
Offer.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. ("NASD") registration
and filing fees, (ii) all fees and expenses incurred in connection with
compliance with state or other securities or blue sky laws and
compliance with the rules of the NASD (including reasonable fees and
disbursements of counsel for any underwriters or Holders in connection
with state or other securities or blue sky qualification of any of the
Exchange Notes or Registrable Notes), (iii) all expenses of any Persons
in preparing or assisting in preparing, word processing, printing and
distributing any Registration Statement, any Prospectus, any amendments
or supplements thereto, certificates representing the Exchange Notes
and other documents relating to the performance of and compliance with
this Agreement, (iv) all rating agency fees, (v) all fees and expenses
incurred in connection with the listing, if any, of any of the
Registrable Notes on any securities exchange or exchanges, (vi) all
fees and disbursements relating to the qualification of the Indenture
under applicable securities laws, (vii) the reasonable fees and
disbursements of counsel for the Company and, in the case of a Shelf
Registration Statement, the reasonable fees and disbursements
(including the expenses of preparing and distributing any underwriting
or securities sales agreement) of one counsel (in addition to
appropriate local counsel)
<PAGE>
4
for the Holders (which counsel shall be selected in writing by the
Majority Holders), (viii) the fees and expenses of the independent
public accountants of the Company, including the expenses of any
special audits or "cold comfort" letters required by or incident to
such performance and compliance, (ix) the fees and expenses of a
"qualified independent underwriter" if required by Schedule E of the By
Laws of the NASD in connection with the offering of the Registrable
Securities, (x) the fees and expenses of the trustee, including its
counsel, and any escrow agent or custodian, and (xi) any fees and
disbursements of the underwriters customarily required to be paid by
issuers or sellers of securities and the reasonable fees and expenses
of any special experts retained by the Company in connection with any
Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the Exchange Notes or Registrable
Notes pursuant to the provisions of this Agreement, and all amendments
and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the then Registrable
Notes on an appropriate form under Rule 415 under the 1933 Act, or any
similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"Trustee" shall mean the trustee with respect to the Notes
under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange Offer
Registration. To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best efforts
to (A) file within 30 days after the date hereof an Exchange Offer Registration
Statement covering the offer by the Company to the Holders to
<PAGE>
5
exchange all of the Registrable Notes for Exchange Notes, (B) cause such
Exchange Offer Registration Statement to be declared effective by the SEC within
90 days after the date hereof, (C) cause such Exchange Offer Registration
Statement to remain effective until the closing of the Exchange Offer and (D)
consummate the Exchange Offer within 120 days following the date hereof. The
Exchange Notes will be issued under the Indenture. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder (other than Participating Broker-Dealers (as defined in Section 3(f))
eligible and electing to exchange Registrable Notes for Exchange Notes (assuming
that such Holder is not an affiliate of the Company within the meaning of Rule
405 under the 1933 Act, acquires the Exchange Notes in the ordinary course of
such Holder's business and has no arrangements or understandings with any person
to participate in the Exchange Offer for the purpose of distributing the
Exchange Notes) to trade such Exchange Notes from and after their receipt
without any limitations or restrictions under the 1933 Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30
business days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) use the services of the Depositary for the
Exchange Offer with respect to Notes evidenced by global
certificates;
(iv) permit Holders to withdraw tendered Registrable
Notes at any time prior to the close of business, New York City time,
on the last business day on which the Exchange Offer shall remain open,
by sending to the institution specified in the notice, a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Notes delivered for
exchange, and a statement that such Holder is withdrawing his election
to have such Notes exchanged; and
(v) otherwise comply in all respects with all
applicable laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
the Company shall:
<PAGE>
6
(i) accept for exchange Registrable Notes duly tendered
and not validly withdrawn pursuant to the Exchange Offer in accordance
with the terms of the Exchange Offer Registration Statement and the
letter of transmittal which is an exhibit thereto;
(ii deliver, or cause to be delivered, to the Trustee
for cancellation all Registrable Notes so accepted for
exchange by the Company; and
(iii) cause the Trustee promptly to authenticate and
deliver Exchange Notes to each Holder of Registrable Notes equal in
amount to the Registrable Notes of such Holder so accepted for
exchange.
Interest on each Exchange Note will accrue from the last date
on which interest was paid on the Registrable Notes surrendered in exchange
therefor or, if no interest has been paid on the Registrable Notes, from October
7, 1996. The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer, or the making of any exchange by a Holder, does not
violate applicable law or any applicable interpretation of the Staff of the SEC.
Each Holder of Registrable Notes (other than Participating Broker-Dealers) who
wishes to exchange such Registrable Notes for Exchange Notes in the Exchange
Offer shall have represented that (i) it is not an affiliate (as defined in Rule
405 under the 1933 Act) of the Company, (ii) it is not a broker-dealer tendering
Notes acquired directly from the Company or if it is such a broker-dealer, it
will comply with the registration and prospectus delivery requirements of the
1933 Act to the extent applicable, (iii) any Exchange Notes to be received by it
were acquired in the ordinary course of business, (iv) at the time of the
commencement of the Exchange Offer it has no arrangement with any person to
participate in the distribution (within the meaning of the 1933 Act) of the
Exchange Notes and (v) it is not acting on behalf of any person who could not
make the representations in clauses (i) through (iv). The Company shall inform
the Initial Purchasers of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Initial Purchasers shall have the right to
contact such Holders and otherwise facilitate the tender of Registrable Notes in
the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law
or applicable interpretations thereof by the Staff of the SEC, the Company is
not permitted to effect the Exchange Offer as contemplated by Section 2(a)
hereof or (ii) if for any other reason the Exchange Offer cannot be consummated
within 120 days following the date hereof, or (iii) upon the request of any
Holder (other than an Initial Purchaser) who is not eligible to participate in
the Exchange Offer (with respect to Registrable Notes held by any such Holders)
or (iv) upon the request of any Initial Purchaser (with respect to any
Registrable Notes which it acquired directly from the Company) following the
consummation of
<PAGE>
7
the Exchange Offer if any such Initial Purchaser shall hold Registrable Notes
which it acquired directly from the Company and if such Initial Purchaser is not
permitted, in the opinion of counsel to such Initial Purchaser, pursuant to
applicable law or applicable interpretation of the Staff of the SEC to
participate in the Exchange Offer, the Company shall, at its cost:
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the
Registrable Notes by the Holders from time to time in accordance with
the methods of distribution elected by the Majority Holders of such
Registrable Notes and set forth in such Shelf Registration Statement,
and use their best efforts to cause such Shelf Registration Statement
to be declared effective by the SEC by the 120th day after the date
hereof (or promptly in the event of a request by any Holder (other than
an Initial Purchaser) who is not eligible to participate in the
Exchange Offer as described in clause (iii) above or Initial Purchaser
pursuant to clause (iv) above). In the event that the Company is
required to file a Shelf Registration Statement upon the request of any
Holder (other than an Initial Purchaser) not eligible to participate in
the Exchange Offer pursuant to clause (iii) above or upon the request
of any Initial Purchaser pursuant to clause (iv) above, the Company
shall file and have declared effective by the SEC both an Exchange
Offer Registration Statement pursuant to Section 2(a) with respect to
all Registrable Notes and a Shelf Registration Statement (which may be
a combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable Notes held
by such Holder or such Initial Purchaser after completion of the
Exchange Offer;
(B) use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of three
years from the Issuance Date (or one year from the date the Shelf
Registration Statement is declared effective if such Shelf Registration
Statement is filed upon the request of any Initial Purchaser pursuant
to clause (iv) above) or such shorter period which will terminate when
all of the Registrable Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement
or all of the Registrable Notes become eligible for resale pursuant to
Rule 144 under the 1933 Act without volume restrictions; and
(C) notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming a part thereof and any
supplement thereto complies in all material respects with the 1933 Act
and the rules and regulations thereunder, (ii) any Shelf Registration
<PAGE>
8
Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any supplement to
such Prospectus (as amended or supplemented from time to time), does
not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements, in light of
the circumstances under which they were made, not misleading.
The Company further agrees, if necessary, to supplement or
amend the Shelf Registration Statement if reasonably requested by the Majority
Holders with respect to information relating to the Holders and otherwise as
required by Section 3(b) below, to use all reasonable efforts to cause any such
amendment to become effective and such Shelf Registration to become usable as
soon as practicable thereafter and to furnish to the Holders of Registrable
Notes copies of any such supplement or amendment promptly after its being used
or filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Section 2(a) and 2(b). Each
Holder shall pay all expenses of its counsel other than as set forth in the
preceding sentence, underwriting discounts and commissions (prior to the
reduction thereof with respect to selling concessions, if any) and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Notes pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The Company will be
deemed not to have used its best efforts to cause a Registration Statement to
become, or to remain, effective during the requisite period if the Company
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable Notes
covered thereby not being able to exchange or offer and sell such Registrable
Notes during that period unless (A) such action is required by applicable law or
(B) such action is taken by the Company in good faith and for valid business
reasons (but not including avoidance of the Company's obligations hereunder),
including a material corporate transaction, so long as the Company promptly
complies with the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or
<PAGE>
9
other order or requirement of the SEC or any other governmental agency or court,
such Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that either (i)
the Exchange Offer Registration Statement is not filed with the Commission on or
prior to the 30th day following the date hereof, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to the 90th day
following the date hereof or (iii) the Exchange Offer is not consummated on or
prior to the 120th day following the date hereof or a Shelf Registration
Statement with respect to the Registrable Notes is not declared effective on or
prior to the 120th day following the date hereof (or, if such Shelf Registration
Statement is filed pursuant to Section 2(b)(iii), the 60th day following the
request therefor if later than such 120th day), the interest rate borne by the
Registrable Notes shall be increased by one-quarter of one percent per annum
following such 30-day period in the case of clause (i) above, following such
90-day period in the case of clause (ii) above or following such 120-day period
in the case of clause (iii) above, which rate will be increased by an additional
one-quarter of one percent per annum for each 90-day period that any such
additional interest continues to accrue, provided that the aggregate increase in
such interest rate will in no event exceed one-percent. Upon (x) the filing of
the Exchange Offer Registration Statement after the 30-day period described in
clause (i) above, (y) the effectiveness of the Exchange Offer Registration
Statement after the 90-day period described in clause (ii) above or (z)
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, after the 120-day period described in clause
(iii) above, the interest rate borne by the Registrable Notes from the date of
such filing, the date of such effectiveness or the date before the date of such
consummation, as the case may be, will be reduced to the original interest rate
if the Company is otherwise in compliance with this paragraph. If the Company
issues a notice that the Shelf Registration Statement is unusable pending the
announcement of a material corporate transaction or otherwise pursuant to
Section 3(k) hereof, or such a notice is required under applicable securities
laws to be issued by the Company, and the aggregate number of days in any
consecutive twelve-month period for which all such notices are issued or
required to be issued exceeds 30 days in the aggregate, then the interest rate
borne by the Registrable Notes will be increased by one-quarter of one percent
per annum following the date that such Shelf Registration Statement ceases to be
usable beyond the 30-day period permitted above, which rate shall be increased
by an additional one-quarter of one percent per annum for each 90-day period
that such additional interest continues to accrue; provided that the aggregate
increase in such annual interest rate may in no event exceed one percent. Upon
the Company declaring that the Shelf Registration Statement is usable after the
<PAGE>
10
interest rate has been increased pursuant to the preceding sentence, the
interest rate borne by the Registrable Notes will be reduced to the original
interest rate if the Company is otherwise in compliance with this paragraph;
provided, however, that if after any such reduction in interest rate the Shelf
Registration Statement again ceases to be usable beyond the period permitted
above, the interest rate will again be increased and thereafter reduced pursuant
to the foregoing provisions.
(f) Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its respective obligations under
Sections 2(a) and 2(b) hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the Company's
obligations under Sections 2(a) and 2(b) hereof.
3. Registration Procedures. In connection with the obligations
of the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement,
within the time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Company,
(ii) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Notes by the selling Holders thereof and (iii)
shall comply as to form in all material respects with the requirements
of the applicable form and include or incorporate by reference all
financial statements required by the SEC to be filed therewith, and use
its best efforts to cause such Registration Statement to become
effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to (i) the Exchange Offer Registration
Statement as may be necessary under applicable law to keep such
Exchange Offer Registration Statement effective for the period required
to comply with Section 2(a) and 3(f) hereof and (ii) the Shelf
Registration Statement as may be necessary under applicable law to keep
such Shelf Registration Statement effective for the period required
pursuant to Section 2(b) hereof; cause each Prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act; and
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by each Registration Statement
during the
<PAGE>
11
applicable period in accordance with the intended method or methods of
distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Notes, at least ten days prior to filing, that a
Shelf Registration Statement with respect to the Registrable Notes is
being filed and advising such Holders that the distribution of
Registrable Notes will be made in accordance with the method elected by
the Majority Holders; and (ii) furnish to each Holder of Registrable
Notes, to counsel for the Initial Purchasers, to counsel for the
Holders and to each underwriter of an underwritten offering of
Registrable Notes, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or
underwriter may reasonably request, including financial statements and
schedules and, if the Holder so requests, all exhibits (including those
incorporated by reference) in order to facilitate the public sale or
other disposition of the Registrable Notes; and (iii) subject to the
last paragraph of Section 3, hereby consent to the use of the
Prospectus, including each preliminary Prospectus, or any amendment or
supplement thereto by each of the selling Holders of Registrable Notes
in connection with the offering and sale of the Registrable Notes
covered by the Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue sky"
laws of such jurisdictions as any Holder of Registrable Notes covered
by a Registration Statement and each underwriter of an underwritten
offering of Registrable Notes shall reasonably request by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with the Holders in connection with any filings required to
be made with the NASD, keep each such registration or qualification
effective during the period such Registration Statement is required to
be effective and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in each such jurisdiction of such Registrable Notes
owned by such Holder; provided, however, that the Company shall not be
required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required
to qualify but for this Section 3(d) or (ii) take any action which
would subject it to general service of process or taxation in any such
jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for such Holders promptly and, if
requested by such Holder or counsel,
<PAGE>
12
confirm such advice in writing promptly (i) when a Registration
Statement has become effective and when any post-effective amendments
and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for post-effective amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Company contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to such offering cease to be true and
correct in all material respects, (v) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Registrable Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the happening
of any event or the discovery of any facts during the period a Shelf
Registration Statement is effective which makes any statement made in
such Shelf Registration Statement or the related Prospectus untrue in
any material respect or which requires the making of any changes in
such Shelf Registration Statement or Prospectus in order to make the
statements therein not misleading and (vii) of any determination by the
Company that a post-effective amendment to a Registration Statement
would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Notes for Exchange Notes for the resale of such Exchange
Notes, (ii) furnish to each broker-dealer who desires to participate in
the Exchange Offer, without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement, including any
preliminary prospectus, and any amendment or supplement thereto, as
such broker-dealer may reasonably request, (iii) include in the
Exchange Offer Registration Statement a statement that any
broker-dealer who holds Registrable Notes acquired for its own account
as a result of market-making activities or other trading activities (a
"Participating Broker-Dealer"), and who receives Exchange Notes for
Registrable Notes pursuant to the Exchange Offer, may be a statutory
underwriter and must deliver a prospectus meeting the requirements of
the 1933 Act in connection with any resale of such Exchange Notes, (iv)
subject to the last paragraph of Section 3, hereby consent to the use
of the Prospectus forming part of
<PAGE>
13
the Exchange Offer Registration Statement or any amendment or
supplement thereto, by any broker-dealer in connection with the sale or
transfer of the Exchange Notes covered by the Prospectus or any
amendment or supplement thereto, and (v) include in the transmittal
letter or similar documentation to be executed by an exchange offeree
in order to participate in the Exchange Offer (x) the following
provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes. If the
undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Registrable Notes,
it represents that the Registrable Notes to be exchanged for
Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Notes pursuant to the Exchange Offer; however,
by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act"; and
(y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Securities,
the broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the 1933 Act; and
(B) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, the Company shall use its best
efforts to cause to be delivered at the request of an entity
representing the Participating Broker-Dealers (which entity shall be
one of the Initial Purchasers, unless it elects not to act as such
representative) only one, if any, "cold comfort" letter with respect to
the Prospectus in the form existing on the last date for which
exchanges are accepted pursuant to the Exchange Offer and with respect
to each subsequent amendment or supplement, if any, effected during the
period specified in clause (C) below; and
(C) to the extent any Participating Broker-Dealer
participates in the Exchange Offer, the Company shall use its best
efforts to maintain the effectiveness of the Exchange Offer
Registration Statement for a period of 120 days following the closing
of the Exchange Offer; and
<PAGE>
14
(D) the Company shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer Registration
Statement as would otherwise be contemplated by Section 3(b), or take
any other action as a result of this Section 3(f), for a period
exceeding 120 days after the last date for which exchanges are accepted
pursuant to the Exchange Offer (as such period may be extended by the
Company) and Participating Broker-Dealers shall not be authorized by
the Company to, and shall not, deliver such Prospectus after such
period in connection with resales contemplated by this Section 3.
(g) (A) in the case of an Exchange Offer, furnish counsel for
the Initial Purchasers and (B) in the case of a Shelf Registration,
furnish counsel for the Holders of Registrable Notes, copies of any
request by the SEC or any state securities authority for amendments or
supplements to a Registration Statement and Prospectus or for
additional information;
(h) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement as
soon as practicable and provide immediate notice to each Holder of the
withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, without charge, at least one conformed
copy of each Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold and not bearing any restrictive legends; and cause such
Registrable Notes to be in such denominations (consistent with the
provisions of the Indenture) and registered in such names as the
selling Holders or the underwriters, if any, may reasonably request at
least one business day prior to the closing of any sale of Registrable
Notes;
(k) in the case of a Shelf Registration, upon the occurrence
of any event or the discovery of any facts, each as contemplated by
Section 3(e)(vi) hereof, use its best efforts to prepare a supplement
or post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes, such Prospectus will not contain
at the time of such delivery any untrue statement of a material fact or
omit to state a material
<PAGE>
15
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
agrees to notify each Holder to suspend use of the Prospectus as
promptly as practicable after the occurrence of such an event, and each
Holder hereby agrees to suspend use of the Prospectus until the Company
has amended or supplemented the Prospectus to correct such misstatement
or omission. At such time as such public disclosure is otherwise made
or the Company determines that such disclosure is not necessary, in
each case to correct any misstatement of a material fact or to include
any omitted material fact, the Company agrees promptly to notify each
Holder of such determination and to furnish each Holder such numbers of
copies of the Prospectus, as amended or supplemented, as such Holder
may reasonably request;
(l) obtain a CUSIP number for all Exchange Notes, or
Registrable Notes, as the case may be, not later than the effective
date of a Registration Statement, and provide the Trustee with printed
certificates for the Exchange Notes or the Registrable Notes, as the
case may be, in a form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "1939 Act"), in connection with
the registration of the Exchange Notes, or Registrable Notes, as the
case may be, (ii) cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the 1939 Act and (iii)
execute, and use its best efforts to cause the Trustee to execute, all
documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the
Majority Holders) in order to expedite or facilitate the disposition of
such Registrable Notes and in such connection whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(i) make such representations and warranties
to the Holders of such Registrable Notes and the underwriters,
if any, in form, substance and scope as are customarily made
by issuers to underwriters in similar underwritten offerings
as may be reasonably requested by them;
<PAGE>
16
(ii) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the holders of a majority
in principal amount of the Registrable Notes being sold)
addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested
in sales of securities or underwritten offerings;
(iii) obtain "cold comfort" letters and updates
thereof from the Company's independent certified public
accountants addressed to the underwriters, if any, and will
use best efforts to have such letters addressed to the selling
Holders of Registrable Notes, such letters to be in customary
form and covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection with
similar underwritten offerings;
(iv) enter into a securities sales agreement
with the Holders and an agent of the Holders providing for,
among other things, the appointment of such agent for the
selling Holders for the purpose of soliciting purchases of
Registrable Notes, which agreement shall be in form, substance
and scope customary for similar offerings;
(v) if an underwriting agreement is entered
into, cause the same to set forth indemnification provisions
and procedures substantially equivalent to the indemnification
provisions and procedures set forth in Section 5 hereof with
respect to the underwriters and all other parties to be
indemnified pursuant to said Section; and
(vi) deliver such documents and certificates as
may be reasonably requested and as are customarily
delivered in similar offerings.
The above shall be done at (i) the effectiveness of such Shelf
Registration Statement (and, if appropriate, each post-effective
amendment thereto) and (ii) each closing under any underwriting or
similar agreement as and to the extent required thereunder. In the case
of any underwritten offering, the Company shall provide written notice
to the Holders of all Registrable Notes of such underwritten offering
at least 30 days prior to the filing of a prospectus supplement for
such underwritten offering. Such notice shall (x) offer each such
Holder the right to participate in such underwritten offering, (y)
specify a date, which shall be no earlier than 10 days following the
date of such notice, by which such Holder must inform the Company of
its intent to participate in such underwritten
<PAGE>
17
offering and (z) include the instructions such Holder must follow in
order to participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Notes
and any underwriters participating in any disposition pursuant to a
Shelf Registration Statement and any counsel or accountant retained by
such Holders or underwriters, at reasonable times and in a reasonable
manner, all financial and other records, pertinent corporate documents
and properties of the Company reasonably requested by any such persons,
and cause the respective officers, directors, employees, and any other
agents of the Company to supply all information reasonably requested by
any such representative, underwriter, special counsel or accountant in
connection with a Registration Statement;
(p) (i) a reasonable time prior to the filing of any Exchange
Offer Registration Statement, any Prospectus forming a part thereof,
any amendment to an Exchange Offer Registration Statement or amendment
or supplement to a Prospectus, provide copies of such document to the
Initial Purchasers, and make such changes in any such document prior to
the filing thereof as any of the Initial Purchasers or their counsel
may reasonably request; (ii) in the case of a Shelf Registration, a
reasonable time prior to filing any Shelf Registration Statement, any
Prospectus forming a part thereof, any amendment to such Shelf
Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Holders of Registrable Notes, to
the Initial Purchasers, to counsel on behalf of the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable
Notes, if any, and make such changes in any such document prior to the
filing thereof as the Holders of Registrable Notes, the Initial
Purchasers on behalf of such Holders, their counsel and any underwriter
may reasonably request; and (iii) cause the representatives of the
Company to be available for discussion of such document as shall be
reasonably requested by the Holders of Registrable Notes, the Initial
Purchasers on behalf of such Holders or any underwriter and shall not
at any time make any filing of any such document of which such Holders,
the Initial Purchasers on behalf of such Holders, their counsel or any
underwriter shall not have previously been advised and furnished a copy
or to which such Holders, the Initial Purchasers on behalf of such
Holders, their counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use their best
efforts to cause all Registrable Securities to be listed on any
securities exchange on which similar debt
<PAGE>
18
securities issued by the Company are then listed if requested by the
Majority Holders or by the underwriter or underwriters of an
underwritten offering of Registrable Securities, if any;
(r) in the case of a Shelf Registration, unless the rating in
effect for the Notes applies to the Exchange Notes and the Notes to be
sold pursuant to a Shelf Registration, use its best efforts to cause
the Registrable Notes to be rated with the appropriate rating agencies,
if so requested by the Majority Holders or by the underwriter or
underwriters of an underwritten offering of Registrable Notes, if any,
unless the Registrable Notes are already so rated;
(s) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
and
(t) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter and its counsel.
In the case of a Shelf Registration Statement, the Company may
(as a condition to such Holder's participation in the Shelf Registration)
require each Holder of Registrable Notes to furnish to the Company such
information regarding such Holder and the proposed distribution by such Holder
of such Registrable Notes and make such representations, in each case, as the
Company may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Notes current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the disposition of
Registrable Notes pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(vi) hereof, the Company shall be deemed to have used its best
efforts to keep the Shelf Registration Statement effective during such period of
suspension provided that the Company shall use its best efforts to file and have
declared effective (if an
<PAGE>
19
amendment) as soon as practicable an amendment or supplement to the Shelf
Registration Statement and shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions.
4. Underwritten Registrations. If any of the Registrable Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Majority Holders of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) The Company shall
indemnify and hold harmless each Initial Purchaser, each Holder, including
Participating Broker-Dealers, each underwriter who participates in an offering
of Registrable Notes, their respective affiliates, and their respective
directors, officers, employees, agents and each Person, if any, who controls any
of such parties within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment thereto) pursuant to which
Exchange Notes or Registrable Notes were registered under the 1933 Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the
<PAGE>
20
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 5(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of counsel chosen
by any indemnified party), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Initial Purchasers, any Holder, including Participating Broker-Dealers, or any
underwriter expressly for use in the Registration Statement (or any amendment or
supplement thereto) or the Prospectus (or any amendment or supplement thereto).
The foregoing indemnity with respect to any untrue statement contained in or any
omission from a Prospectus shall not inure to the benefit of any Initial
Purchaser, any Holder, including Participating Broker-Dealers or any underwriter
(or any person who controls such party within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act) from whom the person asserting any such
loss, liability, claim, damage or expense purchased any of the Notes that are
the subject thereof if the Company shall sustain the burden of proving that such
person was not sent or given a copy of such Prospectus as amended or
supplemented at or prior to the written confirmation of the sale of such Notes
to such person and the untrue statement contained in or the omission from such
Prospectus was corrected in such amended or supplemented Prospectus, unless such
failure resulted from noncompliance by the Company with its obligations
hereunder to furnish the Initial Purchasers with copies of such Prospectus as
amended or supplemented.
(b) In the case of a Shelf Registration, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, each
Initial Purchaser, each underwriter who participates in an offering of
Registrable Notes and the other selling Holders and each of their respective
directors and officers (including each officer of the Company who signed the
Registration Statement) and each Person, if any, who controls the
<PAGE>
21
Company, any Initial Purchaser, any underwriter or any other selling Holder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 5(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or the Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Holder, as the case may be,
expressly for use in the Registration Statement (or any amendment thereto), or
the Prospectus (or any amendment or supplement thereto); provided, however, that
no such Holder shall be liable for any claims hereunder in excess of the amount
of net proceeds received by such Holder from the sale of Registrable Notes
pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 5 hereof (whether or not the indemnified parties
are actual or potential parties thereof), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) hereof effected
without its
<PAGE>
22
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request with such request prior to the date of such
settlement.
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any reason unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand, the Initial Purchasers on
another hand, and the Holders on another hand, from the offering of the Exchange
Notes or Registrable Notes included in such offering or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand, the
Initial Purchasers on another hand, and the Holders on another hand, in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand, the
Initial Purchasers on another hand, and the Holders on another hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company, the
Initial Purchasers or the Holders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Initial Purchasers and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 5 were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity, and the Holders were treated as
one entity, for such purpose) or by another method of allocation which does not
take account of the equitable considerations referred to above in Section 5. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 5 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by a governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation
<PAGE>
23
(within the meaning of Section 11(f) of the 1993 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5, each person, if any, who
controls an Initial Purchaser or Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Initial Purchaser or Holder, and each director of the
Company, each officer of the Company who signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company. The parties hereto agree that any underwriting
discount or commission or reimbursement of fees paid to any Initial Purchaser
pursuant to the Purchase Agreement shall not be deemed to be a benefit received
by any Initial Purchaser in connection with the offering of the Exchange
Securities or Registrable Securities in such offering.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as
the Company is subject to the reporting requirements of Section 13 or 15 of the
1934 Act, the Company covenants that it will file the reports required to be
filed by it under Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder, that if it ceases to be so required
to file such reports, it will upon the request of any Holder of Registrable
Notes (i) make publicly available such information as is necessary to permit
sales pursuant to Rule 144 under the 1933 Act, (ii) deliver such information to
a prospective purchaser as is necessary to permit sales pursuant to Rule 144A
under the 1933 Act and it will take such further action as any Holder of
Registrable Notes may reasonably request and (iii) take such further action that
is reasonable in the circumstances, in each case, to the extent required from
time to time to enable such Holder to sell its Registrable Notes without
registration under the 1933 Act within the limitation of the exemptions provided
by (x) Rule 144 under the 1933 Act, as such Rule may be amended from time to
time, (y) Rule 144A under the 1933 Act, as such Rule may be amended from time to
time, or (z) any similar rules or regulations hereafter adopted by the SEC. Upon
the request of any Holder of Registrable Notes, the Company will deliver to such
Holder a written statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's other issued and outstanding securities under any such agreements.
<PAGE>
24
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or departure; provided, however, that no amendment, modification, supplement or
waiver or consent to any departure from the provisions of Section 5 hereof shall
be effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder (other than an Initial Purchaser), at the most current address
set forth on the records of the Registrar under the Indenture, (ii) if to an
Initial Purchaser, to Merrill Lynch at the most current address given by such
Initial Purchaser to the Company by means of a notice given in accordance with
the provisions of this Section 6(d), which address initially is the address set
forth in the Purchase Agreement; and (iii) if to the Company, initially at the
Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 6(d).
All such notices and communications shall be deemed to have
been duly given; at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be
<PAGE>
25
bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled to receive
the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall continue one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE>
26
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
GENESIS HEALTH VENTURES, INC.
By: /s/ George V. Hager, Jr.
-------------------------------
Name: George V. Hager, Jr.
Title: Sr. Vice President and CFO
CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
ALEX. BROWN & SONS INCORPORATED
BT SECURITIES CORPORATION
MONTGOMERY SECURITIES
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By /s/ Gregory A. Margolies
-------------------------------------------
Authorized Signatory
For itself and as representative of the other
Initial Purchasers named in
Schedule A hereto.
<PAGE>
October 31, 1996
(215) 569-5500
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, PA 19348
Re: Genesis Health Ventures, Inc.
9 1/4% Senior Subordinated Notes due 2006
Registration Statement on Form S-4
----------------------------------
Gentlemen:
We have acted as counsel to Genesis Health Ventures, Inc. (the
"Company") in connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to the offer
to exchange by the Company of up to $125,000,000 in principal amount of 9 1/4%
Senior Subordinated Notes due 2006 (the "Exchange Notes") for outstanding
$125,000,000 in principal amount of 9 1/4% Senior Subordinated Notes due 2006.
The Exchange Notes will be issued pursuant to an Indenture between the Company
and First Union National Bank, as trustee (the "Indenture"). This opinion is
being furnished pursuant to the requirements of Item 601(b)(5) of Regulation
S-K.
In rendering this opinion, we have examined only the documents listed
on Exhibit "A" attached hereto. We have not performed any independent
investigation other than the document examination described. Our opinion is
therefore qualified in all respects by the scope of that document examination.
We have assumed and relied, as to questions of fact and mixed questions of law
and fact, on the truth, completeness, authenticity and due authorization of all
certificates, documents and records examined and the genuineness of all
signatures.
This opinion is limited to the laws of the Commonwealth of Pennsylvania
and no opinion is expressed as to the laws of any other jurisdiction, except
that as to matters of New York law, we have relied on the opinion of Simpson
Thacher & Bartlett (a partnership that includes professional corporations), New
York, New York, attached as Exhibit "B."
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Notes that are being offered by the Company pursuant to the
Registration Statement, when issued by the
<PAGE>
Genesis Health Ventures, Inc.
October 31, 1996
Page 2
- -----------------------------
Company as contemplated by the Registration Statement and in accordance with the
Indenture, will be binding obligations of the Company.
The opinions expressed herein are qualified in all respects by, and
subject to, the following: (a) no opinion is rendered as to the availability of
equitable remedies including, but not limited to, specific performance and
injunctive relief, (b) the effect of bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium and other similar laws or equitable principles
affecting creditors' rights or remedies; (c) general equitable principles
(whether considered in a proceeding in equity or at law) and an implied covenant
of good faith and fair dealing and (d) the effect of applicable law and court
decisions which may now or hereafter limit or render unenforceable certain
rights and remedies.
This opinion is given as of the date hereof. We assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
This opinion is strictly limited to the matters stated herein and no
other or more extensive opinion is intended, implied or to be inferred beyond
the matters expressly stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus which is part of the Registration Statement.
Sincerely,
BLANK ROME COMISKY & McCAULEY
<PAGE>
EXHIBIT "A"
1. The Company's Amended and Restated Articles of Incorporation.
2. The Company's Amended and Restated Bylaws.
3. The Company's Minute Books from May 1985 through the date hereof.
4. Indenture.
5. The Registration Statement.
<PAGE>
EXHIBIT "B"
October 31, 1996
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, PA 19348
Ladies and Gentlemen:
We have acted as counsel to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, CS First Boston Corporation, Donaldson, Lufkin & Jenrette
Securities Corporation, Alex. Brown & Sons Incorporated, BT Securities
Corporation and Montgomery Securities (the "Initial Purchasers") in connection
with the Registration Statement on Form S-4 (the "Registration Statement") filed
by Genesis Health Ventures, Inc., a Pennsylvania corporation (the "Company")
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
issuance by the Company of $125,000,000 aggregate principal amount of its 9 1/4%
Senior Subordinated Notes due 2006 (the "Exchange Notes"). The Exchange Notes
are to be issued by the Company in exchange for $125,000,000 aggregate principal
amount of its outstanding 9 1/4% Senior Subordinated Notes due 2006 (the
"Notes")
We have examined the Registration Statement, which incorporates by
reference the Annual Report on Form 10-K of the Company for the fiscal year
ended September 30, 1995, the Quarterly Reports on Form 10-Q of the Company for
the quarters ended December 31, 1995, March 31, 1996 (as amended by a Form
10-Q/A of
<PAGE>
Genesis Health Ventures, Inc. -2- October 31, 1996
the Company dated March 31, 1996) and June 30, 1996, the Current Report on Form
8-K/A of the Company dated November 30, 1993, the Current Report on Form 8-K of
the Company dated November 30, 1995 (as amended by Current Reports on Form 8-K/A
of the Company dated November 1, 1996, November 2, 1996 and November 3, 1996),
the Current Report on Form 8-K of the Company dated April 21, 1996, the Current
Report on Form 8-K of the Company dated May 3, 1996 (as amended by the Current
Report on Form 8-K/A of the Company dated November 1, 1996), the Current Report
on Form 8-K of the Company dated May 8, 1996, the Current Report on Form 8-K/A
of the Company dated July 11, 1996, the Current Report on Form 8-K of the
Company dated July 26, 1996 and the Current Report on Form 8-K of the Company
dated October 11, 1996; and the Indenture, dated as of October 7, 1996 (the
"Indenture"), between the Company and First Union National Bank, as trustee (the
"Trustee"), relating to the Notes and the Exchange Notes. In addition, we have
examined, and have relied as to matters of fact upon originals or copies,
certified or otherwise identified to our satisfaction, of such corporate
records, agreements, documents and other instruments and such certificates or
comparable documents of public officials and of officers and representatives of
the Company, and have made such other and further investigations, as we have
deemed relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as
<PAGE>
Genesis Health Ventures, Inc. -3- October 31, 1996
certified or photostatic copies, and the authenticity of the originals of such
latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, when (i) the Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), (ii)
the Board of Directors of the Company, a duly constituted and acting committee
thereof or duly authorized officers thereof has taken all necessary corporate
action to approve the issuance and terms of the Exchange Notes, the terms of the
exchange and related matters, and (iii) the Exchange Notes have been duly
executed, authenticated, issued and delivered in accordance with the provisions
of the Indenture upon the exchange, we are of the opinion that the Exchange
Notes will constitute valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms.
Our opinion set forth above is subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the federal law of the United States.
<PAGE>
Genesis Health Ventures, Inc. -4- October 31, 1996
This opinion letter is rendered to you in connection with the above
described transaction. This opinion letter may not be relied upon by you for any
other purpose, or relied upon by, or furnished to, any other person, firm or
corporation without our prior written consent, except that Blank Rome Comisky &
McCauley, counsel for the Company, may rely upon this opinion letter in
rendering their legal opinion pursuant to the Indenture insofar as the opinions
expressed therein relate to or are dependent upon matters governed by laws of
the State of New York.
Very truly yours,
SIMPSON THACHER & BARTLETT
<PAGE>
Consent of Independent Auditors
The Board of Directors
Genesis Health Ventures, Inc.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
We also consent to the incorporation by reference in this Registration Statement
on Form S-4 of Genesis Health Ventures, Inc. of our report dated November 29,
1995 on the financial statement schedules for each of the years in the
three-year period ended September 30, 1995, which report appears in the
September 30, 1995 annual report on Form 10-K of Genesis Health Ventures, Inc.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
October 30, 1996
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) for the registration of $125,000,000, 9 1/4%
Senior Subordinated Notes, due 2006 and to the incorporation by reference
therein of our report dated February 6, 1995, with respect to the financial
statements and other financial information of McKerley Health Care
Center-Concord Limited Partnership included in Genesis Health Ventures, Inc.'s
Current Report (Form 8K/A), dated April 5, 1996, filed with the Securities and
Exchange Commission.
Ernst & Young LLP
Manchester, New Hampshire
October 24, 1996
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) for the registration of $125,000,000, 9 1/4%
Senior Subordinated Notes, due 2006 and to the incorporation by reference
therein of our report dated February 24, 1995, with respect to the financial
statements of McKerley Health Facilities included in Genesis Health Ventures,
Inc.'s Current Report (Form 8K/A), dated April 5, 1996, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Manchester, New Hampshire
October 24, 1996
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) for the registration of $125,000,000, 9 1/4%
Senior Subordinated Notes, due 2006 and to the incorporation by reference
therein of our report dated February 24, 1995, with respect to the financial
statements of McKerley Health Care Centers, Inc. included in Genesis Health
Ventures, Inc.'s Current Report (Form 8K/A), dated April 5, 1996, filed with the
Securities and Exchange Commission.
Ernst & Young LLP
Manchester, New Hampshire
October 24, 1996
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and the related Prospectus of Genesis Health
Ventures, Inc. for the registration of $125,000,000 Senior Subordinated Notes,
due 2006 and to the incorporation by reference therein of our report dated
March 15, 1996, with respect to the combined financial statements of National
Health Care Affiliates, Inc. and Related Entities for the year ended December
31, 1995, included in Genesis Health Ventures, Inc. Current Report (Form 8K/A),
dated May 3, 1996, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Buffalo, New York
October 24, 1996
<PAGE>
Consent of Independent Certified Public Accountants
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of the Registration Statement of Form S-4 dated October 31,
1996, for the registration of 9-1/4% Senior Subordinated Notes due 2006 of our
report dated August 20, 1996, relating to the consolidated financial statements
of Geriatrics & Medical Companies, Inc. as of May 31, 1996 and for each of the
years in the two-year period ended May 31, 1996 included in the Genesis Health
Ventures, Inc.'s current report on Form 8-K/A dated July 11, 1996 filed with the
Securities and Exchange Commission.
We also consent to us being named as "Experts" in the Prospectus.
BDO Seidman, LLP
Philadelphia, Pennsylvania
October 31, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE
ACT OF 1939 OF A CORPORATION DESIGNATED TO
ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)
FIRST UNION NATIONAL BANK
(Exact Name of Trustee as Specified in its Charter)
22-1147033
(I.R.S. Employer Identification No.)
101 NORTHSIDE PLAZA, ELKTON, MARYLAND
(Address of Principal Executive Offices)
21921
(Zip Code)
FIRST UNION NATIONAL BANK
ONE RODNEY SQUARE
920 KING STREET, 1ST FLOOR
WILMINGTON, DE 19801
ATTENTION: CORPORATE TRUST ADMINISTRATION
302-888-7530
(Name, address and telephone number of Agent for Service)
GENESIS HEALTH VENTURES, INC.
(Exact Name of Obligor as Specified in its Charter)
PENNSYLVANIA
(State or other jurisdiction of Incorporation)
1132947
(I.R.S. Employer Identification No.)
148 WEST STATE STREET
KENNETT SQUARE, PENNSYLVANIA
(Address of Principal Executive Offices)
19348
(Zip Code)
9 1/4% SENIOR SUBORDINATED NOTES DUE 2006
(Title of Indenture Securities)
<PAGE>
1. General information.
Furnish the following information as to the trustee:
a) Name and address of each examining or supervisory authority to
which it is subject:
Comptroller of the Currency
United States Department of the Treasury
Washington, D.C. 20219
Federal Reserve Bank (3rd District)
Philadelphia, PA 19106
Federal Deposit Insurance Corporation
Washington, D.C. 20429
b) Whether it is authorized to exercise
corporate trust powers.
Yes.
2. Affiliations with obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities
of the trustee:
Not applicable - see answer to Item 13.
4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, furnish the following
information:
Not applicable - see answer to Item 13.
5. Interlocking directorates and similar relationships with the obligor or
underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director,
2
<PAGE>
officer, partner, employee, appointee, or representative of the obligor
or of any underwriter for the obligor, identify each such person having
any such connection and state the nature of each such connection.
Not applicable - see answer to Item 13.
6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner,
and executive officer of the obligor:
Not applicable - see answer to Item 13.
7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter:
Not applicable - see answer to Item 13.
8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default
by the trustee:
Not applicable - See answer to Item 13.
9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by the
trustee:
Not applicable - see answer to Item 13.
3
<PAGE>
10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
stock of the obligor or (2) is an affiliate, other than a subsidiary,
of the obligor, furnish the following information as to the voting
securities of such person:
Not applicable - see answer to Item 13.
11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge
of the trustee, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of
securities of such person any of which are so owned or held by the
trustee:
Not applicable - see answer to Item 13.
12. Indebtedness of the obligor to the trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
Not applicable - see answer to Item 13.
13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this Indenture. Explain the nature of any such
default.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, or is trustee for
more than one
4
<PAGE>
outstanding series of securities under the indenture, state whether
there has been a default under any such indenture or series, identify
the indenture or series affected, and explain the nature of any such
default.
None.
14. Affiliations with the underwriters.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable - see answer to Item 13.
13. Foreign trustee.
Identify the order or rule pursuant to which the trustee is authorized
to act as sole trustee under indentures qualified or to be qualified
under the Act.
Not applicable - trustee is a national banking association organized
under the laws of the United States.
16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Articles of Association of the trustee as now in
--- effect.**
2. Copy of the Certificate of the Comptroller of the Currency
--- date dated January 11, 1994, evidencing the authority of the
trustee to transact business.*
3. Copy of the Certification of Fiduciary Powers of the
--- trustee by the office of the Comptroller of the Currency dated
July 24, 1992.*
4. Copy of existing by-laws of the trustee.**
---
5. Copy of each indenture referred to in Item 4, if the
--- obligor is in default.
Not applicable.
5
<PAGE>
x 6. Consent of the trustee required by Section 321(b) of the
--- Act.
x 7. Copy of report of condition of the trustee at the close of
--- business on June 30, 1996, published pursuant to the
requirements of its supervising authority.
8. Copy of any order pursuant to which the foreign trustee is
--- authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
Not applicable.
9. Consent to service of process required of foreign trustees
--- pursuant to Rule 10a-4 under the Act.
Not applicable.
- -----------------
*Previously filed with the Securities Exchange Commission on February
11, 1994 as an Exhibit to Form T-1 in connection with Registration Statement
Number 22-73340 and **previously filed with the Securities Exchange Commission
on March 6, 1996 with Registration Statement Number 333-1102 and incorporated
herein by reference.
NOTE
The trustee disclaims responsibility for the accuracy or completeness
of information contained in this Statement of Eligibility and Qualification not
known to the trustee and not obtainable by it through reasonable investigation
and as to which information it has obtained from the obligor and has had to rely
or will obtain from the principal underwriters and will have to rely.
6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, First Union National Bank, a national banking association organized and
existing under the laws of the United States of America, has duly caused this
Statement of Eligibility and Qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Wilmington and State
of Delaware, on the 31st day of October, 1996.
FIRST UNION NATIONAL BANK
By: /s/ Stephen J. Kaba
------------------------
Stephen J. Kaba
Vice President
7
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, and in connection with the proposed issue of Genesis Health
Ventures, Inc., 9 1/4% Senior Subordinated Notes Due 2006, First Union
National Bank, hereby consents that reports of examinations by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
FIRST UNION NATIONAL BANK
By: /s/ Stephen J. Kaba
--------------------------
Stephen J. Kaba
Vice President
Wilmington, Delaware
October 31, 1996
8
<PAGE>
EXHIBIT 7
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the First Union National Bank
of Elkton in the State of Maryland, at the close of business on June 30, 1996
published in response to call made by Comptroller of the Currency, under Title
12, United States Code, Section 161. Charter Number 33869 Comptroller of the
Currency Northeastern District.
Statement of Resources and Liabilities
<TABLE>
<CAPTION>
ASSETS
Thousand of Dollars
<S> <C>
Cash and balance due from depository Institutions:
Noninterest-bearing balances and currency and coin .................................... 1,772,664
Interest-bearing balances ............................................................... 124,929
Securities .............................................................................. /////////
Hold-to-maturity securities ............................................................. 531,451
Available-for-sale securities ......................................................... 5,080,485
Federal funds sold and securities purchased under agreements to resell in domestic ...... /////////
office of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ........... /////////
Federal funds sold ....................................................................... 26,481
Securities purchased under agreements to resell ......................................... 223,204
Loans and leases financing receivables:
Loan and leases, net of unearned income .................20,255,779
LESS: Allowance for loan and lease losses ................ 412,158
LESS: Allocated transfer risk reserve ..................... 0
Loans and leases, net of unearned income, allowance, and reserve ....................... 19,843,621
Assets held in trading accounts ................................................................. 0
Premises and fixed assets (including capitalized leases) .................................. 390,936
Other real estate owned .................................................................... 58,628
Investment in unconsolidated subsidiaries and associated companies ......................... 26,343
Customer's liability to this bank on acceptances outstanding ............................... 51,547
Intangible assets ......................................................................... 747,578
Other assets .............................................................................. 798,531
Total assets ........................................................................... 29,676,398
LIABILITIES
Deposits:
In domestic offices .................................................................. 24,056,990
Noninterest-bearing .................................. 4,453,778
Interest-bearing .....................................19,603,212
In foreign offices, Edge and Agreement subsidiaries, and IBFs ........................... 308,954
Noninterest-bearing ..................................... 0
Interest-bearing ........................................308,954
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries,
and IBFs
Federal fund purchased .................................................................. 389,394
Securities sold under agreements to repurchase .......................................... 820,273
Demand notes issued to the U.S. Treasury .................................................. 113,120
Trading liabilities ............................................................................. 0
Other borrowed money .................................................................... /////////
With original maturity of one year or less ............................................... 6,829
With original maturity of more than one year ............................................ 10,338
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Mortgage indebtedness and obligations under capitalized leases ............................. 16,467
Bank's liability on acceptances executed and outstanding ................................... 51,827
Subordinated notes and debentures ......................................................... 175,000
Other liabilities ......................................................................... 708,654
Total liabilities ...................................................................... 26,657,846
Limited-life preferred stock and related surplus ................................................ 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................................. 160,540
Common stock .............................................................................. 452,156
Surplus ................................................................................. 1,300,080
Undivided profits and capital reserves .................................................. 1,150,698
Net unrealized holding gains (losses) on available-for-sale securities .................... (44,922)
Cumulative foreign currency translation adjustments ............................................. 0
Total equity capital .................................................................... 3,018,552
Total liabilities, limited-life preferred stock and equity capital ..................... 29,676,398
</TABLE>
10
