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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 1-11666
GENESIS HEALTH VENTURES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 06-1132947
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
148 West State Street
Kennett Square, Pennsylvania 19348
(Address, including zip code, of principal executive offices)
(610) 444-6350
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
YES [ x ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of May 9, 1997: 35,006,495 shares of common stock outstanding
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TABLE OF CONTENTS
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Page
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS..........................................1
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements.............................................................2
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................................8
Part II OTHER INFORMATION
Item 1. Legal Proceedings...............................................................14
Item 2. Changes in Securities...........................................................14
Item 3. Defaults Upon Senior Securities.................................................14
Item 4 Submission of Matters to a Vote of Security Holders.............................14
Item 5. Other Information...............................................................14
Item 6 Exhibits and Reports on Form 8-K................................................14
SIGNATURES .......................................................................................16
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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain oral statements made by management from time to time and
certain statements contained herein, including certain statements in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" such as statements concerning Medicaid and Medicare programs and the
Company's ability to meet its liquidity needs and control costs; certain
statements in Notes to Condensed Consolidated Financial Statements, such as
certain Pro Forma Adjustments; and other statements contained herein regarding
matters which are not historical facts are forward looking statements (as such
term is defined in the Securities Act of 1933) 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 below:
1. The Company's substantial indebtedness and significant debt service
obligations.
2. The Company's ability to secure the capital and the related cost of such
capital necessary to fund its future growth through acquisition and
development, as well as internal growth.
3. Changes in the United States healthcare system, including changes in
reimbursement levels under Medicaid and Medicare, and other changes in
applicable government regulations that might affect the profitability of the
Company.
4. The Company's continued ability to operate in a heavily regulated
environment and to satisfy regulatory authorities, thereby avoiding a number
of potentially adverse consequences, such as the imposition of fines,
temporary suspension of admission of patients, restrictions on the ability
to acquire new facilities, suspension or decertification from Medicaid or
Medicare programs, and, in extreme cases, revocation of a facility's license
or the closure of a facility, including as a result of unauthorized
activities by employees.
5. The occurrence of changes in the mix of payment sources utilized by the
Company's customers to pay for the Company's services.
6. The adoption of cost containment measures by private pay sources such as
commercial insurers and managed care organizations, as well as efforts by
governmental reimbursement sources to impose cost containment measures.
7. The level of competition in the Company's industry, including without
limitation, increased competition from acute care hospitals, providers of
assisted and independent living and providers of home health care and
changes in the regulatory system, such as changes in certificate of need
laws, in the states in which the Company operates or anticipates operating
in the future that facilitate such competition.
8. The Company's ability to identify suitable acquisition candidates, to
consummate or complete development projects, or to profitably operate or
successfully integrate enterprises into the Company's other operations.
These and other factors have been discussed in more detail in the Company's
periodic reports including its Annual Report on Form 10K for the fiscal year
ended September 30, 1996.
1
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Genesis Health Ventures, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
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March 31, September 30,
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1997 1996
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Assets (Unaudited)
Current assets:
Cash and equivalents $ 13,835 $ 12,763
Accounts receivable, net of allowance for doubtful accounts of
$36,531 at March 31, 1997 and $11,131 at September 30, 1996 196,987 141,716
Cost report receivables 54,360 41,575
Inventory 24,866 17,051
Prepaid expenses and other current assets 30,092 19,616
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Total current assets 320,140 232,721
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Property, plant, and equipment 633,540 416,766
Accumulated depreciation (77,879) (65,837)
- -----------------------------------------------------------------------------------------------------------------
555,661 350,929
Notes receivable and other investments 104,729 92,574
Other long-term assets 33,083 24,595
Deferred tax assets 10,624 --
Goodwill and other intangibles, net 316,976 249,850
- -----------------------------------------------------------------------------------------------------------------
Total assets $ 1,341,213 $ 950,669
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 114,321 $ 73,084
Current installments of long-term debt 6,493 3,720
Income taxes payable 7,923 426
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Total current liabilities 128,737 77,230
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Long-term debt 618,564 338,933
Deferred income taxes -- 13,812
Deferred gain and other long-term liabilities 10,946 6,086
Shareholders' equity:
Common stock, par $.02, authorized 60,000,000 shares, issued and
outstanding 35,260,207 and 35,214,606 at March 31, 1997;
31,981,393 and 31,935,792 at September 30, 1996 699 640
Additional paid-in capital 455,322 411,472
Retained earnings 127,188 102,739
Treasury stock, at cost (243) (243)
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Total shareholders' equity 582,966 514,608
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Total liabilities and shareholders' equity $ 1,341,213 $ 950,669
=================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
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Genesis Health Ventures, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
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(Unaudited)
Three months
ended March 31,
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1997 1996
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Net revenues:
Basic healthcare services $ 136,825 $ 83,066
Specialty medical services 124,488 61,811
Management services and other, net 11,950 9,862
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Total net revenues 273,263 154,739
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Operating expenses:
Salaries, wages and benefits 130,395 77,283
Other operating expenses 84,886 41,798
General corporate expense 9,907 6,262
Depreciation and amortization 10,620 6,087
Lease expense 7,244 4,068
Interest expense, net 8,960 6,939
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Earnings before income taxes 21,251 12,302
Income taxes 7,757 4,492
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Net income $ $13,494 $ 7,810
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Per common share data:
Primary:
Net income $ 0.37 $ 0.31
Weighted average shares of common stock and equivalents 36,372,903 25,306,685
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Fully diluted:
Net income $ 0.37 $ 0.30
Weighted average shares of common stock and equivalents 36,374,693 28,797,732
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See accompanying notes to condensed consolidated financial statements
3
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Genesis Health Ventures, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
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(Unaudited)
Six months
ended March 31,
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1997 1996
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Net revenues:
Basic healthcare services $ 270,917 $ 155,260
Specialty medical services 238,667 115,001
Management services and other, net 22,223 17,256
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Total net revenues 531,807 287,517
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Operating expenses:
Salaries, wages and benefits 255,450 142,325
Other operating expenses 165,018 79,394
General corporate expense 19,529 11,101
Depreciation and amortization 20,101 11,235
Lease expense 14,182 7,861
Interest expense, net 18,155 12,979
Debenture conversion expense - 1,090
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Earnings before income taxes and extraordinary item 39,372 21,532
Income taxes 14,370 7,864
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Earnings before extraordinary item 25,002 13,668
Extraordinary item, net of tax (553) -
- ---------------------------------------------------------------------------------------------------------------
Net income $ 24,449 $ 13,668
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Per common share data:
Primary:
Earnings before extraordinary item $ 0.71 $ 0.55
Extraordinary item (0.02) -
Net income $ 0.69 0.55
Weighted average shares of common stock and equivalents 35,285,093 24,730,819
- --------------------------------------------------------------------------------------------------------------
Fully diluted:
Earnings before extraordinary item $ 0.70 $ 0.53
Extraordinary item (0.02) -
Net income $ 0.68 0.53
Weighted average shares of common stock and equivalents 36,262,863 28,816,719
==============================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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Genesis Health Ventures, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
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(Unaudited)
Six months ended
March 31,
1997 1996
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Cash flows from operating activities:
Net income $ 24,449 $ 13,668
Adjustments to reconcile net income to
net cash provided by operating activities:
Charges (credits) included in operations not requiring funds:
Provision for deferred taxes 3,592 1,966
Depreciation and amortization 20,101 11,235
Amortization of deferred gain (230) (230)
Debenture conversion expense - 1,090
Extraordinary item 553 -
Changes in assets and liabilities excluding the effects of acquisitions:
Accounts receivable (27,363) (7,519)
Cost reports receivable (5,907) (6,941)
Inventory (5,236) (1,548)
Prepaid expenses and other current assets (5,069) (10,932)
Accounts payable and accrued expenses 6,983 5,355
Income taxes payable 6,522 1,508
- -----------------------------------------------------------------------------------------------------------------------
Total adjustments (6,054) (6,016)
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Net cash provided by operations 18,395 7,652
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Cash flows from investing activities
Capital expenditures (33,778) (12,776)
Payments for acquisitions, net of cash acquired (233,665) (93,316)
Notes receivable and other investment and asset additions, net (11,025) (11,653)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (278,468) (117,745)
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net borrowings under working capital revolving credit 140,783 107,200
Repayment of long term debt (1,955) (322)
Proceeds from issuance of long-term debt 125,000 -
Debt issuance costs (3,750) -
Debenture conversion expense - (1,090)
Common stock options exercised 1,067 1,716
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 261,145 107,504
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 1,072 (2,589)
Cash and equivalents
Beginning of period 12,763 10,387
End of period $ 13,835 $ 7,798
=======================================================================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 14,533 $ 11,876
Income taxes paid $ 6,873 $ 12,005
=======================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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GENESIS HEATLH 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, 1996. 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. Long-Term Debt
In March 1997, the Company amended its credit facility to increase the
revolving credit facility from $300,000,000 to $375,000,000 (the "Revolving
Credit Facility"). In October 1996, the Company entered into an agreement with
the lenders to increase the Revolving Credit Facility from $200,000,000 to
$300,000,000 and the lease financing facility from $85,000,000 to $150,000,000
(the "Lease Financing Facility") and to release liens on accounts receivable,
inventory and personal property. The Revolving Credit Facility bears interest at
a floating rate equal, at the Company's option, to prime rate or LIBOR plus a
margin up to 1.5%. The Lease Financing Facility bears interest at a floating
rate equal, at the Company's option, to prime rate or LIBOR plus a margin up to
1.5%.
In October 1996, the Company completed an offering of $125,000,000
9 1/4% Senior Subordinated Notes due 2006 (the "1996 Note Offering"). The
Company used the net proceeds of approximately $121,250,000 together with
borrowings under the Revolving Credit Facility, to pay the cash portion of the
purchase price of the GMC Transaction (defined below), to repay certain debt
assumed as a result of the GMC Transaction and to repurchase GMC (defined below)
accounts receivable which were previously financed.
4. Pro Forma Financial Information
Effective October 1, 1996, Geriatric & Medical Companies, Inc. ("GMC")
merged with a wholly-owned subsidiary of Genesis (The "GMC Transaction"). Under
the terms of the merger agreement, GMC shareholders received $5.75 per share in
cash for each share of GMC stock. The total consideration paid, including
assumed indebtedness of approximately $132,000,000, is approximately
$223,000,000. The merger was financed in part with approximately $121,250,000 in
net proceeds from the 1996 Note Offering. The remaining consideration was
financed through borrowings under the Company's Revolving Credit Facility. The
GMC Transaction added to Genesis 24 owned eldercare centers with approximately
3,300 beds. GMC also operated businesses which provided 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; and information management services. In connection with the
GMC Transaction, the Company has preliminarily recorded approximately
$63,700,000 of goodwill, which is being amortized on a straight-line basis over
lives ranging from 20 to 40 years, and approximately $25,300,000 of deferred tax
assets available to reduce future income taxes, which are included net in
deferred tax assets on the balance sheet. Management believes it is more likely
than not that such deferred tax assets will be realized.
6
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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 the Lease
Financing Facility. The balance of the total consideration paid to National
Health was funded with available cash of $51,800,000 and assumed indebtedness 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 owned and leased.
In June 1996, the Company acquired the outstanding stock of
NeighborCare Pharmacies, Inc. and its related entities (collectively,
"NeighborCare"), a privately held institutional pharmacy, infusion therapy and
retail professional 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 McKerley Health Care
Centers, Inc. and its related entities (collectively, "McKerley") for total
consideration of approximately $68,700,000. The transaction (the "McKerley
Transaction") also provided for up to an additional $6,000,000 of contingent
consideration payable upon the achievement of certain financial objectives
through October 1997, of which approximately $4,000,000 was paid in February
1997, and $2,000,000 of which remains contingent consideration. McKerley added
15 eldercare centers in New Hampshire and Vermont with a total of 1,535 beds to
Genesis. McKerley also operated a home healthcare company. The acquisition was
financed with borrowings under the Revolving Credit Facility and assumed
indebtedness.
The following unaudited proforma 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 period
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 proforma
financial information does not necessarily reflect results of operations that
would have occurred had the acquisitions occurred at the beginning of the period
presented.
(In thousands, except per share data)
Six Months
Ended
Pro Forma Statement of Operations Information: March 31, 1996
Total net revenues $ 473,086
Net income 20,857
Primary earnings per share $ 0.66
Fully diluted earnings per share $ 0.63
7
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Item 2. 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 and community-based
services to the elderly. 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 health care.
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, community-based
pharmacies, subacute care programs, home health care, physician services, and
other specialized services. Management services and other include fees earned
for management of eldercare centers, development of life care communities and
revenues from the group purchasing, staff replacement and vending businesses,
and transactional revenues.
Certain Transactions
Effective January 1, 1997, the Company entered into an agreement to
provide management services for NewCourtland, Inc. ("NewCourtland"), a wholly
owned subsidiary of The Presbyterian Foundation for Philadelphia (the
"Presbyterian Foundation"), a non-profit organization. Under the terms of the
agreement, Genesis will provide management services to eight eldercare centers
with 1,844 beds located throughout the Delaware Valley.
Effective October 1, 1996, Geriatric & Medical Companies, Inc. ("GMC")
merged with a wholly-owned subsidiary of Genesis (The "GMC Transaction"). Under
the terms of the merger agreement, GMC shareholders received $5.75 per share in
cash for each share of GMC common stock. The total consideration paid, including
assumed indebtedness of approximately $132,000,000, is approximately
$223,000,000. The merger was financed in part with approximately $121,250,000 in
net proceeds from an offering of 9 1/4% Senior Subordinated Notes issued in
October 1996 (the "1996 Note Offering"). The remaining consideration was
financed through borrowings under the Company's revolving credit facility (the
"Revolving Credit Facility"). The GMC Transaction added to Genesis 24 owned
eldercare centers with approximately 3,300 beds. GMC also operated businesses
which provided 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; and
information management services.
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 a $150,000,000
lease financing facility (the "Lease Financing Facility"). The balance of the
total consideration paid to National Health was funded with available cash of
$51,800,000 and assumed indebtedness of $7,900,000. National Health added 16
eldercare centers in Florida, Virginia and
8
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Connecticut with approximately 2,200 beds to Genesis. National Health also
provided enteral nutrition and rehabilitation therapy services to the eldercare
centers which it owned and leased.
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 McKerley Health Care
Centers, Inc. and its related entities (collectively, "McKerley") for total
consideration of approximately $68,700,000. The transaction (the "McKerley
Transaction") also provided for up to an additional $6,000,000 of contingent
consideration payable upon the achievement of certain financial objectives
through October 1997, of which approximately $4,000,000 was paid in February
1997, and $2,000,000 of which remains contingent consideration. McKerley added
15 eldercare centers in New Hampshire and Vermont with a total of 1,535 beds to
Genesis. McKerley also operated a home healthcare company. The acquisition was
financed with borrowings under the Revolving Credit Facility and assumed
indebtedness.
Results of Operations
Three months ended March 31, 1997 compared to three months ended March 31, 1996.
The Company's total net revenues for the quarter ended March 31, 1997
were $273,263,000 compared to $154,739,000 for the quarter ended March 31, 1996,
an increase of $118,524,000 or 77%. Basic healthcare services increased
$53,759,000 or 65% of which approximately $31,600,000 is attributed to the GMC
Transaction, approximately $14,500,000 is attributed to the National Health
transaction, and the remaining increase of approximately $7,700,000 is primarily
due to providing care to higher acuity patients and to rate increases. Specialty
medical services revenue increased $62,677,000 or 101% of which approximately
$14,500,000 is attributed to the GMC Transaction, approximately $18,100,000 is
due to the NeighborCare Pharmacies transaction, approximately $5,800,000 is
attributed to the National Health transaction, and the remaining increase of
approximately $24,300,000 is primarily due to other volume growth in the
institutional pharmacy, medical supply and contract therapy divisions and
increased acuity in the health centers division. Specialty medical services
revenue per patient day in the health centers division increased 19% to $34.58
in the quarter ended March 31, 1997 compared to $29.04 in the quarter ended
March 31, 1996 primarily due to treatment of higher acuity patients. Management
services and other income increased $2,088,000 or 21%. This increase is
primarily due to approximately $3,000,000 of other service related business
acquired in GMC Transaction, approximately $750,000 earned in connection with
the management agreement with the Presbyterian Foundation, offset by
approximately $2,000,000 of other transactional revenues earned in the quarter
ended March 31, 1996 which included the sale of non-core assets.
The Company's operating expenses before depreciation, amortization,
lease expense, and interest expense were $225,188,000 for the quarter ended
March 31, 1997 compared to $125,343,000 for quarter ended March 31, 1996, an
increase of $99,845,000 or 80%, of which approximately $74,300,000 is due to the
impact of acquisitions and the remaining increase of approximately $25,500,000
is attributed to growth in the institutional pharmacy, medical supply and
contract therapy divisions.
Increased depreciation and amortization, and lease expense are
primarily attributed to the GMC Transaction, the National Health transaction,
and the NeighborCare transaction.
Interest expense increased $2,021,000 or 29%. This increase was
primarily due to additional borrowings used to finance recent acquisitions,
including the 1996 Note Offering used to finance the GMC Transaction, offset by
the repayment of debt associated with proceeds of $202,280,000 from the May 1996
equity offering, and offset by the conversion of 6% Convertible Senior
Subordinated Debentures (the Debentures).
9
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Six months ended March 31, 1997 compared to six months ended March 31, 1996.
The Company's total net revenues for the six months ended March 31,
1997 were $531,807,000 compared to $287,517,000 for the six months ended March
31, 1996, an increase of $244,290,000 or 85%. Basic healthcare services
increased $115,657,000 or 74% of which approximately $64,500,000 is attributed
to the GMC Transaction, approximately $29,500,000 is attributed to the National
Health transaction, approximately $9,900,000 is due primarily to the inclusion
of the eldercare centers acquired in the McKerley Transaction for the full six
months in 1997 versus four months in the prior year and the remaining increase
of approximately $11,800,000 is due to providing care to higher acuity patients
and to rate increases. Specialty medical services revenue increased $123,666,000
or 108% of which approximately $28,300,000 is attributed to the GMC Transaction,
approximately $36,100,000 is due to the NeighborCare Pharmacies transaction,
approximately $10,800,000 is attributed to the National Health transaction,
approximately $1,500,000 is due to the inclusion of the eldercare centers
acquired in the McKerley Transaction for the full six months in 1997 versus four
months in the prior year, and the remaining increase of approximately
$47,000,000 is primarily due to other volume growth in the institutional
pharmacy, medical supply and contract therapy divisions and increased acuity in
the health centers division. Specialty medical service revenue per patient day
in the health centers division increased 10% to $31.49 in the six months ended
March 31, 1997 compared to $28.51 in the six months ended March 31, 1996
primarily due to treatment of higher acuity patients. Management services and
other income increased $4,967,000 or 29%. This increase is primarily due to
approximately $6,000,000 of other service related business acquired in GMC
Transaction, approximately $750,000 earned in connection with the Company
management agreement with the Presbyterian Foundation, offset by approximately
$2,000,000 of other transactional revenues earned in the quarter ended March 31,
1996 which included the sale of non-core assets.
The Company's operating expenses before depreciation, amortization,
lease expense, interest expense and excluding debenture conversion expense were
$439,997,000 for the six months ended March 31, 1997 compared to $232,820,000
for six months ended March 31, 1996, an increase of $207,177,000 or 89%, of
which approximately $156,500,000 is due to the impact of acquisitions and the
remaining increase of approximately $50,700,000 is attributed to growth in the
institutional pharmacy, medical supply and contract therapy divisions.
Increased depreciation and amortization, and lease expense are
primarily attributed to the GMC Transaction, the National Health transaction,
the NeighborCare transaction and the McKerley Transaction.
Interest expense increased $5,176,000 or 40%. This increase in interest
expense was primarily due to additional borrowings used to finance recent
acquisitions, including the 1996 Note Offering used to finance the GMC
Transaction, offset by the repayment of debt associated with proceeds of
$202,280,000 from the May 1996 equity offering, and offset by the conversion of
6% Convertible Senior Subordinated Debentures.
In the quarter ended December 31, 1995 the Company converted
approximately $33,500,000 of the Debentures due 2003. In connection with the
early conversion of the Debentures, the Company paid approximately $1,090,000
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 six months ended March 31, 1996.
In connection with the early repayment of debt and the restructuring
and amendment of the Revolving Credit Facility in the quarter ended December 31,
1996, the Company recorded an extraordinary item (net of tax) of approximately
$553,000 to write off unamortized deferred financing fees.
10
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Liquidity and Capital Resources
Working capital increased to $191,403,000 at March 31, 1997 from
$155,491,000 at September 30, 1996. Accounts receivable increased to
$196,987,000 at March 31, 1997 from $141,716,000 at September 30, 1996.
Approximately $34,800,000 of this increase relates to the GMC acquisition, while
the remaining approximately $20,500,000 relates primarily to the continuing
shift in business mix to specialty medical services including the acquisition of
NeighborCare in fiscal 1996. The allowance for doubtful accounts increased
approximately $25,400,000, primarily as a result of reserves provided in
connection with the GMC Transaction. Days revenue in accounts receivable
remained unchanged at 65 days during the quarter ended March 31, 1997 versus the
quarter end December 31, 1996, (68 days excluding GMC). The Company's cash flow
from operations for the six months ended March 31, 1997 provided cash of
$18,395,000 compared to $7,652,000 for the six months ended March 31, 1996. The
increase in positive cash flow from operations in the quarter ended March 31,
1997 versus the quarter ended December 31, 1996 is primarily attributed to
increased earnings and improved collection of cost report receivables.
Investing activities for the six months ended March 31, 1997 include
approximately $33,800,000 of capital expenditures primarily related to
betterments and expansion of eldercare centers, the purchase of additional
corporate office space and investment in data processing hardware and software.
In March 1997, the Company amended its credit facility to increase the
Revolving Credit Facility from $300,000,000 to $375,000,000. In October 1996,
the Company entered into an agreement with the lenders to increase the Revolving
Credit Facility from $200,000,000 to $300,000,000 and the Lease Financing
Facility from $85,000,000 to $150,000,000 and to release liens on accounts
receivable, inventory and personal property. The Revolving Credit Facility bears
interest at a floating rate equal, at the Company's option, to prime rate or
LIBOR plus a margin up to 1.5%. The Lease Financing Facility bears interest at a
floating rate equal, at the Company's option, to prime rate or LIBOR plus a
margin up to 1.5%.
In February 1997, the Company made a payment of approximately
$4,000,000 for contingent consideration in connection with the McKerley
Transaction. In January 1997, the Company acquired $2,500,000 of convertible
preferred stock of Doctors Health System Inc., ("Doctors Health") an independent
physician owned and controlled integrated delivery system and practice
management company. The convertible preferred stock carries an 8% cumulative
dividend and is convertible into common stock. To date, the Company has
purchased $10,000,000 of Doctors Health convertible preferred stock that, if
converted, would represent an approximate 10% ownership interest in Doctors
Health. The Company is committed to purchase an additional $5,000,000 of
convertible preferred stock upon Doctors Health's achievement of certain
operational and financial benchmarks. Also, the Company is committed to lend
Doctors Health up to $5,000,000 at 11%, of which approximately $3,325,000 has
been loaned to date.
In connection with the GMC Transaction, the Company has preliminarily
recorded approximately $63,700,000 of goodwill, which is being amortized on a
straight-line basis over lives ranging from 20 to 40 years, and approximately
$25,300,000 of deferred tax assets available to reduce future income taxes,
which are included net in deferred tax assets on the balance sheet. Management
believes it is more likely than not that such deferred tax assets will be
realized.
In November 1996, the Company called for redemption the then
outstanding Debentures at a redemption price equal to 104.2% of the principal
amount. The Debenture holders had the option to tender Debentures at the
redemption price or to convert the Debentures at a conversion price of $15.104
per share. All of the approximately $43,800,000 of remaining Debentures
outstanding were converted to Common Stock in the quarter ended December 31,
1996. In the quarter ended December 31, 1995, the Company converted
approximately $33,500,000 of Debentures. The conversions improved the Company's
leverage and provides the Company with the ability to borrow under its revolving
credit facilities at lower rates.
11
<PAGE>
In October 1996, the Company completed the 1996 Note Offering. The
Company used the net proceeds of approximately $121,250,000 together with
borrowings under the Revolving Credit Facility, to pay the cash portion of the
purchase price of the GMC Transaction, to repay certain debt assumed as a result
of the GMC Transaction and to repurchase GMC accounts receivable which were
previously financed.
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 cash flow and debt service
coverage, and must maintain certain ratios of liabilities to net worth. 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.
The Company believes that its liquidity needs can be met by expected
operating cash flow and availability of borrowings under its credit facilities.
At May 9, 1997, approximately $335,000,000 was outstanding under the Revolving
Credit Facility and Lease Financing Facility, and approximately $171,000,000 was
available under the credit facilities after giving effect to approximately
$19,000,000 in outstanding letters of credit issued under the credit facilities.
Seasonality
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.
12
<PAGE>
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). This
statement simplifies the standards for computing earnings per share ("EPS") and
makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS and requires dual
presentation of basic and diluted EPS on the face of the income statement of all
entities with complex capital structures. SFAS 128 also requires a
reconciliation of the numerator and denominator of the diluted EPS computation.
Had SFAS 128 been adopted in the first quarter of fiscal 1997, basic and diluted
EPS would have been computed for the three and six-months ended March 31, 1997
as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Per Share
Income Shares Amount
<S> <C> <C> <C>
(Three months ended March 31, 1997)
Basic EPS
Net Income $ 13,494 35,168 $0.38
Incremental shares from
assumed exercise of
dilutive stock options - 1,207 -
---------- ---------- -------
Diluted EPS
Net Income $ 13,494 36,375 $0.37
========== ========== =======
(Six months ended March 31, 1997)
Basic EPS
Income before
extraordinary item $ 25,002 34,273 $0.73
Extraordinary item (553) (0.02)
---------- ---------- -------
Net Income $ 24,449 34,273 $0.71
Diluted EPS
Effect of assumed
conversion of debt 303 884 -
Incremental shares from
assumed exercise of
dilutive stock options - 1,012 -
---------- ---------- -------
Net Income $ 24,752 36,169 0.68
Extraordinary item 553 0.02
---------- ---------- -------
Net Income before
extraordinary item $ 25,305 36,169 $0.70
========== ========== =======
</TABLE>
13
<PAGE>
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
On March 6, 1997, the Company held its Annual Meeting of
Shareholders (the "Annual Meeting"). Proxies were solicited
for the Annual Meeting pursuant to Regulation 14 of the
Securities Exchange Act of 1934.
At the Annual Meeting the following matters were voted on: (i)
Stephen E. Luongo and Michael R. Walker were elected to serve
on the Board of Directors of the Company for three-year terms
and until their respective successors are duly elected and
qualified, each receiving 31,634,231 votes for their election
and 235,454 against their election (with 3,031,178 broker
non-votes and abstentions); and (ii) an amendment to the
Company's 1985 Amended and Restated Employee Stock Option Plan
increasing the number of shares which may be issued under the
plan to 4,500,000 shares was approved by a vote of 29,004,964
for the amendment and 2,735,980 votes against the amendment
(with 3,159,178 broker non-votes and abstentions).
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
------ -----------
10.1 Amended and Restated Lease and Agreement dated as of
October 7, 1996 between Mellon Financial Services
Corporation #4, as Lessor, and Genesis Eldercare
Properties, Inc., as lessee.
10.2 Second Amendment to Amended and Restated
Participation Agreement dated March 7, 1997 among
Genesis Eldercare Properties, Inc., as lessee, Mellon
Financial Services Corporation #4, as lessor; various
financial institutions as lenders and Mellon Bank
N.A., a national banking association as Agent for
Lessor and the Lenders.
14
<PAGE>
10.3 Amendment No. 1 to Second Amended and Restated Credit
Agreement, dated as of March 7, 1997 by and among
Genesis Health Ventures, Inc. and certain
subsidiaries as Borrowers and Mellon Bank N.A. Issuer
of Letters of Credit, Mellon Bank N.A. as
Administrator Agent and Co-Syndication Agent,
Citibank, N.A. as Co-Syndication Agent, and other
Co-Agents.
10.4 Employment Agreement by and between Michael R. Walker
and Genesis Health Ventures, Inc., dated April 1,
1997
10.5 The Company's Amended and Restated Employee Stock
Option Plan
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereto duly authorized.
GENESIS HEALTH VENTURES, INC.
Date: May 14, 1997 /s/ George V. Hager, Jr.
-------------------------------------------------
George V. Hager, Jr.
Senior Vice President and Chief Financial Officer
16
<PAGE>
- --------------------------------------------------------------------------------
AMENDED AND RESTATED LEASE AND AGREEMENT
Dated as of October 7, 1996
between
MELLON FINANCIAL SERVICES CORPORATION #4,
as Lessor,
and
GENESIS ELDERCARE PROPERTIES, INC.,
as Lessee
- --------------------------------------------------------------------------------
ALL RIGHT, TITLE AND INTEREST OF LESSOR UNDER THIS LEASE AND AGREEMENT AND THE
PROPERTY SUBJECT HERETO HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO A SECURITY
INTEREST IN FAVOR OF MELLON BANK, N.A., AGENT ("AGENT"), UNDER CERTAIN
MORTGAGES, ASSIGNMENTS OF RENTS AND LEASES, SECURITY AGREEMENTS AND FIXTURE
FILING STATEMENTS (AS SUCH AGREEMENTS AND INSTRUMENTS MAY BE AMENDED AND/OR
SUPPLEMENTED TO THE EXTENT PERMITTED THEREBY), FOR THE BENEFIT OF THE LENDERS
REFERRED TO IN SUCH SECURITY INSTRUMENTS. THIS LEASE AND AGREEMENT HAS BEEN
EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS LEASE AND
AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY
INTEREST IN THIS LEASE AND AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR
POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN THE "ORIGINAL EXECUTED
COUNTERPART NO. 1", WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE
RECEIPT THEREFOR EXECUTED BY AGENT ON OR FOLLOWING THE SIGNATURE PAGE THEREOF.
SEE SECTION 21.20 FOR THE NATURE OF THIS TRANSACTION AND INTENTION
1
<PAGE>
OF THE PARTIES.
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART NO. 1.
2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(Lease and Agreement)
||
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS; LESSEE LIABILITY....................................... 1
ARTICLE II
LEASE OF SITES; LEASE TERM......................................... 2
SECTION 2.1. Acceptance and Lease of Sites.............................................................. 2
SECTION 2.2. Acceptance Procedure....................................................................... 2
SECTION 2.3. Lease Term................................................................................. 3
SECTION 2.4. Lease Renewal.............................................................................. 3
ARTICLE III
OTHER PROPERTY............................................... 4
ARTICLE IV
RENT.................................................... 4
SECTION 4.1. Basic Rent................................................................................. 4
SECTION 4.2. Supplemental Rent.......................................................................... 4
SECTION 4.3. Method and Amount of Payment............................................................... 4
SECTION 4.4. Late Payment............................................................................... 5
SECTION 4.5. Net Lease; No Setoff; Etc.................................................................. 5
ARTICLE V
UTILITY CHARGES.............................................. 7
ARTICLE VI
RENEWAL OPTION; SALE, RETURN AND PURCHASE OPTIONS............................. 7
SECTION 6.1. Renewal Option............................................................................. 7
SECTION 6.2. Purchase Option............................................................................ 8
SECTION 6.3. Sale Option................................................................................ 8
SECTION 6.4. Conditions for Sale of the Sites........................................................... 9
SECTION 6.5. Early Termination.......................................................................... 12
SECTION 6.6. Exercise of Options; Failure to Elect...................................................... 13
SECTION 6.7. Return of Sites ........................................................................... 13
SECTION 6.8. Completion of Facilities................................................................... 14
SECTION 6.9. Failure of Lessee to Sell Sites............................................................ 14
ARTICLE VII
CONDITION AND USE OF SITES......................................... 18
SECTION 7.1. Waivers.................................................................................... 18
ARTICLE VIII
LIENS; EASEMENTS.............................................. 19
SECTION 8.1. Liens...................................................................................... 19
SECTION 8.2. No Lessor Consent or Liability............................................................. 19
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 8.3. Easements ................................................................................. 19
ARTICLE IX
MAINTENANCE AND REPAIR;
ALTERATIONS AND ADDITIONS......................................... 21
SECTION 9.1. Maintenance and Repair; Compliance With Law................................................ 21
SECTION 9.2. Alterations................................................................................ 22
SECTION 9.3. Title to Alterations....................................................................... 24
SECTION 9.4. Maintenance and Repair Reports............................................................. 25
SECTION 9.5. Permitted Contests......................................................................... 25
ARTICLE X
USE.................................................... 26
ARTICLE XI
INSURANCE................................................. 26
SECTION 11.1. Required Coverages........................................................................ 26
SECTION 11.2. Delivery of Insurance Certificates........................................................ 28
ARTICLE XII
ASSIGNMENT AND SUBLEASING......................................... 29
SECTION 12.1. Assignment and Subletting................................................................. 29
SECTION 12.2. Sublease Subordination.................................................................... 31
ARTICLE XIII
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................................. 32
SECTION 13.1. Event of Loss; Condemnation or Casualty................................................... 32
SECTION 13.2. Application of Payments Relating to an Event
of Loss.................................................................... 33
SECTION 13.3. Application of Certain Payments Relating to
a Condemnation............................................................. 33
SECTION 13.4. Casualty.................................................................................. 33
SECTION 13.5. Other Dispositions........................................................................ 34
SECTION 13.6. Negotiations.............................................................................. 34
SECTION 13.7. No Rent Abatement......................................................................... 35
ARTICLE XIV
NON-INTERFERENCE.............................................. 35
SECTION 14.1. Non-Interference.......................................................................... 35
SECTION 14.2. Certain Duties and Responsibilities of
Lessor..................................................................... 35
ARTICLE XV
INSPECTION AND REPORTS........................................... 36
SECTION 15.1. Inspection................................................................................ 36
SECTION 15.2. Reports................................................................................... 36
ARTICLE XVI
OWNERSHIP, GRANT OF SECURITY INTEREST
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
AND FURTHER ASSURANCES........................................... 36
SECTION 16.1. Grant of Security Interest................................................................ 36
SECTION 16.2. Attorney-in-Fact.......................................................................... 37
ARTICLE XVII
LEASE EVENTS OF DEFAULT.......................................... 38
ARTICLE XVIII
ENFORCEMENT................................................ 41
SECTION 18.1. Remedies.................................................................................. 41
SECTION 18.2. Proceeds of Sale; Deficiency.............................................................. 45
SECTION 18.3. Grant and Foreclosure on Lessee's Estate.................................................. 45
SECTION 18.4. Remedies Cumulative; No Waiver; Consents.................................................. 46
ARTICLE XIX
RIGHT TO PERFORM FOR LESSEE........................................ 46
ARTICLE XX
LESSOR LIENS................................................ 47
ARTICLE XXI
MISCELLANEOUS............................................... 47
SECTION 21.2. Severability.............................................................................. 47
SECTION 21.3. Notices................................................................................... 48
SECTION 21.4. Amendment; Complete Agreements............................................................ 48
SECTION 21.5. Headings.................................................................................. 48
SECTION 21.6. Original Lease............................................................................ 48
SECTION 21.7. GOVERNING LAW............................................................................. 48
SECTION 21.8. Discharge of Lessee's Obligations by its
Affiliates................................................................. 49
SECTION 21.9. Liability of Lessor Limited............................................................... 49
SECTION 21.10. Estoppel Certificates.................................................................... 49
SECTION 21.11. No Joint Venture......................................................................... 50
SECTION 21.12. No Accord and Satisfaction............................................................... 50
SECTION 21.13. No Merger................................................................................ 50
SECTION 21.14. Successor Lessor......................................................................... 51
SECTION 21.15. Survival................................................................................. 51
SECTION 21.16. Transfer of Sites to Lessee or any other
Person..................................................................... 51
SECTION 21.17. Enforcement of Certain Warranties........................................................ 51
SECTION 21.18. Investment of Security Funds............................................................. 52
SECTION 21.19. Recording of Lease Supplements........................................................... 52
SECTION 21.20. Nature of Transaction.................................................................... 53
SCHEDULE I - Description of Initial Sites
EXHIBIT A - Form of Lease Supplement and Memorandum of
Lease and Agreement
</TABLE>
3
<PAGE>
||
4
<PAGE>
Lease Agreement
THIS AMENDED AND RESTATED LEASE AND AGREEMENT dated as of October 7,
1996 (as amended, supplemented, or otherwise modified from time to time, this
"Lease"), is between MELLON FINANCIAL SERVICES CORPORATION #4, a Pennsylvania
corporation, as Lessor and as mortgagee ("Lessor"), and GENESIS ELDERCARE
PROPERTIES, INC., a Pennsylvania corporation and a wholly-owned subsidiary of
Genesis, as Lessee and as mortgagor ("Lessee").
In consideration of the mutual agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, hereby
agree as follows:
ARTICLE I
DEFINITIONS; LESSEE LIABILITY
This Lease is an amendment and restatement of an existing Lease and
Agreement dated as of July 24, 1996 (the "Original Lease") and the existing
Lease Supplements under such Lease and Agreement relating to the Sites
identified on Schedule I hereof, which Lease Supplements shall continue to be in
full force and effect hereunder.
For all purposes hereof, the capitalized terms used herein and not
otherwise defined shall have the meanings assigned thereto in Appendix 1 to that
certain Amended and Restated Participation Agreement dated as of October 7,
1996, by and among Lessee, Lessor, the Lenders identified therein, and Mellon
Bank, N.A., as Agent (the "Participation Agreement"). All obligations imposed on
the "Lessee" in this Lease shall be the full recourse liability of Lessee and no
obligation or liability of Lessee hereunder or under any other Operative
Document shall be limited by reason of any provision of any Ground Lease
restricting the liability of "Landlord" thereunder.
This Lease refunds, refinances and replaces that certain Acquisition
Credit Agreement, dated as of September 29, 1995, as amended, among Genesis
Health Ventures, Inc. ("Genesis"), certain of its subsidiaries, Mellon Bank,
N.A., ("Mellon") as Agent, Citibank, N.A. ("Citibank") as Co-Agent and the
lenders named therein, which agreement supplemented that certain Amended and
Restated Credit Agreement, dated as of September 29, 1995, as amended, among
Genesis, certain of its subsidiaries, Mellon as Issuer of Letters of Credit,
Mellon as agent and Citibank as co-Agent, which agreement refunded, refinanced
and replaced that certain Credit Agreement, dated as of November 22, 1993, among
Genesis, certain of its subsidiaries, Mellon as agent and the lenders named
therein. The obligations hereunder are secured and superior in right of payment
to the obligations under those certain Debentures issued pursuant to the 1993
Indenture (as hereinafter defined). This Lease (including all amendments and
supplements hereto including, without limitation, any amendments
<PAGE>
Lease Agreement
which may increase the amount of this facility) is a "Credit Facility" within
the meaning of that certain Indenture, dated as of June 15, 1995, between
Genesis and Delaware Trust Company as Trustee (the "1995 Indenture") and
constitutes "Senior Indebtedness" within the meaning of that certain Indenture,
dated as of November 30, 1993, between Genesis and First Fidelity Bank, N.A.,
Pennsylvania as Trustee (the "1993 Indenture"). From and after the execution and
delivery of the 1996 Indenture and the issuance of the notes thereunder, this
Lease (including all amendments and supplements hereto including, without
limitation, any amendments which may increase the amount of this facility) will
be a "Credit Facility" within the meaning of the 1996 Indenture.
ARTICLE II
LEASE OF SITES; LEASE TERM
SECTION II.1. Acceptance and Lease of Sites. On each Site Acquisition
Date, Lessor, subject to the satisfaction or waiver of the conditions set forth
in Article III of the Participation Agreement, hereby agrees to accept delivery
on such Site Acquisition Date of the portion of the Land Interests together with
any Facilities thereon (or, with respect to the Non-Acquired Land Interests, the
ground lease of such Non-Acquired Land Interest and the Facilities located on
such Non-Acquired Land Interests) to be delivered on such Site Acquisition Date
pursuant to the terms of the Participation Agreement and simultaneously to lease
(or in the case of such Non-Acquired Land Interests, sublease) such portion of
the Land Interests together with any Facilities thereon to Lessee hereunder, and
Lessee, subject to the satisfaction or waiver of the conditions set forth in
Article III of the Participation Agreement, hereby agrees, expressly for the
direct benefit of Lessor, to lease commencing on such Site Acquisition Date from
Lessor for the Lease Term, such portion of the Land Interests together with any
Facilities thereon to be delivered on such Site Acquisition Date, and with
respect to any Facilities constructed thereon pursuant to the Construction
Agency Agreement, such Facilities automatically (without further act) commencing
on expiration or termination of the Construction Period applicable to such
Facilities. Lessee has heretofore accepted delivery and entered into a lease,
pursuant to the Original Lease, with Lessor of the Sites known as the NHCA
Sites.
SECTION II.2. Acceptance Procedure. Lessor hereby authorizes a
Responsible Officer of Lessee, to be designated by Lessee, as the authorized
representative or representatives of Lessor to accept delivery of the portion of
the Site(s) identified on the applicable Advance Request. Lessee hereby agrees
2
<PAGE>
Lease Agreement
that such acceptance of delivery by such authorized representative or
representatives and the execution and delivery by Lessee as of each Site
Acquisition Date, of a Lease Supplement in the form of Exhibit A hereto or in
such other form as may be reasonably acceptable to the Agent and Lessor (in each
case, appropriately completed) shall, without further act, constitute the
irrevocable acceptance by Lessee of the Site(s) which are the subject thereof
for all purposes of this Lease and the other Operative Documents on the terms
set forth therein and herein. Any Facility constructed on an Undeveloped Site
pursuant to the Construction Agency Agreement shall be deemed to be included in
the Leasehold Estate as of the date of expiration or termination of the
Construction Period applicable to such Facility.
SECTION II.3. Lease Term. Unless earlier terminated, the term of this
Lease shall consist of the Basic Term, commencing on and including July 24, 1996
and ending on the date (the "Basic Term Expiration Date") which is five years
thereafter (i.e., July 24, 2001) and the Renewal Term, if exercised and
effective (collectively, the "Lease Term"); provided, that with respect to the
Developed Sites and the Undeveloped Sites (but only in respect of the Land
Interest portion of such Undeveloped Sites, including any Non-Acquired Land
Interest), the commencement of the Basic Term shall be the relevant Site
Acquisition Date for each such Site (which, in the case of the NHCA Sites shall
be July 24, 1996, as provided in Section 3.2(s) of the Participation Agreement);
provided, further, that with respect to the Facility to be constructed on any
Undeveloped Site, the commencement of the Basic Term shall be upon the
expiration or termination of the Construction Period for such Undeveloped Site
and the end of the Basic Term with respect to such Facility shall be upon the
Basic Term Expiration Date. Any provision of this Lease or any other Operative
Document to the contrary notwithstanding, Lessee acknowledges that Lessor's sole
interest in the Non-Acquired Land Interests, if any, is as ground lessee, and
Lessor is hereby subleasing such Non-Acquired Land Interests to Lessee; and
Lessor and Lessee specifically agree that this Lease and the remedies available
to Lessor for Lessee's default hereunder shall apply to the Non-Acquired Land
Interests, notwithstanding that such Land Interests are not owned by Lessor, and
Lessee shall pay as and when due all ground rent applicable to any Non-Acquired
Land Interest and shall perform all obligations of the ground lessee under any
Ground Lease accruing prior to the Lease Termination Date with respect to such
Land Interest.
SECTION II.4. Lease Renewal. Subject to the consent of Lessor and the
3
<PAGE>
Lease Agreement
Lenders pursuant to Section 2.10 of the Participation Agreement, Lessee may
elect to renew this Lease for one five-year renewal term (the "Renewal Term")
commencing upon the expiration of the Basic Term (the "Renewal Term Commencement
Date") and ending on the date which is five years after the Renewal Term
Commencement Date, as provided in Article VI and in the applicable Lease
Supplement.
ARTICLE III
OTHER PROPERTY
Lessee may from time to time own or hold under lease from Persons other
than Lessor, furniture, trade fixtures and equipment located on or about the
Sites that is not subject to this Lease. Lessor shall from time to time, upon
the reasonable request, and at the cost and expense of Lessee, which request
shall be accompanied by such supporting information and documents as Lessor may
reasonably require, promptly acknowledge in writing to Lessee or other Persons
that the particular items of furniture, trade fixtures and equipment in question
are not part of the related Site and that, subject to the rights of Lessor under
any other Operative Documents, Lessor does not own or have any other right or
interest in or to such furniture, trade fixtures and equipment.
ARTICLE IV
RENT
SECTION IV.1. Basic Rent. Lessee shall pay to Agent, for the benefit of
Lessor and the Lenders, the amounts of Basic Rent during the Basic Term and, if
applicable, the Renewal Term, determined in accordance with the definition of
"Basic Rent" on each Payment Date.
SECTION IV.2. Supplemental Rent. Lessee shall pay to Agent, for the
benefit of Lessor, or to whomever shall be entitled thereto as expressly
provided herein or in any other Operative Document (and Lessor hereby directs
Lessee, on behalf of Lessor, to so pay such Agent or other Person), any and all
Supplemental Rent promptly as the same shall become due and payable and, in the
event of any failure on the part of Lessee to pay any Supplemental Rent, Lessor
shall have all rights, powers and remedies provided for herein or by law or in
equity or otherwise in the case of nonpayment of Basic Rent. Lessee hereby
4
<PAGE>
Lease Agreement
reaffirms its obligation to pay as Supplemental Rent (i) any and all Additional
Costs, and (ii) any Transaction Costs not paid by Lessor, as further described
in Section 9.9 of the Participation Agreement.
SECTION IV.3. Method and Amount of Payment. As long as any obligations
remain outstanding under the Loan Agreement, Basic Rent and Supplemental Rent
shall be paid to Agent (or, in the case of Supplemental Rent, to such Person as
may be entitled thereto) on the due date therefor at such place as Agent shall
specify in writing to Lessee at least two (2) Business Days prior to the due
date therefor. Agent, on behalf of Lessor, shall notify Lessee of the applicable
LIBO Rate or Prime Rate, as applicable, promptly upon the determination thereof.
Each payment of Rent shall be made by Lessee prior to 12:00 noon Philadelphia
time (and payments made after such time shall be deemed to have been made on the
next day) at the place of payment in funds consisting of lawful currency of the
United States of America which (in the case of any amount payable to Lessor,
Agent or any Lender) shall be immediately available on the scheduled date when
such payment shall be due, unless the scheduled date shall not be a Business
Day, in which case such payment shall be made on the next succeeding Business
Day (unless the result of such extension would be to carry such payment into the
next calendar month, in which event such payment shall be made on the next
preceding Business Day). The provisions of the foregoing sentence of this
Section 4.3 shall be applicable only to Basic Rent and to Supplemental Rent
payable to, or on behalf of or for the account of, Lessor, any Lender, Agent and
any other Indemnitee. Any amounts payable by Lessee to Lessor hereunder shall be
payable in accordance with Section 9.16 of the Participation Agreement.
SECTION IV.4. Late Payment. If any Basic Rent shall not be paid when
due (not taking into account any applicable grace period), Lessee shall pay to
Agent on behalf of Lessor and the Lenders, or if any Supplemental Rent payable
to or on behalf or for the account of Lessor, any Lender, Agent or other
Indemnitee is not paid when due (not taking into account any applicable grace
period), Lessee shall pay to whomever shall be entitled thereto, in each case as
Supplemental Rent, interest at the Overdue Rate (to the maximum extent permitted
by law) on such overdue amount from and including the initial due date thereof
(not taking into account any applicable grace period) to but excluding the
Business Day of payment thereof at the Overdue Rate.
SECTION IV.5. Net Lease; No Setoff; Etc. This Lease shall constitute a
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net lease and, notwithstanding any other provision of this Lease, it is intended
that Basic Rent and Supplemental Rent shall be paid without counterclaim,
setoff, deduction or defense of any kind and without abatement, suspension,
deferment, diminution or reduction of any kind, and Lessee's obligation to pay
all such amounts, throughout the Basic Term and the Renewal Term, if applicable,
is absolute and unconditional. The obligations and liabilities of Lessee
hereunder shall in no way be released, discharged or otherwise affected for any
reason, including, without limitation, to the maximum extent permitted by law:
(a) any defect in the condition, merchantability, design, construction, quality
or fitness for use of any portion of the Sites, or any failure of the Sites to
comply with all Applicable Laws and Regulations, including any inability to
occupy or use the Sites by reason of such non-compliance; (b) any damage to,
abandonment, loss, contamination of or Release from or destruction of or any
requisition or taking of the Sites or any part thereof, including eviction; (c)
any restriction, prevention or curtailment of or interference with any use of
the Sites or any part thereof, including eviction; (d) any defect in title to or
rights to the Sites or any Lien on such title or rights or on the Sites; (e) any
change, waiver, extension, indulgence or other action or omission or breach in
respect of any obligation or liability of or by Lessor, Agent or any Lender; (f)
any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceedings relating to Lessee, Lessor,
Agent, any Lender or any other Person, or any action taken with respect to this
Lease by any trustee or receiver of Lessee, Lessor, Agent, any Lender or any
other Person, or by any court, in any such proceeding; (g) any claim that Lessee
has or might have against any Person, including, without limitation, Lessor, or
any Lender; (h) any failure on the part of Lessor to perform or comply with any
of the terms of this Lease, any other Operative Document or of any other
agreement whether or not related to the Overall Transaction; (i) any invalidity
or unenforceability or disaffirmance against or by Lessee of this Lease or any
provision hereof or any of the other Operative Documents or any provision of any
thereof; (j) the impossibility of performance by Lessee, Lessor or both; (k) any
action by any court, administrative agency or other Authority; any restriction,
prevention or curtailment of or any interference with the construction on or any
use of any Site or any part thereof; or (l) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not Lessee shall have
notice or knowledge of any of the foregoing. Except as specifically set forth in
Section 6.5 or Article XIII of this Lease, this Lease shall be noncancellable by
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Lessee for any reason whatsoever, and Lessee, to the extent permitted by
Applicable Laws and Regulations, waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate or surrender this Lease, or to any
diminution, abatement or reduction of Rent payable by Lessee hereunder. If for
any reason whatsoever this Lease shall be terminated in whole or in part by
operation of law or otherwise, except as expressly provided in Section 6.5 or
Article XIII of this Lease, Lessee shall, unless prohibited by Applicable Laws
and Regulations, nonetheless pay to Lessor (or, in the case of Supplemental
Rent, to whomever shall be entitled thereto) an amount equal to each Rent
payment at the time and in the manner that such payment would have become due
and payable under the terms of this Lease if it had not been terminated in whole
or in part, and in such case, so long as such payments are made and no Lease
Event of Default shall have occurred and be continuing, Lessor will deem this
Lease to have remained in effect. Each payment of Rent made by Lessee hereunder
shall be final and, absent manifest error in the computation of the amount
thereof, Lessee shall not seek or have any right to recover all or any part of
such payment from Lessor, Agent or any party to any agreements related thereto
for any reason whatsoever. Lessee assumes the sole responsibility for the
condition, use, operation, maintenance, and management of the Sites and Lessor
shall have no responsibility in respect thereof and shall have no liability for
damage to the property of Lessee or any subtenant of Lessee on any account or
for any reason whatsoever other than by reason of Lessor's willful misconduct or
gross negligence or breach of any of its obligations under any Operative
Document.
ARTICLE V
UTILITY CHARGES
Lessee shall pay or cause to be paid all charges for electricity,
power, gas, oil, water, telephone, sanitary sewer service and all other rents
and utilities used in or on a Site during the Lease Term. Lessee shall be
entitled to receive any credit or refund with respect to any utility charge paid
by Lessee and the amount of any credit or refund received by Lessor on account
of any utility charges paid by Lessee, net of the costs and expenses reasonably
incurred by Lessor in obtaining such credit or refund, shall be promptly paid
over to Lessee. All charges for utilities imposed with respect to a Site for a
billing period during which this Lease expires or terminates (except pursuant to
Section 6.2, in which case Lessee shall be solely responsible for all such
charges) shall be adjusted and prorated on a daily basis between Lessor and
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Lessee, and each party shall pay or reimburse the other for each party's pro
rata share thereof.
ARTICLE VI
RENEWAL OPTION; SALE, RETURN AND PURCHASE OPTIONS
SECTION VI.1. Renewal Option. Subject to the consent of Lessor and the
Lenders pursuant to Section 2.10 of the Participation Agreement, Lessee shall
have the right, at its option, to request the Participants to renew all (but not
less than all) of the Lease Supplements for the Renewal Term, commencing
immediately following the expiration of the Basic Term. In order to exercise
such option, Lessee shall give irrevocable written notice thereof to Lessor no
earlier than fifteen (15) months and no later than twelve (12) months prior to
the end of the Basic Term and no Lease Payment/Bankruptcy Default or Lease Event
of Default shall have occurred and be continuing at the time of exercise and at
the commencement of the Renewal Term. If the Renewal Term is applicable, Lessee
shall continue to pay Rent, including Basic Rent (upon the terms agreed to by
Lessee and the Participants for the Renewal Term), during the Renewal Term on
each Payment Date occurring during the Renewal Term. All of the provisions of
this Lease shall remain in effect during the Renewal Term.
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SECTION VI.2. Purchase Option. Lessee will have the right, at its
option and upon ten (10) months prior written notice (which notice shall be
irrevocable) to Lessor prior to expiration of the Lease Term, to purchase all
(but not less than all) of the Sites then subject to the Lease Supplements at a
price equal to the Purchase Option Exercise Amount (the "Purchase Option"). If
Lessee shall have elected to purchase the Sites, Lessor shall, upon discharge of
the Lien of the Mortgages pursuant to the provisions thereof, and the payment in
full of an amount sufficient to retire the Notes and pay in full the Equity
Amount, and the payment of all accrued but unpaid Rent and breakage fees, if
any, plus all other amounts (including, without limitation, all Supplemental
Rent), fees and expenses then due and payable, transfer by quitclaim deed (or
quitclaim ground lease assignment) all of Lessor's right, title and interest in
and to the Sites to Lessee or its designee, without recourse or warranty (except
as to the absence of Lessor Liens), and re-assign to Lessee, as Construction
Agent, any Construction Documents previously assigned by Lessee, as Construction
Agent, to Lessor, against payment by Lessee of the Purchase Option Exercise
Amount in immediately available funds. Lessee, at its option, may assign its
right to exercise the Purchase Option by written notice thereof to Agent and
Lessor; provided that (i) Lessee shall be bound by any exercise of the Purchase
Option by the assignee, (ii) such assignee shall be bound by the provisions of
this Article VI applicable to the Purchase Option, and (iii) no such assignment
shall release Lessee from its obligations under this Article VI and, without
limitation, Lessee shall remain primarily liable to Lessor for the payment of
all amounts due under this Article VI in respect of the Purchase Option.
SECTION VI.3. Sale Option. If no Lease Payment/Bankruptcy Default or
Lease Event of Default shall have occurred and be continuing, then Lessee may
cause all (but not less than all) of the Sites subject to the Lease Supplements
to be sold on the last day of the Lease Term for cash to a purchaser or
purchasers not affiliated in any way with Lessee (the "Sale Option"); provided
that each Land Interest and the Facility thereon shall be sold to the same
Person and all Land Interests and all Facilities thereon shall be sold to one or
more Persons in the same transaction; and provided further that in connection
with the sale of each Facility located on a Non-Acquired Land Interest, Lessee
shall be obligated to sell the related Land Interest as well. In the event
Lessee timely elects the Sale Option, on the last day of the Lease Term, Lessee
will pay as Supplemental Rent to Lessor the amounts determined in accordance
with Section 6.4(b) until the Lease Balance and all other amounts payable under
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the Operative Documents have been paid in full.
SECTION VI.4. Conditions for Sale of the Sites.
(a) In the event that the Sale Option is applicable, Lessee
shall cause all (but not less than all) of the Sites to be sold in accordance
with the procedures set forth in this Section 6.4. In order to exercise the Sale
Option, Lessee shall give notice of its election of the Sale Option effective at
the expiration of the Basic Term or Renewal Term, as the case may be, not later
than ten (10) months prior to such expiration, which exercise shall be
irrevocable, and any failure of Lessee to so elect the Sale Option shall be
deemed an election of the Purchase Option pursuant to Section 6.2. Subject to
the preceding sentence, during the period commencing on the date ten (10) months
prior to the scheduled end of the Basic Term or the Renewal Term, as the case
may be, Lessee, on behalf of Lessor, shall use best commercial efforts, as
nonexclusive agent for Lessor, to obtain the highest cash bids for the purchase
of the Sites and, in the event it receives any bid, Lessee shall, within five
(5) Business Days after receipt thereof and at least twenty (20) Business Days
prior to the Lease Termination Date, certify to Lessor and Agent in writing the
amount and terms of such bid, and the name and address of the party or parties
(who shall not be Lessee or any Affiliate of Lessee or any Person with whom
Lessee has an understanding or arrangement regarding the future use of the Sites
by Lessee or such Affiliate, but who may be Lessor or a Lender, any Affiliate
thereof or any Person contacted by a Lender) submitting such bid. Lessee will
keep Agent promptly informed of the material terms of any proposed bid. Lessee
shall bear its own expenses and pay, as Supplemental Rent, the reasonable
expenses of Lessor, Agent and each Lender in connection with any such bidding
and sale process pursuant to this Section 6.4 including any recapture costs
incurred under government-funded healthcare programs, as well as all costs and
expenses incurred by any party (including a buyer or potential buyer) to place
the Sites in the condition required by Section 9.1 and costs of repairs,
Alterations or improvements desired by such buyer.
(b) In the event that Lessee contemplates accepting any bid
which, upon payment of all amounts under Section 6.4(b), shall result in any
portion of the Lease Balance or any other amount due under the Operative
Documents remaining outstanding (a "Loss Bid"), Lessee shall notify Agent and
Lessor in writing (a "Loss Bid Notice") of such fact and the calculation thereof
prior to accepting any such bid; and in the event of such bid, any Participant
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may submit a bid to Lessee not later than thirty (30) days after the date of
such notice from Lessee. On or before the Lease Termination Date, so long as no
Lease Event of Default or Lease Payment/Bankruptcy Default shall have occurred
and be continuing, and subject to the release of the security interest with
respect to the Sites under the Mortgages: (i) Lessee shall transfer all of
Lessee's right, title and interest in the Sites, or cause the Sites to be
transferred, to the bidder(s), if any, which shall have submitted the highest
bid therefor at least twenty (20) (or, in the case of a Participant, any
Affiliate thereof or Person contacted by a Participant, five (5)) Business Days
prior to such Lease Termination Date, in the same manner and in the same
condition and otherwise in accordance with all the terms of this Lease; (ii)
subject to prior or concurrent payment by Lessee of all amounts due under clause
(iii) of this sentence, Lessor shall exercise such rights as it has to cause the
Sites to be released from the Lien of the Mortgages and shall, without recourse
or warranty (except as to the absence of Lessor Liens), transfer by quitclaim
deed Lessor's right, title and interest in and to the Sites for cash to such
bidder(s); and (iii) Lessee shall simultaneously pay or cause to be paid to
Lessor in immediately available funds an amount equal to the sum of (p) all
unpaid Basic Rent due on or prior to the Lease Termination Date, and all
Supplemental Rent due on or prior to such date and any other amounts due and
payable by Lessee to Lessor, Agent and each Lender plus (q) the gross sale
proceeds of the Sites sold by Lessor (the "Proceeds"); plus (r) the Applicable
Percentage Amount. To the extent the sum of the Proceeds plus the Applicable
Percentage Amount shall exceed the Lease Balance, upon receipt of the amounts
described in clause (p) of the preceding sentence, Lessor shall apply the amount
of Proceeds equal to such excess to the amount payable by Lessee under clause
(r); provided, that to the extent that the Proceeds alone shall exceed the Lease
Balance, upon receipt of the Proceeds and the amounts described in clause (p) of
the preceding sentence, Lessor shall pay the amount of such excess to Lessee.
For purposes of clause (q), with respect to the gross sales proceeds relating to
the sale of the Non-Acquired Land Interests and the related Facilities, such
gross proceeds shall be allocated between Lessee's interest in such Non-Acquired
Land Interest (as the owner thereof) and Lessor's interest in such Non-Acquired
Land Interest (as the ground lessee thereof) and in the Facility thereon based
upon the respective Fair Market Sales Values of Lessee's interest in such
Non-Acquired Land Interest and Lessor's interest in such Non-Acquired Land
Interest and the Facility thereon as determined by an appraisal conducted, at
Lessee's expense, by an appraiser of nationally recognized standing, selected
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and engaged by the Required Participants; provided, that the maximum portion of
the gross sales proceeds allocated to any Non-Acquired Land Interest shall be
Lessee's cost for such Non-Acquired Land Interest as set forth in the
applicable Lease Supplement. The "Applicable Percentage Amount" shall be based
upon the Applicable Percentage for the Lease Supplement applicable to such Site,
and shall be determined in accordance with the definition thereof in Appendix 1
to the Participation Agreement. The "Applicable Percentage" for each Lease
Supplement shall be determined on or about the date of acquisition by Lessor of
the related Undeveloped Site or as soon thereafter as Lessor obtains sufficient
information to make a determination for financial accounting purposes and shall
be set forth in the Lease Supplement; provided that the maximum "Applicable
Percentage Amount" will be determined as the greatest amount which would not
cause the present value at the beginning of the Lease Term of the minimum lease
payments (including, without limitation, such Applicable Percentage Amount), as
determined in accordance with generally accepted accounting principles, to equal
or exceed ninety percent (90%) of the Fair Market Sales Value, at the beginning
of this Lease, of the applicable Site. The Applicable Percentage for any Lease
Supplement shall in no event be less than eighty percent (80%).
(c) If Lessee exercises the Sale Option and a Loss Bid Notice
is to be provided pursuant to Section 6.4(b), then as a condition to Lessee's
right to consummate the Sale Option pursuant to Sections 6.3 and 6.4, Lessee
shall cause to be delivered to Lessor not later than five (5) Business Days
prior to the Lease Termination Date, at Lessee's sole cost and expense, a report
in form and substance reasonably satisfactory to the Agent and Lessor from an
Appraiser selected by Lessee and reasonably acceptable to the Agent and Lessor
(the "End of Term Report") to establish the reason for any impairment to the
value of any of the Sites which are being sold for less than the Allocated
Amount applicable to such Site. Without limiting the indemnities provided in the
Operative Documents, on the Lease Termination Date, Lessee shall pay to Agent,
on behalf of Lessor and the Lenders, an amount equal to the Shortfall Amount
that the End of Term Report demonstrates was the result of any impairment to the
value in any of the Sites due to:
(i) the existence of any Hazardous Materials,
Environmental Concern Materials or violations of
Environmental Laws with respect to a Site occurring or
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discovered after the date such Site becomes subject to the
Lease (regardless of the Person so discovering any of the
foregoing), or
(ii) any restoration or rebuilding carried out by Lessee
or any failure of Lessee to complete any Alterations,
restoration or rebuilding, or
(iii) any easements or other actions described in
clauses (i) through (viii) of Section 8.3, or
(iv) the failure of Lessor to have good and marketable title to
any Site free and clear of all Liens (including Permitted
Liens (other than Lessor Liens)) and exceptions to title
caused by the acts or omissions of Lessee or any Affiliate
or Subtenant.
As used herein, the term "Shortfall Amount" means the excess, if any, of (i) the
Lease Balance over (ii) the sum of the Proceeds plus the Applicable Percentage
Amount.
SECTION VI.5. Early Termination.
(a) Commencing July 24, 1998 and provided that no Lease
Payment/Bankruptcy Default or Lease Event of Default shall have occurred and be
continuing (or any such defaults are cured contemporaneously with the
consummation of the purchase option under this Section 6.5(a)), Lessee shall
have the option to purchase all (but not less than all) of the Sites on the next
scheduled Payment Date for an amount equal to, without penalty, the Lease
Balance plus all other amounts then due under the Lease and the other Operative
Documents, including, without limitation, accrued but unpaid Rent and breakage
fees, if any, plus all other amounts, fees and expenses then due and payable.
(b) On any scheduled Payment Date on or prior to July 24,
1997, Lessee may, at its option, by giving at least ninety (90) days' advance
written notice to Lessor, purchase all (but not less than all) of the Sites for
an amount equal to the Lease Balance, accrued but unpaid Rent and breakage fees,
if any, all other amounts, fees and expenses then due and payable plus a
prepayment fee equal to 50 basis points of the Lease Balance. On any scheduled
Payment Date after July 24, 1997, but prior to July 24, 1998, Lessee may, at its
option, by giving at least ninety (90) days' advance written notice to Lessor,
purchase all (but not less than all) of the Sites for an amount equal to the
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Lease Balance, accrued but unpaid Rent and breakage fees, if any, all other
amounts, fees and expenses then due and payable, plus a prepayment fee equal to
25 basis points of the Lease Balance.
SECTION VI.6. Exercise of Options; Failure to Elect. In order to
exercise any of its purchase or sale options under this Lease (other than under
Section 6.5), Lessee shall give irrevocable written notice to Lessor not less
than twelve (12) months prior to the end of the Basic Term, that Lessee intends
to exercise one of the options provided in this Article VI and specifying such
option. If Lessee shall fail to deliver such written notice in the time
required, Lessee shall be deemed to have elected to exercise the Purchase Option
pursuant to Section 6.2. Lessee's election (or deemed election) of the Purchase
Option will be irrevocable at the time it is made (or deemed made). If Lessee
has elected the option to sell the Sites under Section 6.3, such option shall be
automatically revoked and such election shall be deemed of no effect if, on or
after the date Lessee elects such option, there exists or occurs a Lease Event
of Default or Lease Payment/Bankruptcy Default or Lessee shall fail in any
manner fully to comply with this Article VI, in which case Lessee shall be
automatically deemed to have elected the Purchase Option pursuant to Section
6.2.
SECTION VI.7. Return of Sites. Unless the Sites shall have been
transferred to Lessee pursuant to Section 6.2 or 6.5, Lessee shall, on the Lease
Termination Date, and at its own expense, transfer the Sites (together with the
reports described in Section 9.4 relating thereto) to the independent purchaser
thereof pursuant to Section 6.3, free and clear of all Liens other than
Permitted Exceptions and Lessor Liens, in as good condition as they were on the
Document Closing Date, ordinary wear and tear excepted, and in compliance with
all Applicable Laws and Regulations and the other requirements of Article IX
(and in any event without (x) any asbestos installed or maintained in any part
of the Site, (y) any polychlorinated byphenyls (PCBs) in, on or used, stored or
located at the Site, and (z) any other Hazardous Materials). Lessee shall
cooperate with the independent purchaser of the Site in order to facilitate the
ownership and operation by such purchaser of the Site after the Lease
Termination Date, including providing all books, reports and records regarding
the maintenance, repair and ownership of the Site and all data and technical
information relating to the physical operation and maintenance of the Site,
granting or assigning (to the extent permitted by law) all licenses necessary
for the operation and maintenance of the Site and cooperating in seeking and
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obtaining all necessary Governmental Action. Lessee shall have also paid the
total cost for the completion of all Alterations commenced prior to the Lease
Termination Date. The obligation of Lessee under this Article VI regarding the
Purchase Option shall survive the expiration or termination of this Lease,
except if Lessee duly and timely exercises the Sale Option and performs its
obligations under Sections 6.3 and 6.4, or Lessee duly and timely exercises its
rights under Section 6.5 and performs its obligations thereunder. Unless Lessee
shall have exercised or been deemed to have exercised its option to purchase the
Sites, then after the date which is twelve (12) months prior to the Lease
Termination Date, Lessor shall at Lessee's expense be entitled to perform such
investigation, including obtaining reports of engineers and other experts as to
the condition and state of repair and maintenance required by this Section 6.7
and as to the compliance with Environmental Laws of the Site, as it deems
appropriate. Lessee, at its sole cost and expense, shall cause the repair or
other remediation of any discrepancies between the actual condition of the Site
and the condition required under the Lease, such repair or remediation to be
completed not later than the expiration of this Lease.
SECTION VI.8. Completion of Facilities. In the event that any Facility
becomes subject to this Lease pursuant to Sections 2.1 and 2.2 prior to
Completion thereof due to the termination of the Construction Period applicable
thereto under Section 5.1 of the Construction Agency Agreement, Lessee (at its
cost) shall diligently pursue construction of such Facility in accordance with
the construction-related provisions of the Operative Documents (including those
set forth in the provisions of Article III of the Participation Agreement,
notwithstanding that the Participants shall not be obligated to make any
Advances in respect of such construction) and shall cause the Completion of such
Facility not later than the earlier to occur of (x) the date which is twelve
(12) months after the Site Acquisition Date for the Site on which such Facility
is being constructed and (y) the original expiration date of the Construction
Period for such Facility, not taking into account the early termination of such
Construction Period; provided that the dates described in clauses (x) and (y)
for such Facility shall be subject to extension for Force Majeure delays not to
exceed ninety (90) days in the aggregate.
SECTION VI.9. Failure of Lessee to Sell Sites. If Lessee shall exercise
the Sale Option and shall fail to arrange for the sale of all of the Sites on or
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before the Lease Termination Date in accordance with and subject to the
provisions of Sections 6.4 and 6.6, then Lessee and Lessor hereby agree as
follows:
(a) On the Lease Termination Date, Lessee shall (i) pay to
Agent (on behalf of the Participants) the Applicable Percentage Amount
and (ii) Lessee will do both of the following:
(1) at the option of Agent (on behalf of the
Participants), either (x) cancel the sale of the Sites for
which Lessee has arranged a sale (in which case, all Sites
will constitute "unsold Sites" under this Section 6.9) or (y)
sell the Sites for which Lessee has arranged a sale pursuant
to the provisions of Sections 6.4 and 6.6; and
(2) at the option of Agent (on behalf of the
Participants), either (x) tender to Lessor possession of the
unsold Sites or (y) continue to lease the unsold Sites during
a holdover period (the "Holdover Period") and in the case of
such holdover, Lessee shall continue to market, on a
non-exclusive basis, the Sites for sale on behalf of Lessor in
accordance with the provisions of the Lease. For each such
Site, such Holdover Period shall expire on the earlier of (x)
the sale of such Site and (y) the reduction of the Lease
Balance to zero and the payment by Lessee of all Basic Rent,
Supplemental Rent and all other amounts then due and payable
under the Operative Documents, and (z) written notice by
Agent, as Agent for the Lenders, of a date specified for the
termination of such Holdover Period with respect to such Site.
The Basic Rent payable by Lessee for the Sites during any
Holdover Period shall be applied first to payment of the
portion of Basic Rent set forth in clauses (i) and (ii) of the
definition thereof, with any excess being applied to
reduce such Lease Balance. Any Proceeds from the sale of any
Sites during the Holdover Period will be applied to reduce the
Lease Balance, with such application being allocated first to
the Lenders in respect of the remaining amount of the Notes
(i.e., that portion of the outstanding principal balance of
the Notes in excess of the Applicable Percentage Amount), and
second to the Equity Amount. If and when the Lease Balance
shall be reduced to zero, (i) any further Proceeds from the
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sale of any remaining Sites shall be remitted to Lessee for
its own account, (ii) at the request of either Lessor (or
Agent on Lessor's behalf) or Lessee, Lessor will transfer to
Lessee or its designee, and Lessee will accept or cause its
designee to accept the transfer of, all remaining Sites by
quitclaim deed, and Lessee shall pay or cause to be paid all
costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses of counsel to the Participants)
in connection with such transfer.
Agent shall not make the elections under clause (1)(y) and clause
(2)(x) above without receiving (x) the consent of the Lenders if after
giving effect to such partial sale and payment by Lessee of the
Applicable Percentage Amount, any portion of the principal of and
accrued interest on the Notes will remain outstanding, and (y) the
consent of the Lessor if after giving effect to such partial sale and
payment by Lessee of the Applicable Percentage Amount, any portion of
the Equity Amount or accrued Yield will remain outstanding.
(b) On or after the Lease Termination Date, Agent, on behalf
of Lessor and the Lenders, shall have the right, but not the
obligation, to sell the Sites for such purchase price and upon such
terms as Agent shall determine in its sole discretion. In the event
that Agent shall so elect to sell the Sites, Agent shall notify each of
Lessor, Lessee and the Lenders thereof, and each shall have the right
to submit a bid and/or to cause any other Person to submit a bid to
Agent not later than twenty (20) Business Days prior to the date Agent
desires to sell the Sites (as set forth in the aforementioned notice
thereof); provided, however, that Agent, on behalf of Lessor and the
Lenders, shall have the right, in its sole discretion, from time to
time, to defer such proposed sale date, in which event, the rights of
Lessee, Lessor and each Lender to submit a bid and/or to cause any
other Person to submit a bid to Agent shall be extended to the date
that is twenty (20) Business Days prior to the revised proposed sale
date. At no time shall Agent be obligated to accept any bid for the
sale of the Sites (whether such bid was obtained by Lessee, Lessor, any
Lender or otherwise) or to consummate any proposed sale.
(c) At any time and from time to time on or after the Lease
Termination Date, Agent, on behalf of Lessor and the Lenders, shall
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have the right to withdraw from the Sale Deposit (other than the
portion thereof constituting the Applicable Percentage Amount) amounts
to pay, or reimburse itself for the payment of, expenses of Lessor,
Agent and each Participant in connection with any bidding and sale (or
proposed sale, whether or not consummated) described in clause (b). In
the event that there are insufficient funds remaining from the Sale
Deposit to pay such expenses, Lessee shall pay such expenses from time
to time upon demand.
(d) Contemporaneously with the consummation of any sale of the
Sites by Lessee or Agent pursuant to this Section 6.9, (i) Lessee will
transfer all of Lessee's right, title and interest in the Sites to be
transferred to the purchaser, (ii) subject to prior or concurrent
payment by Lessee of all amounts due under clause (iii) of this
sentence and receipt by Lessor of Proceeds from such sale, Lessor shall
exercise such rights as it has to cause the Sites to be released from
the Lien of the Mortgages and shall, without recourse or warranty
(except as to the absence of Lessor Liens), transfer by quitclaim deed
Lessor's right, title and interest in and to the Sites for cash to such
purchaser; and (iii) Lessee shall simultaneously pay or cause to be
paid to Agent, on behalf of Lessor and the Lenders, in immediately
available funds an amount equal to all unpaid Basic Rent and all
Supplement Rent due on or prior thereto and any other amounts due and
payable by Lessee to Lessor, Agent and each Lender. Any Proceeds in
excess of the sum of (x) the Lease Balance, plus (y) all unpaid Basic
Rent and all Supplemental Rent due on or prior thereto and any other
amounts due and payable by Lessee to Lessor, Agent and each Lender,
shall be remitted to Lessee promptly after receipt.
(e) Until a sale of the Sites by Lessee or Agent pursuant to
this Section 6.9, Lessee shall be bound by all of the obligations and
duties of Lessee under this Lease, notwithstanding the occurrence of
the Lease Termination Date.
(f) Lessor reserves all rights under this Lease and the other
Operative Documents arising out of Lessee's breach of any provisions of
this Lease (including Article VI), whether occurring prior to, on or
after the Lease Termination Date, including Lessee's breach of any of
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its obligations under Sections 6.3 and 6.4, including the right to sue
Lessee for damages.
(g) To the greatest extent permitted by law, Lessee hereby
unconditionally and irrevocably waives, and releases Lessor and Agent
from, any right to require Lessor or Agent to sell the Sites at all or
for any minimum purchase price or on any particular terms and
conditions, Lessee hereby agreeing that if Lessee shall elect the Sale
Option, its ability to sell the Sites on or prior to the Lease
Termination Date and its right thereafter to submit a bid or to cause
any other Person to submit a bid to Agent pursuant to Section 6.9(b) in
the event Agent shall elect to sell the Sites, shall constitute full
and complete protection of Lessee's interest hereunder.
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ARTICLE VII
CONDITION AND USE OF SITES
SECTION VII.1. Waivers. LESSEE ACKNOWLEDGES AND AGREES THAT, ALTHOUGH
LESSOR WILL OWN AND HOLD TITLE TO THE SITES, LESSEE IS SOLELY RESPONSIBLE UNDER
THE TERMS OF THE CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT,
BUDGETING, CHANGE ORDERS AND CONSTRUCTION OF THE FACILITIES AND ANY ALTERATIONS.
The Sites are let by Lessor "AS IS" in their present or then condition, as the
case may be, subject to (a) any rights of any parties in possession thereof, (b)
the state of the title thereto existing at the time Lessor acquired its interest
in the Site, (c) any state of facts which an accurate survey or physical
inspection might show (including any survey delivered on or prior to the
Document Closing Date or the Completion Date), (d) all Applicable Laws and
Regulations, and (e) any violations of Applicable Laws and Regulations which may
exist at the commencement of the Lease Term. Lessee has examined the Site and
(insofar as Lessor is concerned) has found the same to be satisfactory. NEITHER
LESSOR, AGENT NOR ANY LENDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY
LIABILITY WHATSOEVER AS TO THE TITLE TO THE SITES OR TO THE VALUE,
MERCHANTABILITY, HABITABILITY, CONDITION, OR FITNESS FOR USE OF THE SITES, OR
ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE SITES, OR ANY PART THEREOF, AND NEITHER LESSOR,
AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT
THEREIN OR THE FAILURE OF THE SITES, OR ANY PART THEREOF, TO COMPLY WITH ANY
APPLICABLE LAWS AND REGULATIONS, except that Lessor hereby represents and
warrants that the Site is and shall be free of Lessor Liens. Lessee has been
afforded full opportunity to inspect the Sites, is satisfied with the results of
its inspections and is entering into this Lease solely on the basis of the
results of its own inspections, and all risks incident to the matters discussed
in the preceding sentence (other than Lessor Liens), as between Lessor, Agent
and the Lenders, on the one hand, and Lessee, on the other, are to be borne by
Lessee. The provisions of this Article VII have been negotiated, and, except to
the extent otherwise expressly stated, the foregoing provisions are intended to
be a complete exclusion and negation of any representations or warranties by any
of Lessor, Agent or the Lenders, express or implied, with respect to the Sites
(or any interest therein), that may arise pursuant to any law now or hereafter
in effect or otherwise.
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ARTICLE VIII
LIENS; EASEMENTS
SECTION VIII.1. Liens. Lessee shall not directly or indirectly create,
incur, assume or suffer to exist any Lien, defect, attachment, levy, title
retention agreement or claim upon any Site or Alteration, or with respect to the
Sites, any Basic Rent or Supplemental Rent, the title thereto, or any interest
therein, including all Liens which arise out of the possession, use, occupancy
or construction of the Sites or by reason of labor or materials furnished or
claimed to have been furnished to Lessee, or any of its contractors or agents or
by reason of the financing of any Alterations constructed by or for the benefit
of Lessee and not financed by Lessor, except in all cases Permitted Liens. With
respect to all Liens other than Permitted Liens, Lessee shall promptly, but not
later than thirty (30) days (or, in the case of non-consensual Liens, sixty (60)
days) after the filing thereof, at its own expense, take such action as may be
necessary duly to discharge or eliminate or bond in a manner reasonably
satisfactory to Lessor any such Lien if the same shall arise at any time.
SECTION VIII.2. No Lessor Consent or Liability. Nothing contained in
this Lease shall be construed as constituting the consent or request of the
Lessor, expressed or implied, to or for the performance by any contractor,
mechanic, laborer, materialman, supplier or vendor of any labor or services or
for the furnishing of any materials for any construction, alteration, addition,
repair or demolition of or to any Site or any part thereof. NOTICE IS HEREBY
GIVEN THAT NEITHER LESSOR NOR ANY LENDER OR AGENT IS OR SHALL BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO
ANYONE HOLDING A SITE OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO
MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH
TO OR AFFECT THE INTEREST OF LESSOR, AGENT OR ANY LENDER IN AND TO ANY SITE.
SECTION VIII.3. Easements. Subject to Section 3.4 of the Construction
Agency Agreement (which shall take precedence over these provisions during the
Construction Period with respect to any Undeveloped Site) and notwithstanding
the foregoing paragraph, at the request of Lessee, Lessor shall, from time to
time during the Lease Term and upon at least thirty (30) days' prior written
notice from Lessee, and receipt of the materials specified in the next
succeeding sentence, consent to and join in any (i) grant of easements,
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licenses, rights of way, party wall rights and other rights in the nature of
easements, with or without consideration, (ii) release or termination of
easements, licenses, rights of way, party wall rights or other rights in the
nature of easements which are for the benefit of a Site or any portion thereof,
with or without consideration, (iii) dedication or transfer of portions of a
Site, not improved with a building, for road, highway or other public purposes,
with or without consideration, (iv) execution of petitions to have a Site or any
portion thereof annexed to any municipal corporation or utility district, (v)
execution of agreements for the use and maintenance of common areas, for
reciprocal rights of parking, ingress and egress and amendments to any covenants
and restrictions affecting a Site or any portion thereof, with or without
consideration, (vi) request to any Authority for platting or subdivision or
replatting or resubdivision approval with respect to a Site or any portion
thereof or any parcel of land of which a Site or any portion thereof forms a
part or a request for any variance from zoning, (vii) creation of a governmental
special benefit district for public improvements and collection of special
assessments in connection therewith, in lump sum or installments, and (viii)
execution and delivery of any instrument appropriate to confirm or effect such
grant, release, dedication, transfer request or such other matter, document or
proceeding. Lessor's obligations pursuant to the preceding sentence shall be
subject to the requirements that:
(a) any such action shall be at the sole cost and expense of
Lessee, and Lessee shall pay all reasonable out-of-pocket costs of Lessor, Agent
and the Lenders in connection therewith (including, without limitation, the
reasonable fees of attorneys (including allocated costs of internal counsel of
Agent);
(b) Lessee shall have delivered to Lessor a certificate of a
Responsible Officer of Lessee stating that:
(1) such action will not cause the Site or any
portion thereof to fail to comply in any respect with the provisions of
the Lease or any other Operative Documents and in any material respect
with all Applicable Laws and Regulations (including, without
limitation, all applicable zoning, planning, building and subdivision
ordinances, all applicable restrictive covenants and all applicable
architectural approval requirements);
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(2) all governmental consents or approvals required
prior to such action have been obtained, and all filings required prior
to such action have been made;
(3) such action will not result in any material
down-zoning of the Site or any portion thereof or a material reduction
in the maximum density or development rights available to the Site
under all Applicable Laws and Regulations;
(4) this Lease and Lessee's obligations hereunder
shall continue in full force and effect, without abatement, suspension,
deferment, diminution, reduction, counterclaim, setoff, defense or
deduction;
(5) such action will not materially reduce the Fair
Market Sales Value, utility, remaining economic useful life or residual
value of the Site or Lessor's interest therein; and
(6) such action will not impose or create any
liability or obligation on Lessor;
(c) all consideration received in connection with such
action shall be paid to Lessee; and
(d) no Lease Event of Default shall have occurred and
be continuing.
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ARTICLE IX
MAINTENANCE AND REPAIR;
ALTERATIONS AND ADDITIONS
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SECTION IX.1. Maintenance and Repair; Compliance With Law. Lessee, at
its own expense, shall at all times (a) maintain the Sites in good repair and
condition, subject to ordinary wear and tear, and in safe repair and condition
(all whether involving interior or exterior, structural or nonstructural,
ordinary or extraordinary, and foreseen or unforeseen circumstances); (b) except
to the extent Section 9.5 shall apply, maintain, manage and monitor the Sites in
accordance with all Applicable Laws and Regulations, whether or not such
maintenance requires structural modifications, noncompliance with which (i)
would have a material adverse effect on Lessee's right to use the Sites or
Lessee's business or financial condition, (ii) would cause any of the results
enumerated in Section 9.5 hereof, (iii) would materially adversely affect the
Fair Market Sales Value, utility, remaining economic useful life or residual
value of the Sites, or (iv) would materially adversely affect Lessor's interest
in the Sites; (c) comply with the standards imposed by any insurance policies
required to be maintained hereunder which are in effect at any time with respect
to the Sites or any part thereof; (d) maintain, manage and monitor the Sites in
accordance with all applicable contracts, including service contracts and
insurance contracts; (e) conduct maintenance and repair under the same programs
and subject to the same standards as Lessee or its Affiliates shall maintain and
repair other healthcare facilities owned, leased or operated by Lessee or its
Affiliates; (f) cause the Sites to continue to have at all times the capacity
and functional ability to be used for, on a continuing basis (subject to normal
interruption in the ordinary course of business for maintenance, inspection and
repair) and in commercial operation, the purposes for which it was specifically
designed; (g) maintain appropriate and customary written environmental
operations and maintenance plans (including, where appropriate for
asbestos-containing materials) for the Sites; and (h) procure, maintain and
comply in all material respects with all material licenses, permits, orders,
approvals, consents and other authorizations required for the construction, use,
maintenance and operation of the Sites and for the use, operation, maintenance,
repair and restoration of the Facilities. Lessee waives any right that it may
now have or hereafter acquire to (x) require Lessor to maintain, repair,
replace, alter, remove or rebuild all or any part of the Sites or (y) make
repairs at the expense of Lessor pursuant to any Applicable Laws and Regulations
or other agreements.
SECTION IX.2. Alterations.
(a) At Lessee's own cost and expense, (i) Lessee shall make
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alterations, renovations, improvements and additions to any Site(s) or any part
thereof and substitutions and replacements therefor (collectively,
"Alterations") so long as such Alterations are (A) made to repair or maintain
the Site(s) in the condition required by Section 9.1; (B) necessary in order for
the Site(s) to be in compliance with Applicable Laws and Regulations; or (C)
necessary or advisable to restore the Site(s) to their condition existing prior
to a Casualty or Condemnation; and (ii) so long as no Lease Event of Default or
Lease Payment/Bankruptcy Default has occurred and is continuing, Lessee may
undertake Alterations on one or more Sites so long as such Alterations comply
with Applicable Laws and Regulations and with Section 9.1 and subsection (b) of
this Section 9.2.
(b) The making of any Alterations must be in compliance with
the following requirements; provided that in the case of any Alteration required
by an emergency or by Applicable Laws and Regulations, Lessee shall (x) promptly
notify Agent thereof, (y) not be bound by the provisions of clause (1) below and
(z) effect such Alteration in a manner to avoid (or minimize if it is not
possible to avoid) any violation of clause (5) below:
(1) No such Alterations with a cost exceeding $500,000 (or, in
the case of related Alterations at any one Site, with an aggregate cost
exceeding $500,000) shall be made or undertaken except upon not less
than thirty days' prior written approval of Agent, which approval shall
not be unreasonably withheld. For any Alterations which are subject to
this clause (1), if Agent, in its good faith judgment, believes that
such Alterations may violate the provisions of clause (5) below, Agent
(on behalf of the Participants) may engage an appraiser of nationally
recognized standing, at Lessee's expense, to determine (by appraisal
methods satisfactory to Agent) the projected Fair Market Sales Value of
any Facility following the completion of Alterations relating thereto
and may delay its approval until receipt of such appraisal.
(2) Lessee shall not make any Alterations in violation of the
terms of any restriction, easement, condition or covenant or other
matter affecting title to the Site.
(3) No Alterations shall be undertaken until Lessee shall have
procured and paid for, so far as the same may be required from time to
time, all permits and authorizations relating to such Alterations of
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all municipal and other Authorities having jurisdiction over the Site.
Lessor, at Lessee's expense, shall join in the application for any such
permit or authorization and execute and deliver any document in
connection therewith, whenever such joinder is necessary or advisable.
(4) The Alterations shall be expeditiously completed in a good
and workmanlike manner and in compliance with all Applicable Laws and
Regulations then in effect and the standards imposed by any insurance
policies required to be maintained hereunder.
(5) All Alterations shall, when completed, be of such a
character as to not materially adversely affect the Fair Market Sales
Value, utility, remaining economic useful life or residual value of the
Site from its Fair Market Sales Value, utility, remaining economic
useful life or residual value immediately prior to the making thereof
or, in the case of Alterations being made by virtue of a Casualty or
Condemnation, immediately prior to the occurrence of such Casualty or
Condemnation.
(6) Lessee shall have made adequate arrangements for payment
of the cost of all Alterations when due so that the Site shall at all
times be free of Liens for labor and materials supplied or claimed to
have been supplied to the Site, other than Permitted Liens; provided,
that Lessee shall have the right to contest the amount claimed by any
such supplier of labor or materials in accordance with the applicable
provisions of Section 9.5.
SECTION IX.3. Title to Alterations. Title to Alterations shall without
further act vest in Lessor and shall be deemed to constitute a part of the
related Site and be subject to this Lease in the following cases:
(a) such Alterations shall be in replacement of or in
substitution for a portion of the Facilities and/or the Sites;
(b) such Alterations shall be required to be made pursuant to
the terms of Section 9.1 or 9.2(a)(i) hereof; or
(c) such Alterations shall be Nonseverable.
Lessee, at Lessor's request, shall execute and deliver any
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deeds, bills of sale, assignments or other documents of conveyance reasonably
necessary to evidence the vesting of title in and to such Alterations to Lessor.
If such Alterations are not within any of the categories set
forth in clauses (a) through (c) of this Section 9.3, then title to such
Alterations shall vest in Lessee and such Alterations shall not be deemed to be
Alterations which are part of the Site.
All Alterations to which Lessee shall have title may, so long
as removal thereof shall not result in the violation of any Applicable Laws and
Regulations and no Lease Event of Default or Lease Payment/Bankruptcy Default is
continuing, be removed at any time by Lessee. Any such Alterations shall be
removed by Lessee at its expense if Lessor shall so request prior to the return
of the Site to Lessor or sale of the Site in accordance with the provisions of
this Lease, and Lessee shall at its expense repair any damage to the Site caused
by the removal of such Alterations. Lessor (or the purchaser of the applicable
Site) may purchase from Lessee Alterations (if not already owned by Lessor)
which Lessee notifies Lessor that Lessee intends to remove from the Site prior
to the return of the Site to Lessor or sale of the Site, which purchase shall be
at the Fair Market Sales Value of such Alterations. Title to any Lessee
Alterations shall vest in Lessor (or the purchaser of the applicable Site) if
not removed from the Site by Lessee prior to the return of the Site to Lessor or
sale of the Site.
SECTION IX.4. Maintenance and Repair Reports. Lessee shall keep
maintenance and repair reports in sufficient detail, and as customary for owners
of commercial real estate, to indicate the nature and date of major work done.
Lessee shall prepare and maintain appropriate and customary written operations
and maintenance plans (including, where appropriate for asbestos-containing
materials) for the Sites. Such reports and plans shall be kept on file by Lessee
at its offices during the Lease Term, and shall be made available to Lessor upon
reasonable request. Lessee shall give notice to Lessor and Agent of any
Condemnation or Casualty the cost to repair which is reasonably expected by
Lessee to exceed $250,000, promptly after Lessee has knowledge thereof.
SECTION IX.5. Permitted Contests. If, to the extent and for so long as
(a) a test, challenge, appeal or proceeding for review of any Applicable Laws
and Regulations or any Governmental Action relating to any Site or to the
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operation or maintenance of any Facility shall be prosecuted diligently and in
good faith in appropriate proceedings by Lessee or (b) compliance with such
Applicable Laws and Regulations or such Governmental Action shall have been
excused or exempted by a valid nonconforming use permit, waiver, extension or
forbearance, Lessee shall not be required to comply with such Applicable Laws
and Regulations or such Governmental Action but only if and so long as any such
test, challenge, appeal, proceeding or noncompliance shall not, in the
reasonable opinion of Lessor, involve (A) any meaningful risk of (1)
foreclosure, forfeiture or loss of a Site, (2) criminal liability being imposed
on Lessor, Agent, any Lender or the Site or (3) the nonpayment of Rent or (B)
any substantial danger of (1) the sale of, or the creation of any Lien (other
than a Permitted Lien) on, any part of the Site, (2) material civil liability
being imposed on Lessor, Agent, any Lender or the Site, (3) the extension of the
ultimate imposition of such Applicable Laws and Regulations or such Governmental
Action beyond the last day of the Lease Term, or (4) enjoinment of, or
interference with, the use, possession or disposition of the Site in any
material respect. Lessee shall provide Lessor with notice of any contest of the
type described in clause (a) above in detail sufficient to enable Lessor to
ascertain whether such contest may have an effect of the type described in
clauses (b)(A) and (B) above.
Lessor will not be required to join in any proceedings
pursuant to this Section 9.5 unless a provision of any Applicable Laws and
Regulations requires, or, in the good faith opinion of Lessee, it is helpful to
Lessee that such proceedings be brought by or in the name of Lessor; and in that
event Lessor will join in the proceedings or permit them or any part thereof to
be brought in its name if and so long as no Lease Event of Default or Lease
Payment/Bankruptcy Default is continuing and Lessee pays all related expenses.
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ARTICLE X
USE
Each Site shall be used, during its Construction Period, in a manner
consistent with the Construction Agency Agreement, and thereafter, Lessee may
use each Site as a health care facility and for related ancillary purposes, or
in such other manner reasonably acceptable to Lessor and Agent in their sole
discretion. Lessee shall not use any Site or any part thereof for any purpose or
in any manner that would materially adversely affect the Fair Market Sales
Value, utility, remaining useful life or residual value of the Site or that
would create a materially increased risk of environmental liability or that
would violate or conflict with, or constitute or result in a violation or
default under (a) any Applicable Laws and Regulations whether now existing or
hereafter in effect, foreseen or unforeseen, except to the extent permitted by
Section 9.5, (b) any insurance policies required by Article XI, or (c) any
Operative Document. Lessee shall pay, or cause to be paid, all charges and costs
required in connection with the use of the Sites as contemplated by this Lease
and the Construction Agency Agreement. Lessee shall not commit or permit any
waste of the Sites or any part thereof.
ARTICLE XI
INSURANCE
SECTION XI.1. Required Coverages. Lessee will keep insured all property
of a character usually insured by corporations engaged in the same or similar
business similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such corporations, and carry such other
insurance as is usually carried by such corporations, provided that in any event
Lessee will maintain:
(a) Commercial General Liability Insurance. Combined single
limit insurance against claims for bodily injury, death or third-party property
damage occurring on, in or about each Site (including adjoining streets and
sidewalks) in an amount at least equal to $5,000,000 per person and $5,000,000
per occurrence (subject to a maximum deductible of $350,000 per occurrence) and
$5,000,000 for property damage per occurrence, with a minimum general annual
limit of $5,000,000 and a minimum of $15,000,000 excess of such coverage.
(b) Property Insurance. Insurance against loss of damage
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covering each Site or any portion thereof by reason of any Peril (as defined
below) in an amount (subject to such deductibles and/or self-insurance in such
maximum amounts as is approved by Agent from time to time, such approval not to
be unreasonably withheld) at least equal to such minimum amounts as are carried
by corporations owning and/or operating healthcare facilities comparable to the
Sites; provided, however, that at no time shall the amount of such coverage be
less than replacement cost.
(c) Workers' Compensation Insurance. Lessee shall, in the
construction of the Facilities (including in connection with any Alterations
thereof) and the operation of the Sites, comply with the applicable Workers'
Compensation laws and protect Lessor, Agent and the Lenders against any
liability under such laws.
(d) Builder's Risk Insurance. During the construction of any
Alteration, Lessee shall also maintain, for the benefit of Lessor, all-risk
Builders' Risk Insurance in an amount equal to the greater of the replacement
value of the applicable Facility and Alteration and the then outstanding
Allocated Amount of the applicable Site.
(e) Flood Insurance. For any Site located in a special flood
hazard area (as defined in National Flood Insurance Reform Act), Lessee shall
maintain flood insurance, for the benefit of Lessor, Agent and the Lenders, in
an amount at least equal to the then outstanding Allocated Amount of the
applicable Site. Prior to the date hereof and from time to time upon Lessor's
request, Lessee shall deliver to Lessor evidence reasonably satisfactory to
Lessor for each Site establishing whether such Site is located in a special
flood hazard area.
(f) Other Insurance. Such other insurance, including worker's
compensation insurance, malpractice or professional liability insurance,
automobile liability (if applicable) and business interruption insurance, in
each case as is generally carried by owners of similar properties in such
amounts and against such risks as are then customary for properties similar in
use.
Such insurance shall be written by reputable insurance
companies that are financially sound and solvent and otherwise reasonably
appropriate considering the amount and type of insurance being provided by such
companies. Any insurance company selected by Lessee shall be rated in A.M.
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Best's Insurance Guide or any successor thereto (or if there be none, an
organization having a similar national reputation) and shall have a general
policyholder rating of "A-" (or comparable rating for a rating by an
organization other than A.M. Best) and a financial rating of at least "X" (or
comparable rating for a rating by an organization other than A.M. Best) or be
otherwise acceptable to the Required Participants. In the case of liability
insurance maintained by Lessee, it shall name Agent, together with Lessor, as
additional insureds and, in the case of property insurance maintained by Lessee,
it shall name Agent, together with Lessor, as mortgagees and loss payees. Each
policy referred to in this Section 11.1 shall provide that: (i) it will not be
cancelled, materially modified or its limits reduced, or allowed to lapse
without renewal, except after not less than 30 days' prior written notice to
Agent; (ii) the interests of Agent and Lessor shall not be invalidated by any
act or negligence of or breach of warranty or representation by Lessee or any
Person having an interest in a Site or the Facility thereon; (iii) such
insurance is primary with respect to any other insurance carried by or available
to Agent and Lessor; (iv) the insurer shall waive any right of subrogation,
setoff, counterclaim, or other deduction, whether by attachment or otherwise,
against Agent or Lessor; and (v) such policy shall contain a cross-liability
clause providing for coverage of Agent and Lessor as if separate policies had
been issued to each of them. Lessee will notify Agent promptly of any policy
cancellation, reduction in policy limits, modification or amendment. The term
"Peril" shall mean, collectively, fire, lightning, flood, windstorm, hail,
explosion, riot and civil commotion, vandalism and malicious mischief, damage
from aircraft, vehicles and smoke and all other perils covered by the "all risk
endorsement" then in use in the Commonwealth of Pennsylvania.
SECTION XI.2. Delivery of Insurance Certificates. On or before the
Document Closing Date, Lessee shall deliver to Agent and Lessor certificates of
insurance satisfactory to Agent and Lessor evidencing the existence of all
insurance required to be maintained hereunder and setting forth the respective
coverages, limits of liability, carrier, policy number and period of coverage.
Thereafter, throughout the Lease Term, at the time each of Lessee's insurance
policies is renewed (but in no event less frequently than once each year),
Lessee shall deliver to Agent and Lessor certificates of insurance evidencing
that all insurance required by Section 11.1 to be maintained by Lessee with
respect to the Sites is in effect.
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ARTICLE XII
ASSIGNMENT AND SUBLEASING
SECTION XII.1. Assignment and Subletting.
(a) Lessee may not assign, mortgage or pledge, in whole or in
part, any of its right, title or interest in, to or under this Lease or any
portion of the Sites to any Person (including an Affiliate of Lessee) at any
time, and any such assignment, mortgage or pledge shall be void; provided,
however, that without the consent of Lessor, Lessee may assign this Lease to a
single-purpose, wholly-owned, direct or indirect Subsidiary of Genesis (the
"Permitted Assignee") provided that the following conditions are met:
(i) The Permitted Assignee must be incorporated under the laws
of the State of Delaware or the Commonwealth of Pennsylvania;
(ii) No Lease Event of Default or Lease Payment/Bankruptcy
Default shall have occurred and be continuing;
(iii) The Permitted Assignee shall, prior to or simultaneously
with the assignment, enter into an assumption agreement, which
agreement shall include all of the representations, warranties
and covenants contained in this Lease;
(iv) Genesis and its Material Subsidiaries shall, prior to or
simultaneously with the assignment of the Lease deliver a
reaffirmation of the Guaranties; and
(v) Lessee shall deliver an opinion of counsel for the
Permitted Assignee, reasonably acceptable to Lessor and Agent,
dated as of the date of the assignment, stating that the
Permitted Assignee has the legal capacity to perform and
fulfill all of the obligations and liabilities contained in
the Lease, and containing other matters as reasonably
requested by Lessor and Agent.
Lessee may not sublease, in whole or in part, any of its right, title or
interest in, to or under this Lease or any portion of the Sites to any Person at
any time, and any such sublease shall be void and of no force or effect;
provided, however, that without the consent of Lessor, Lessee may sublease any
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Site to a wholly-owned direct or indirect Subsidiary of Genesis (any such
permitted sublease is hereinafter referred to as a "Sublease"). Any such
permitted sublessee under any Sublease described in this Section 12.1(a) shall
hereinafter be referred to as a "Subtenant."
Regardless of Lessor's consent, no subletting shall release
Lessee of Lessee's obligation or alter the primary liability of Lessee to pay
Rent hereunder (including, without limitation, Basic Rent and Supplemental Rent)
and to perform all other obligations to be performed by Lessee hereunder. The
acceptance of Rent by Lessor from any other Person shall not be deemed to be a
waiver by Lessor of any provision hereof. Consent to one subletting of one Site
shall not be deemed consent to any subsequent or further subletting of such Site
or any other Site. Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said successor.
(b) Lessee hereby assigns to Lessor all of Lessee's right,
title and interest in and to all Subleases entered into by Lessee in accordance
with Section 12.1(a), now or hereafter in effect, including but not limited to
all rents and other sums payable to Lessee under each such Sublease. Lessor
shall have no obligation to perform, and Lessee shall not by reason of such
assignment be relieved of its obligation to perform, any of Lessee's covenants
or agreements under this Lease or covenants or agreements of Lessee, as
sublessor, under any such Sublease; provided that, upon the termination of this
Lease or upon termination of Lessee's right to possess the Site following a
Lease Event of Default (the date of such termination shall be referred to herein
as the "Turnover Date") the following shall apply: (A) if Lessee acquires
ownership of the Site in accordance with the terms of this Lease or if Lessee's
right to possess the Site has been terminated following a Lease Event of Default
then, subject to the provisions of Article XVIII, Lessee shall continue to be
liable for all obligations under the Subleases; or (B) if Lessee does not
acquire ownership of the Site, (i) Lessee shall continue to be liable for any
obligations under the Subleases accruing or arising prior to the Turnover Date
and for any tenant improvement obligations arising or accruing prior to the
later of (x) the Turnover Date and (y) the scheduled termination date of the
Basic Term or the Renewal Term or the Extended Renewal Term, as applicable, and
(ii) with respect to any Subleases not terminated in accordance with Section
12.2(b), Lessor (or any successor owner of the Site (the "Designated Owner"))
shall assume and be liable for, subject to the limitations on the liability of
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the Designated Owner set forth in Section 12.2 and subject to the limitations on
the liability of Lessee set forth in Article XVIII, Lessee's obligations under
the Subleases other than those referred to in clause (i) above. Prior to the
Turnover Date, Lessee shall have the right to collect and enjoy all rents and
other sums of money payable under any Sublease and Lessee shall have the right
to modify, extend, amend or terminate any or all of the Subleases (except that
Lessee shall not have the right to amend or modify any Sublease, the effect of
which would be to cause a Qualified Subtenant (defined below) to become a
non-Qualified Subtenant, unless the modification also revises the language
required in the Sublease pursuant to Section 12.2(a) hereof to be consistent
with the language required by Section 12.2(c) hereof.
SECTION XII.2. Sublease Subordination.
(a) In the case of any proposed Sublease with a Subtenant, not
less than thirty days prior to the consummation of such Sublease (or in the case
of a Sublease to be entered into within ten days after the Document Closing
Date, not later than the fifth day after the Document Closing Date), Lessee
shall deliver to Lessor each of the following: (i) a certification of Lessee
identifying the proposed Subtenant in question and confirming that such proposed
Subtenant satisfies the requirements of Section 12.1(a) and Section 12.2(b), and
(ii) a copy of the proposed Sublease.
(b) In the case of any Sublease, following the Turnover Date
the Designated Owner shall have the right to terminate such Sublease and the
Subtenant's Sublease and right of possession thereunder or, in the alternative
(at the Designated Owner's option), the Designated Owner may require the
Subtenant under such Sublease to attorn to the Designated Owner; and in the case
of such required attornment, the rights (including, without limitation, the
right of possession) of such Subtenant under such Sublease shall not be
disturbed or affected by the Designated Owner so long as no default by such
Subtenant exists under the terms of such Sublease as would enable Lessee (as
sublessor) to terminate such Sublease or would cause termination of such
Sublease or would entitle Lessee (as sublessor) to dispossess the Subtenant
under such Sublease. Each Sublease shall contain the following language:
"The Tenant hereunder agrees that this Lease
is subject and subordinate to the lease under which the
Landlord hereunder occupies the Property (the "Overlease",
with the landlord under the Overlease and its successors and
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assigns in interest to the Property or this Lease being
hereinafter referred to as the "Overlandlord") and in the
event of the termination of the Overlease or in the event the
Overlandlord terminates the Landlord's right of possession
under the Overlease (the date on which either such termination
becomes effective being referred to herein as the "Turnover
Date"), the Overlandlord shall have (i) the right to terminate
this Lease and the Tenant's right of possession hereunder, or,
in the alternative (at the Overlandlord's option), (ii) the
right to require the Tenant hereunder to attorn to the
Overlandlord; and in the case of such required attornment
election, the Tenant hereunder will attorn to the Overlandlord
and pay the Overlandlord all of the rents and other monies
required to be paid by the Tenant hereunder, and perform all
of the terms, covenants, conditions and obligations contained
in this Lease, and this Lease shall continue as a direct lease
between the Tenant hereunder and the Overlandlord upon all of
the terms and conditions hereof except that in no event shall
the Overlandlord have any obligation to perform any obligation
of the Landlord hereunder with respect to obligations of the
Landlord hereunder accruing prior to the Turnover Date and
that any obligations of the Overlandlord (or any successor
Overlandlord) hereunder arising after the Turnover Date shall
be without recourse to Overlandlord (other than the interest
of the Overlandlord in the property demised by this Lease)."
ARTICLE XIII
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
SECTION XIII.1. Event of Loss; Condemnation or Casualty.
(a) If an Event of Loss shall occur, Lessee shall give Lessor
and Agent prompt written notice of such occurrence and the date thereof and
Lessee shall purchase the Site(s) affected thereby from Lessor on the next
succeeding Payment Date after the date such Event of Loss shall have occurred at
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a purchase price equal to the sum of (A) the Allocated Amount, plus (B) all
accrued but unpaid Rent, plus (C) all other sums due and payable by Lessee to
Lessor, Agent or any Lender with respect to such affected Site(s) under any of
the Operative Documents.
(b) Upon payment in full of all amounts payable pursuant to
Section 13.1(a) and the discharge of the Lien of the Mortgage pursuant to
Section 6.3 thereof, (i) the Lease Term shall end with respect to the affected
Site(s), (ii) the obligations of Lessee hereunder with respect to the affected
Site(s) (other than any obligations expressed herein as surviving termination of
this Lease) shall terminate as of the date of such payment.
SECTION XIII.2. Application of Payments Relating to an Event of Loss.
All Net Condemnation Proceeds and property insurance proceeds received at any
time by Lessor, Lessee or Agent from any Authority or other Person with respect
to any Event of Loss of one or more Sites shall be promptly remitted to Lessor
and, in the event Lessee purchases the affected Site(s) pursuant to Section
13.1(a), be applied against the purchase price payable by Lessee pursuant to
Section 13.1(a), and any such Net Condemnation Proceeds and property insurance
proceeds remaining thereafter shall be paid over to, or retained by, Lessee, or
as Lessee may direct.
SECTION XIII.3. Application of Certain Payments Relating to a
Condemnation. In case of a requisition for temporary use of all or a portion of
any Site which is not an Event of Taking, this Lease shall remain in full force
and effect, without any abatement or reduction of Rent, and the proceeds
received from any Authority relating to a Condemnation for the affected Site
shall be paid to Lessee, except that any portion of such proceeds that is
awarded with respect to the time period after the expiration or termination of
the Lease Term (unless Lessee shall have exercised an option to purchase the
Sites and no Lease Payment/Bankruptcy Default or Lease Event of Default shall
have occurred and be continuing) shall be paid to Lessor; provided, that if
Lessee has paid the Lease Balance to Lessor, such proceeds (or the portion of
such proceeds in excess of the portion thereof applied to payment of the Lease
Balance) shall be paid over to Lessee.
SECTION XIII.4. Casualty. Upon any Casualty with respect to a Site the
cost of repair of which would exceed $250,000, Lessee shall give to Lessor
written notice thereof. As soon as practicable after a Casualty, Lessee shall
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repair and rebuild the affected portions of the Site suffering such Casualty (or
cause such affected portions to be repaired and rebuilt) to the condition
required to be maintained by Section 9.1 hereof; provided, that the value and
functional capability of such item as restored is at least equivalent to the
value and functional capability of such item as in effect immediately prior to
the occurrence of such Casualty. If any insurance proceeds received with respect
to any Casualty shall be in excess of twenty-five percent (25%) of the Allocated
Amount for the applicable Site, the insurance proceeds received with respect to
such Casualty shall be paid over to or retained by Agent (on behalf of the
Participants), to be distributed to Lessee upon completion of such repairs and
rebuilding of the affected portions of the applicable Site in accordance with
the conditions set forth in this Section 13.4; provided that in such event, at
Lessee's request and expense, Agent and Lessee shall enter into an insurance
escrow and disbursement agreement in form and substance reasonably satisfactory
to Agent providing for the disbursement of proceeds (not more often than once
per month and with each monthly disbursement being not less than $100,000) to
Lessee or its contractor during the course of such repair and rebuilding upon
conditions satisfactory to Agent in its reasonable judgment.
SECTION XIII.5. Other Dispositions. Notwithstanding the foregoing
provisions of this Article XIII, as long as a Lease Payment/Bankruptcy Default
or Lease Event of Default shall have occurred and be continuing, any amount that
would otherwise be payable to or for the account of, or that would otherwise be
retained by, Lessee pursuant to this Article XIII shall be paid to Agent (or to
Lessor after the Loan Agreement shall have been satisfied and discharged) as
security for the obligations of Lessee under this Lease, shall be invested by
Agent (or Lessor) in accordance with Section 21.18 in Permitted Investments and,
if a Lease Event of Default is continuing, may be applied to the obligations of
Lessee hereunder, and, at such time thereafter as no Lease Payment/Bankruptcy
Default or Lease Event of Default shall be continuing, such amount and gain
thereon shall be paid promptly to Lessee to the extent not previously applied in
accordance with the terms of this Lease.
SECTION XIII.6. Negotiations. In the event any part of a Site becomes
subject to condemnation or requisition proceedings, Lessee shall give notice
thereof to Lessor and Agent promptly after Lessee has knowledge thereof and, to
the extent permitted by any Applicable Laws and Regulations, Lessee shall
control the negotiations with the relevant Authority unless a Lease
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Payment/Bankruptcy Default or Lease Event of Default shall be continuing, in
which case Lessor shall control such negotiations; provided that in any event
Lessor may participate at Lessor's expense (or if a Lease Payment/Bankruptcy
Default or Lease Event of Default shall be continuing, at Lessee's expense) in
such negotiations; and provided in all cases, that no settlement will be made
without Lessor's prior written consent, not to be unreasonably withheld. Lessee
shall give to Lessor and Agent such information, and copies of such documents,
which relate to such proceedings, or which relate to the settlement of amounts
due under insurance policies required by Article XI, and are in the possession
of Lessee, as are reasonably requested by Lessor or Agent. If the proceedings
relate to an Event of Taking, Lessee shall act diligently in connection
therewith.
SECTION XIII.7. No Rent Abatement. Rent shall not abate hereunder by
reason of any Casualty, any Event of Loss, any Event of Taking or any
Condemnation of a Site, and Lessee shall continue to perform and fulfill all of
Lessee's obligations, covenants and agreements hereunder notwithstanding such
Casualty, Event of Loss, Event of Taking or Condemnation until the Lease
Termination Date.
ARTICLE XIV
NON-INTERFERENCE
SECTION XIV.1. Non-Interference. Lessor covenants that it will not
interfere in Lessee's or any of its Subtenants' use of the Sites in accordance
with this Lease during the Lease Term, so long as no Lease Event of Default has
occurred and is continuing; it being agreed that Lessee's remedies for breach of
the foregoing covenant shall be limited to a claim for damages or the
commencement of proceedings to enjoin such breach. Such right is independent of
and shall not affect Lessor's rights otherwise to initiate legal action to
enforce the obligations of Lessee under this Lease.
SECTION XIV.2. Certain Duties and Responsibilities of Lessor. Lessor
undertakes to perform such duties and only such duties as are specifically set
forth herein and in the other Operative Documents, and no implied covenants or
obligations shall be read into this Lease against Lessor, and Lessor agrees that
it shall not, nor shall it have a duty to, manage, control, use, sell, maintain,
insure, register, lease, operate, modify, dispose of or otherwise deal with the
Sites in any manner whatsoever, except as required by the terms of the Operative
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Documents and as otherwise provided herein; provided that during the continuance
of a Lease Event of Default or a Lease Payment/Bankruptcy Default, Lessor shall
have no obligation to Lessee to perform any such duties.
ARTICLE XV
INSPECTION AND REPORTS
SECTION XV.1. Inspection. Upon five (5) Business Days prior notice to
Lessee, each of Agent, Lessor, any Lender and their respective authorized
representatives (the "Inspecting Parties") may inspect (a) any Site and (b) the
books and records of Lessee relating directly and primarily to the Site and make
copies and abstracts therefrom, but only after material related to matters other
than the Site shall have been redacted therefrom. All such inspections shall be
at the expense and risk of the Inspecting Parties, except that if a Lease Event
of Default or Lease Payment/Bankruptcy Default has occurred and is continuing,
Lessee shall reimburse the Inspecting Parties for the reasonable costs of such
inspections and such inspection shall be at Lessee's risk. Lessee shall furnish
to the Inspecting Parties statements accurate in all material respects regarding
the condition and state of repair of the Sites, all at such times and as often
as may be reasonably requested. No inspection shall unreasonably interfere with
Lessee's operations or the operations of any other occupant of the Sites. None
of the Inspecting Parties shall have any duty to make any such inspection or
inquiry, and none of the Inspecting Parties shall incur any liability or
obligation by reason of not making any such inspection or inquiry. None of the
Inspecting Parties shall incur any liability or obligation by reason of making
any such inspection or inquiry unless and to the extent, so long as no Lease
Event of Default has occurred and is continuing at the time of inspection, such
Inspecting Party causes damage to the Site or any property of Lessee or any
other Person during the course of such inspection.
SECTION XV.2. Reports. To the extent permissible under Applicable Laws
and Regulations, Lessee shall prepare and file in timely fashion, or, where
Lessor shall be required to file, Lessee shall prepare and make available to
Lessor and Agent within a reasonable time prior to the date for filing and
Lessor shall file, any reports with respect to the condition or operation of the
Sites that shall be required to be filed with any Authority.
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ARTICLE XVI
OWNERSHIP, GRANT OF SECURITY INTEREST
AND FURTHER ASSURANCES
SECTION XVI.1. Grant of Security Interest. Lessee hereby assigns,
grants and pledges to Lessor for the benefit of Agent and the Lenders a security
interest in and Lien against all of Lessee's right, title and interest, whether
now or hereafter existing or acquired, in the Sites and proceeds therefrom, to
secure the payment and performance of all obligations of Lessee now or hereafter
existing under this Lease or any other Operative Document. Lessee shall, at its
expense, do any further act and execute, acknowledge, deliver, file, register
and record any further documents which Lessor or any Lender may reasonably
request in order to protect Lessor's title to and their perfected Lien in the
Sites, subject to no Liens other than Permitted Liens, and Lessor's rights and
benefits under this Lease. Lessee shall promptly and duly execute and deliver to
Lessor such documents and assurances and take such further actions as Lessor or
any Lender may from time to time reasonably request in order to carry out more
effectively the intent and purpose of this Lease and the other Operative
Documents, to establish and protect the rights and remedies created or intended
to be created in favor of Lessor hereunder and thereunder, and to establish,
perfect and maintain the right, title and interest of Lessor in and to the
Sites, subject to no Lien other than Permitted Liens, or of such financing
statements or fixture filings or other documents with respect hereto as Lessor
or any Lender may from time to time reasonably request, and Lessee agrees to
execute and deliver promptly such of the foregoing financing statement and
fixture filings or other documents as may require execution by Lessee. To the
extent permitted by Applicable Laws and Regulations, Lessee hereby authorizes
any such financing statement and fixture filings to be filed without the
necessity of the signature of Lessee. Upon Lessee's request, Lessor shall at
such time as all of the obligations of Lessee under this Lease or any other
Operative Documents have been indefeasibly paid or performed in full (other than
Lessee's contingent obligations, if any, under Article VII of the Participation
Agreement) execute and deliver termination statements and other appropriate
documentation reasonably requested by Lessee, all at Lessee's expense, to
evidence Lessor's release of its Lien against the Sites.
SECTION XVI.2. Attorney-in-Fact. Lessee hereby irrevocably appoints
Agent as Lessee's attorney-in-fact, with full authority in the place and stead
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of Lessee and in the name of Lessee or otherwise, from time to time in Lessor's
discretion, upon the occurrence and during the continuance of a Lease Event of
Default, to take any action (including any action that Lessee is entitled to
take) and to execute any instrument which Lessor may deem necessary or advisable
to accomplish the purposes of this Lease (subject to any limitations set forth
in the Operative Documents), including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for money due and to become due under
or in connection with the Sites;
(b) to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with the foregoing clause
(a);
(c) to file any claim or take any action or institute any
proceedings which Lessor may deem to be necessary or advisable for the
collection thereof or to enforce compliance with the terms and conditions of the
Lease; and
(d) to perform any affirmative obligations of Lessee
hereunder.
Lessee hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section 16.2 is irrevocable and coupled with an
interest.
ARTICLE XVII
LEASE EVENTS OF DEFAULT
The occurrence of any one or more of the following events,
whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body, shall constitute a "Lease Event of
Default":
(a) Lessee shall fail to make any payment (i) of any
Supplemental Rent payable to Agent or any Participant or of Basic Rent when due
and such failure shall continue for a period of five days, or (ii) of amounts
payable pursuant to the exercise of the Sale Option, or amounts payable pursuant
to Section 13.1, when due, or (iii) of Supplemental Rent payable to any Person
other than Agent or a Participant and such failure under this clause (iii) shall
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continue for a period of five days after notice to Lessee from any Person of
such failure; provided that Lessee shall not be entitled to any five-day grace
or cure period under this clause (a) with respect to any payment of the Lease
Balance under Section 6.2 or Section 6.5, or Proceeds or the Applicable
Percentage Amount under Section 6.4(b) or Section 6.9(a);
(b) Lessee or any Guarantor shall fail to make any payment of
any other amount payable hereunder or under any of the other Operative Documents
(other than the Construction Agency Agreement) and such failure shall continue
for a period of five days after such amount first became due and payable (or in
the case of any payment to any Person other than Agent or any Participant, such
failure shall continue for a period of five days after notice to Lessee from any
Person of such failure);
(c) Lessee shall (i) fail to maintain insurance as required by
Section 11.1, or (ii) default in the performance or observance of any term,
covenant, condition or agreement on its part to be performed or observed under
Section 5.2, 5.3, 5.4, 5.7 or 5.11 of the Participation Agreement;
(d) any representation or warranty by Lessee or any Guarantor
in any Operative Document or in any certificate or document (including any
Advance Request) delivered to Lessor, Agent or any Lender pursuant to any
Operative Document shall have been incorrect in any material respect when made
and shall remain material when discovered and if curable shall continue for a
period of 30 days; provided that if Lessee or such Guarantor shall commence such
cure within said 30-day period and shall diligently be pursuing such cure, then
said 30-day period shall be extended to 90 days;
(e) Lessee or any Guarantor shall fail in any material respect
timely to perform or observe any covenant, condition or agreement (not included
in any other clause of this Article XVII) to be performed or observed by it
hereunder or under any other Operative Document and such failure shall continue
for a period of 30 days; provided that if Lessee or such Guarantor shall
commence such cure within said 30-day period and shall diligently be pursuing
such cure, then said 30-day period shall be extended to 90 days;
(f) (i) Lessee or any Guarantor shall generally fail to pay,
or admit in writing its inability to pay, its debts as they become due, or shall
voluntarily commence any case or proceeding or file any petition under any
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bankruptcy, insolvency or similar law or seeking dissolution, liquidation or
reorganization or the appointment of a receiver, trustee, custodian or
liquidator for itself or a substantial portion of its property, assets or
business or to effect a plan or other arrangement with its creditors, or shall
file any answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition filed against it in any bankruptcy,
insolvency or similar case or proceeding, or shall be adjudicated bankrupt, or
shall make a general assignment for the benefit or creditors, or shall consent
to, or acquiesce in the appointment of, a receiver, trustee, custodian or
liquidator for itself or a substantial portion of its property, assets or
business, or (ii) corporate action shall be taken by Lessee or any Guarantor for
the purpose of effectuating any of the foregoing;
(g) involuntary proceedings or an involuntary petition shall
be commenced or filed against Lessee or any Guarantor under any bankruptcy,
insolvency or similar law or seeking the dissolution, liquidation or
reorganization of Lessee or the appointment of a receiver, trustee, custodian or
liquidator for Lessee or any Guarantor or of a substantial part of the property,
assets or business of Lessee or any Guarantor or, any writ, judgment, warrant of
attachment, execution or similar process shall be issued or levied against a
substantial part of the property, assets or business of Lessee or any Guarantor,
and such proceedings or petition shall not be dismissed, or such writ, judgment,
warrant of attachment, execution or similar process shall not be released,
vacated or fully bonded, within 30 days after commencement, filing or levy, as
the case may be;
(h) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against Lessee
or any Guarantor or any Subsidiary of any Guarantor, and such judgment or
judgements remain undischarged, unbonded, unstayed or unsatisfied for a period
(during which execution shall be effectively stayed) of 30 days; provided, that
the aggregate of all such judgments exceeds $500,000;
(i) Lessee or any Guarantor shall directly or indirectly
contest the validity of any Operative Document in any manner in any court of
competent jurisdiction or the Lien granted by this Lease or any Mortgage;
(j) (A) an event of default shall occur in the payment when
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due (subject to any applicable grace period), whether by acceleration or
otherwise, of any Indebtedness of Lessee or any Guarantor or any Subsidiary of
any Guarantor that individually or in the aggregate exceeds $1,000,000 or (B)
any other event of default shall occur with respect to any Indebtedness of
Lessee or any Guarantor or any Subsidiary of any Guarantor that individually or
in the aggregate exceeds $1,000,000;
(k) Any one or more Pension-Related Events referred to in
subsection (a)(ii), (b) or (e) of the definition of "Pension-Related Event"
shall have occurred; or any one or more other Pension-Related Events shall have
occurred and the Agent shall determine in good faith (which determination shall
be conclusive) that such other Pension-Related Events, individually or in the
aggregate, could have a Material Adverse Effect;
(l) either of the Guaranties shall no longer be in full force
and effect; or
(m) an Event of Default (as defined in the Credit Agreement)
shall occur under the Credit Agreement.
ARTICLE XVIII
ENFORCEMENT
SECTION XVIII.1. Remedies. Upon the occurrence of a Lease Event of
Default, at Lessor's option and without limiting Lessor in the exercise of any
other right or remedy Lessor may have on account of such default (including,
without limitation, the obligation of Lessee to purchase the Sites as set forth
below), and without any further demand or notice, Lessor may cause the following
to occur:
(i) By notice to Lessee, Lessor may terminate
Lessee's right to possession of the Sites. A notice given in connection
with unlawful detainer proceedings specifying a time within which to
cure a default shall terminate Lessee's right to possession if Lessee
fails to cure the default within the time specified in the notice.
(ii) Upon termination of Lessee's right to possession
and without further demand or notice, Lessee shall surrender possession
and vacate the Sites and deliver possession thereof, and Lessor may
re-enter the Sites and remove any persons in possession thereof.
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(iii) Upon termination of Lessee's right to
possession, this Lease shall terminate and Lessor may declare to be
immediately due and payable, and Lessor shall be entitled to (x)
recover from Lessee the following amounts and (y) take the following
actions:
(A) Lessee shall pay all accrued and unpaid
Rent hereunder (including, without limitation, Basic Rent and
Supplemental Rent) which had been earned at the time of termination;
(B) Lessor may elect any of the following:
(1) Lessor may demand, by written notice to
the Lessee specifying a Payment Date (the
"Final Rent Payment Date") not earlier than
ten (10) days after the date of such notice,
that Lessee pay to Lessor, and Lessee shall
pay to Lessor, on the Final Rent Payment
Date (in lieu of Basic Rent due after the
Final Rent Payment Date), an amount equal to
the sum of (A) the Lease Balance computed as
of the Final Rent Payment Date, plus (B) all
accrued and unpaid Rent due and unpaid to
and including the Final Rent Payment Date,
and upon payment of such amount, and the
amount of all other sums due and payable by
Lessee under this Lease and the other
Operative Documents (and interest at the
Overdue Rate on the amounts payable under
this clause (B)(1) from the Final Rent
Payment Date to the date of actual payment),
Lessor shall transfer by quitclaim deed to
Lessee all of Lessor's right, title and
interest in and to the Sites without
recourse or warranty, but free and clear of
Lessor Liens; or
(2) Lessor may sell its interest in the
Sites, in which event Lessee shall pay to
Lessor an amount equal to the excess, if
any, of (x) all amounts due Lessor under
clause (B)(1) above over (y) the net sale
proceeds received by Lessor from the
foregoing sale (provided, that in
calculating such net sale proceeds, all
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expenses and taxes incurred by Lessor, Agent
or any of the Lenders in connection with
such sale, including, without limitation,
legal fees, shall be deducted from such
sales proceeds);
(C) Any other amount necessary to compensate
Lessor for all actual damages caused by Lessee's failure to perform
Lessee's obligation under this Lease or which in the ordinary course of
things would be likely to result therefrom, including, but not limited
to, the costs and expenses (including without limitation, reasonable
attorneys' fees, advertising costs and brokers' commissions) of
recovering possession of the Sites, removing persons or property
therefrom, placing the Sites in good order, condition, and repair,
preparing and altering the Sites for reletting, and all other costs and
expenses of reletting; and
(D) Such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time
by applicable law.
(iv) Lessor may enforce the Lien given hereunder
pursuant to Section 16.1 hereof, Section 11 of the Lease Supplements,
the Uniform Commercial Code or any other law.
(v) If Lessee has breached this Lease and abandoned
the Site, this Lease shall continue in effect for so long as Lessor
does not terminate Lessee's right to possession, and Lessor may enforce
all of Lessor's rights and remedies under this Lease, including the
right to recover the Rent hereunder (including, without limitation,
Basic Rent and Supplemental Rent) as it becomes due under this Lease.
Lessee's right to possession shall not be deemed to have been
terminated by Lessor except pursuant to clause (i) above. The following
do not constitute a termination of Lessee's right to possession:
(A) Acts of maintenance or preservation or
efforts to relet the Sites;
(B) The appointment of a receiver upon the
initiative of Lessor to protect Lessor's interest under this
Lease;
(C) Reasonable withholding of consent to an
assignment or subletting, or terminating a subletting or
assignment by Lessee.
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(vi) In the event that Lessor elects to continue
this Lease in full force and effect, Lessor may enforce all its rights
and remedies under this Lease, including, but not limited to, the right
to recover Rent hereunder (including, without limitation, Basic Rent
and Supplemental Rent) as it becomes due. During the continuance of a
Lease Event of Default, Lessor may enter the Sites in accordance with
applicable law without terminating this Lease and sublet all or any
part of the Sites for Lessee's account to any Person, for such term
(which may be a period beyond the remaining Lease Term), at such rents
and on such other terms and conditions as are commercially reasonable.
In the event of any such subletting, rents received by Lessor from such
subletting shall be applied (i) first, to the payment of the reasonable
costs incurred by Lessor in maintaining, preserving, altering and
preparing the Sites for subletting and other costs of subletting,
including, but not limited to, brokers' commissions and attorneys' fee;
(ii) second, to the payment of Rent hereunder (including, without
limitation, Basic Rent and Supplemental Rent) then due and payable;
(iii) third, to the payment of future Rent hereunder (including,
without limitation, Basic Rent and Supplemental Rent) as the same may
become due and payable hereunder; (iv) fourth, to the payment of all
other obligations of Lessee hereunder, and (v) fifth, the balance, if
any, shall be paid to Lessee upon (but not before) expiration of the
Lease Term. If the rents received by Lessor from such subletting, after
application as provided above, are insufficient in any period to pay
the Rent (including, without limitation, Basic Rent and Supplemental
Rent) due and payable hereunder for such period, Lessee shall pay such
deficiency to Lessor upon demand. Notwithstanding any such subletting
for Lessee's account without termination, Lessor may at any time
thereafter, by written notice to Lessee, elect to terminate this Lease
by virtue of a previous Lease Event of Default.
Upon (but not before) and during the continuance of a Lease
Event of Default, if Lessee has abandoned the Sites, for so long as
Lessor does not terminate Lessee's right to possession of the Sites,
Lessor shall not unreasonably withhold its approval to a sublease of
the Sites; provided, however, that Lessor's withholding of such consent
shall not be deemed unreasonable upon the standard contained in Section
12.1.
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(vii) Lessor may exercise any other right or remedy
that may be available to it under Applicable Laws and Regulations or in
equity, or proceed by appropriate court action (legal or equitable) to
enforce the terms or to recover damages for the breach hereof. Separate
suits may be brought to collect any such damages for any Rent
Installment Period(s), and such suits shall not in any manner prejudice
Lessor's right to collect any such damages for any subsequent Rent
Installment Period(s), or Lessor may defer any such suit until after
the expiration of the Basic Term or any Renewal Term, in which event
such suit shall be deemed not to have accrued until the expiration of
the Basic Term, or such Renewal Term; or
(viii) Lessor may retain and apply against Lessor's
damages all sums which Lessor would, absent such Lease Event of
Default, be required to pay to, or turn over to, Lessee pursuant to the
terms of this Lease.
(ix) Lessor may exercise the remedies described in
Section 11 of the Lease Supplement.
In addition to the foregoing, Lessee acknowledges that (i) pursuant to the
Collateral Agency Agreement and the Security Agreement, the Joint Stock
Collateral constitutes additional security for the payment and performance of
Lessee's obligations under this Lease and the other Operative Documents, and
(ii) the Guaranty and Agreement of Suretyship Regarding Obligations Lessee and
Affiliates, as it may be amended from time to time, which constitutes one of the
Guaranties shall constitute further additional security for, among other things,
the payment and performance of Lessee's obligations under this Lease and the
other Operative Documents.
SECTION XVIII.2. Proceeds of Sale; Deficiency. All payments received
and amounts held or realized by Lessor at any time when a Lease Event of Default
shall have occurred and be continuing and after the Lease Balance shall have
been accelerated pursuant to Article XVIII as well as all payments or amounts
then held or thereafter received by Lessor, except for rents received by Lessor
from subletting pursuant to Section 18.1(vi) and the proceeds of sale pursuant
to Section 11 of the Lease Supplements, shall be distributed forthwith upon
receipt by Lessor in the following order of priority:
first: so much of such payments or amounts as shall be
required to reimburse Lessor for any tax (other than any
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income tax payable on Basic Rent or interest and on fees and
other compensation of Lessor), expense or other amount owed to Lessor
in connection with the collection or distribution of such payments or
amounts to the extent not previously reimbursed by Lessee (including,
without limitation, the expenses of any sale, taking or other
proceeding, expenses in connection with realizing on any of the Sites,
reasonable attorneys' fees and expenses (including the allocated costs
of internal counsel), court costs and any other reasonable expenditures
incurred or reasonable expenditures or advances made by Lessor in the
protection, exercise or enforcement of any right, power or remedy upon
such Lease Event of Default whether pursuant to Article XVII or
otherwise) shall be so applied by Lessor;
second: so much of such payments or amounts except those
specified in clause third below, which under the terms of this Lease
and the other Operative Documents have accrued shall be so applied;
third: so much of such payments or amounts remaining as shall
be required to pay Agent (on behalf of the Participants) in full the
aggregate unpaid Lease Balance and all Basic Rent (including, to the
extent permitted by applicable law, interest on interest) shall be so
applied (to be distributed by Agent pursuant to Section 3.3 of the Loan
Agreement); and
fourth: so much of such payments or amounts as shall
remain shall be distributed to Lessee.
SECTION XVIII.3. Grant and Foreclosure on Lessee's Estate. Each Lease
Supplement shall contain a provision by which Lessee grants to a trustee, in
trust, with power of sale, or grants a mortgage lien to Lessor in, all of
Lessee's right, title and interest in and to the Sites subject to each such
Lease Supplement and, upon the occurrence of a Lease Event of Default, granting
Lessor the power and authority, after fulfillment of certain conditions, to
cause the trustee to sell, or foreclose its mortgage lien against, the Sites.
SECTION XVIII.4. Remedies Cumulative; No Waiver; Consents. To the
extent permitted by, and subject to the mandatory requirements of, Applicable
Laws and Regulations, each and every right, power and remedy herein specifically
given to Lessor or otherwise in this Lease shall be cumulative and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, in equity or by statute, and each and every right,
power and remedy whether specifically herein
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given or otherwise existing may be exercised from time to time and as often and
in such order as may be deemed expedient by Lessor, and the exercise or the
beginning of the exercise of any power or remedy shall not be construed to be a
waiver of the right to exercise at the same time or thereafter any right, power
or remedy. No delay or omission by Lessor in the exercise of any right, power or
remedy or in the pursuit of any remedy shall impair any such right, power or
remedy or be construed to be a waiver of any default on the part of Lessee or be
an acquiescence therein. Lessor's consent to any request made by Lessee shall
not be deemed to constitute or preclude the necessity for obtaining Lessor's
consent, in the future, to all similar requests. No express or implied waiver by
Lessor of any Lease Event of Default shall in any way be, or be construed to be,
a waiver of any future or subsequent Lease Default or Lease Event of Default. To
the extent permitted by Applicable Laws and Regulations, Lessee hereby waives
any rights now or hereafter conferred by statute or otherwise that may require
Lessor (i) to provide any notice to Lessee, or (ii) to sell, lease or otherwise
use the Site or part thereof in mitigation of Lessor's damages, or (iii) to take
any other action, upon the occurrence of a Lease Event of Default, or that may
otherwise limit or modify any of Lessor's rights or remedies under this Article
XVIII.
ARTICLE XIX
RIGHT TO PERFORM FOR LESSEE
If Lessee shall fail to perform or comply with any of its
agreements contained herein, Lessor may, but shall not be obligated to, on five
Business Days' prior notice to Lessee (except in the event of an emergency, in
which case only one Business Day's prior notice shall be required), perform or
comply with such agreement, and Lessor shall not thereby be deemed to have
waived any default caused by such failure, and the amount of such payment and
the amount of the expenses of Lessor (including reasonable attorneys' fees and
expenses) incurred in connection with such payment or the performance of or
compliance with such agreement, as the case may be, together with interest
thereon at the Overdue Rate, shall be deemed Supplemental Rent, payable by
Lessee to Lessor upon demand; provided that in the case of an emergency Lessee
shall permit Lessor so to perform or comply on less than one Business Day's
notice unless Lessee has a good faith reason not to permit Lessor to do so.
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ARTICLE XX
LESSOR LIENS
In the event that Lessor shall be obligated to remove any Lessor Liens
from the Sites and shall fail to do so, Lessee shall have a claim against Lessor
for such failure, but shall not have any right of offset.
ARTICLE XXI
MISCELLANEOUS
SECTION XXI.1. Binding Effect; Successors and Assigns; Survival. The
terms and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor, Lessee, Agent and the Lenders shall be binding upon them
and their respective successors, legal representatives and assigns (including,
in the case of Lessor, any Person to whom Lessor may transfer the Sites or any
interest therein in accordance with the provisions of the Operative Documents),
and inure to their benefit and the benefit of their respective permitted
successors, legal representatives and assigns.
SECTION XXI.2. Severability. Any provision of this Lease that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, and Lessee shall remain
liable to perform its obligations hereunder except to the extent of such
unenforceability. To the extent permitted by Applicable Laws and Regulations,
Lessee hereby waives any provision of law that renders any provision hereof
prohibited or unenforceable in any respect.
SECTION XXI.3. Notices. Unless otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be in writing and shall be delivered and shall be deemed to have
been given in accordance with Section 9.3 of the Participation Agreement.
SECTION XXI.4. Amendment; Complete Agreements. Neither this Lease nor
any of the terms hereof may be terminated, amended, supplemented, waived or
modified orally, but only by an instrument in writing signed by the party
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against which the enforcement of the termination, amendment, supplement, waiver
or modification shall be sought. This Lease, together with the other Operative
Documents, is intended by the parties as a final expression of their agreement
and as a complete and exclusive statement of the terms thereof, all
negotiations, considerations and representations between the parties having been
incorporated herein and therein. No course of prior dealings between the parties
or their officers, employees, agents or Affiliates shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Lease or any
other Operative Document. Acceptance of, or acquiescence in, a course of
performance rendered under this or any prior agreement between the parties or
their Affiliates shall not be relevant or admissible to determine the meaning of
any of the terms of this Lease or any other Operative Document. No
representations, undertakings, or agreements have been made or relied upon in
the making of this Lease other than those specifically set forth in the
Operative Documents.
SECTION XXI.5. Headings. The Table of Contents and headings of the
various Articles and Sections of this Lease are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
hereof.
SECTION XXI.6. Original Lease. The single executed original of this
Lease containing the receipt of Lessor therefor on or following the signature
page thereof shall be the "original executed counterpart" of this Lease. To the
extent that this Lease constitutes chattel paper, as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction, no security
interest in this Lease may be created through the transfer or possession of any
counterpart other than the "original executed counterpart".
SECTION XXI.7. GOVERNING LAW. THIS LEASE HAS BEEN DELIVERED IN, AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE
CREATION, PERFECTION AND ENFORCEMENT OF LIENS AND SECURITY INTERESTS AND THE
EXERCISE OF REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE APPLICABLE SITE
IS LOCATED.
SECTION XXI.8. Discharge of Lessee's Obligations by its Affiliates.
Lessor agrees that performance of any of Lessee's obligations hereunder by one
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or more of its Affiliates or one or more sublessees of the Site or any part
thereof shall constitute performance by Lessee of such obligations to the same
extent and with the same effect hereunder as if such obligations were performed
by Lessee, but no such performance shall excuse Lessee from any obligation not
performed by it or on its behalf under the Operative Documents.
SECTION XXI.9. Liability of Lessor Limited. The parties hereto agree
that Lessor shall have no personal liability whatsoever to Lessee or its
respective successors and assigns for any Claim based on or in respect of this
Lease or any of the other Operative Documents or arising in any way from the
transactions contemplated hereby or thereby; provided, however, that Lessor
shall be liable in its individual capacity for (i) Lessor Liens required to be
removed by Lessor under Section 6.2(a) of the Participation Agreement and (ii)
its own willful misconduct or gross negligence. It is understood and agreed
that, except as provided in the preceding proviso: (i) Lessor shall have no
personal liability under any of the Operative Documents; (ii) all obligations of
Lessor to Lessee are solely nonrecourse obligations, recourse being limited to
its interest in the Sites and the Operative Documents (excluding Excluded
Amounts); and (iii) all such personal liability of Lessor is expressly waived
and released as a condition of, and as consideration for, the execution and
delivery of the Operative Documents by Lessor.
SECTION XXI.10. Estoppel Certificates. Each party hereto agrees that at
any time and from time to time during the Lease Term, it will promptly, but in
no event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser has signed a commitment letter or
letter of intent to purchase the Sites or any part thereof or to purchase any
Note), assignee or mortgagee or third party designated by such other party, a
certificate stating (a) that this Lease is unmodified and in force and effect
(or if there have been modifications, that this Lease is in force and effect as
modified, and identifying the modification agreements); (b) the date to which
Basic Rent has been paid; (c) in the case of an estoppel certificate to be given
by Lessee, whether or not there is any existing default by Lessee in the payment
of Basic Rent or any other sum of money hereunder, and whether or not there is
any other existing Lease Default or Lease Event of Default with respect to which
a notice of default has been served, and, if there is any such default,
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specifying the nature and extent thereof; (d) in the case of an estoppel
certificate to be given by Lessee, whether or not, to the knowledge of Lessee
after due inquiry and investigation, there are any purported setoffs, defenses
or counterclaims against enforcement of the obligations to be performed
hereunder existing in favor of Lessee; and (e) other items that may be
reasonably requested; provided that no such certificate may be requested unless
the requesting party has a good faith reason for such request. In addition,
Lessee, promptly, but in no event later than thirty days after request by any
other party hereto, shall obtain and deliver to such other party or to any
prospective purchaser (if such prospective purchaser has signed a commitment
letter or letter of intent to purchase the Site or any part thereof or to
purchase any Note), assignee, mortgagee or third party designated by such other
party, an estoppel certificate from each Subtenant under each Sublease
containing such items as reasonably requested by the party requesting the same;
provided that no such certificate may be requested unless the requesting party
has a good faith reason for such request.
SECTION XXI.11. No Joint Venture. Any intention to create a joint
venture or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
SECTION XXI.12. No Accord and Satisfaction. The acceptance by Lessor of
any sums from Lessee (whether as Basic Rent or otherwise) in amounts which are
less than the amounts due and payable by Lessee hereunder is not intended, nor
shall be construed, to constitute an accord and satisfaction of any dispute
between Lessor and Lessee regarding sums due and payable by Lessee hereunder,
unless the Required Participants specifically deem it as such in writing.
SECTION XXI.13. No Merger. In no event shall the Leasehold Estate of
Lessee hereunder, or the rights and interests of the holder of any Notes secured
by a Lien in this Lease, merge with any interests, estates or rights of Lessor
in or to the Site, it being understood that such Leasehold Estate of Lessee
hereunder, and the rights and interests of the holder of any Notes secured by a
Lien in this Lease, shall be deemed to be separate and distinct from Lessor's
interests, estates and rights in or to the Site, notwithstanding that any such
interests, estates or rights shall at any time or times be held by or vested in
the same Person.
SECTION XXI.14. Successor Lessor. Lessee agrees that, in the case of
any transfer of the Sites to a successor Lessor in accordance with the
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provisions of Section 6.2 of the Participation Agreement from time to time, such
successor Lessor shall, upon written notice by such successor Lessor to Lessee,
succeed to all the rights, powers and title of Lessor hereunder and shall be
deemed to be Lessor for all purposes hereof and without in any way altering the
terms of this Lease or Lessee's obligations hereunder. Such transfer to a
successor Lessor shall not exhaust the right to any further transfer to another
successor Lessor pursuant to said Section 6.2, but such right may be exercised
repeatedly as long as this Lease shall be in effect.
SECTION XXI.15. Survival. The obligations of Lessee to be performed
under this Lease prior to the Lease Termination Date and the obligations of
Lessee pursuant to Sections 4.1, 4.2, 4.4, 4.5, Article XVIII and Section 21.1
shall survive the expiration or termination of this Lease. The extension of any
applicable statute of limitations by Lessor, Agent, Lessee or any other
Indemnitee shall not affect such survival.
SECTION XXI.16. Transfer of Sites to Lessee or any other Person.
Whenever pursuant to any provision of this Lease Lessor is required to transfer
the Sites to Lessee or to any other Person, such transfer shall be made at
Lessee's expense (including, without limitation, all costs of conveyance,
applicable transfer taxes and recording fees without regard to local custom) by
the quitclaim transfer of all of Lessor's right, title and interest in and to
the Sites on an "as is, where is, with all faults" basis free and clear of all
Lessor Liens, but subject to the Lien of the Loan Agreement if and to the extent
it may then attach, and otherwise without recourse, representation or warranty
of any kind, and together with the due assumption by Lessee (or such third
party) of, and due release of Lessor from, all obligations relating to the Sites
or the Operative Documents. Any provision in this Lease or other Operative
Document to the contrary notwithstanding, Lessor shall not be obligated to make
any such transfer until Lessor has received all Rent and other amounts due and
owing hereunder.
SECTION XXI.17. Enforcement of Certain Warranties.
(a) Unless a Lease Event of Default shall have occurred and be
continuing, Lessor authorizes Lessee (directly or through agents), at Lessee's
expense, to assert, during the Lease Term, all of Lessor's rights (if any) under
any applicable warranty and any other claim that Lessee or Lessor may have under
the warranties provided to Lessor in connection with the purchase, of the Sites
and Lessor agrees to cooperate, at Lessee's expense, with Lessee and its agents
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in asserting such rights. Any amount recovered by Lessee under any such
warranties shall be paid to Lessee.
(b) Notwithstanding the foregoing provisions of this Section
21.17, so long as a Lease Event of Default or Lease Payment/Bankruptcy Default
shall have occurred and be continuing, any amount that would otherwise be
retained by Lessee pursuant to Section 21.17(a) shall be paid to Lessor as
security for the obligations of Lessee under this Lease, shall be invested by
Lessor in accordance with Section 21.18 in Permitted Investments and, if a Lease
Event of Default is continuing, may be applied to the obligations of Lessee
hereunder, and, at such time thereafter as no Lease Event of Default or Lease
Payment/Bankruptcy Default shall be continuing, such amount and gain thereon
shall be paid promptly to Lessee to the extent not previously applied in
accordance with the terms of this Lease.
SECTION XXI.18. Investment of Security Funds. Any amounts not payable
to Lessee and paid to or retained by Lessor pursuant to any provision hereof
solely because a Lease Event of Default or Lease Payment/Bankruptcy Default
shall have occurred and be continuing or because Lessee shall not have performed
in full its obligations under Article XIII shall be held by Lessor as security
for the obligations of Lessee under this Lease and the other Operative
Documents. At such time as no Lease Event of Default or Lease Payment/Bankruptcy
Default, or failure to perform shall be continuing, such amounts, net of any
amounts previously applied to Lessee's obligations hereunder or under any other
Operative Documents, shall be paid to Lessee. Any such amounts which are held
pending payment to Lessee or application hereunder shall be invested by Lessor
(or Agent) as directed from time to time in writing by Lessee (provided,
however, if a Lease Event of Default has occurred and is continuing it will be
directed by Lessor), and at the expense and risk of Lessee, in Permitted
Investments. Any gain (including interest received) realized as the result of
any such investment (net of any fees, commissions and other expenses, if any,
incurred in connection with such investment) shall be applied from time to time
in the same manner as the principal invested. Lessee will promptly pay to Lessor
on demand, the amount of any loss realized as the result of any such investment
(together with any fees, commissions and other expenses, if any, incurred in
connection with such investment), such amount to be held, paid and applied
in the same manner as other amounts subject to this Section 21.18.
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SECTION XXI.19. Recording of Lease Supplements. Concurrently with the
execution and delivery of this Lease and concurrently with the execution and
delivery of each Lease Supplement, Lessor and Lessee shall execute, acknowledge
and cause to be recorded each such Lease Supplement in the official records of
each County where the Site(s) that are the subject of this Lease or such Lease
Supplement are located. Notwithstanding the execution, delivery and recording of
any such Lease Supplement, the terms, covenants and conditions of this Lease
shall control.
SECTION XXI.20. Nature of Transaction. (a) It is the intent of the
parties hereto that: (i) the transaction contemplated hereby constitutes an
operating lease from Lessor to Lessee for purposes of Lessee's financial
reporting, (ii) the transaction contemplated hereby preserves ownership in the
Sites to Lessee for purposes of Federal and state tax and bankruptcy purposes,
(iii) Lessee, pursuant to the Lease, grants a security interest or lien, as the
case may be, in the Sites and the other Collateral to Lessor, (iv) for purposes
of Federal and state tax and bankruptcy purposes, the payment by Lessee of the
portions of Basic Rent described in clauses (i) and (ii) of the definition
thereof shall be treated as payments of interest, and the payment by Lessee of
the portions of Basic Rent described in clause (iii) of the definition thereof
and any other amounts in respect of the Lease Balance shall be treated as
repayments of principal, and (v) the Mortgage and Assignment of Lease create a
lien and security interest in the Sites, subject to certain limited exceptions.
Nevertheless, Lessee acknowledges and agrees that none of Lessor, Agent or any
Lender has provided or will provide tax, accounting or legal advice to Lessee
regarding the Overall Transaction or made any representations or warranties
concerning the tax, accounting or legal characteristics of the Operative
Documents and that Lessee has obtained and relied upon such tax, accounting and
legal advice concerning the Operative Documents as it deems appropriate.
(b) Specifically, without limiting the generality of subsection (a) of
this Section 21.20, but understanding that the parties' characterization is not
the sole determinant of the issue, the parties hereto intend and agree that with
respect to the nature of the transactions evidenced by this Lease in the context
of the exercise of remedies under the Operative Documents, relating to and
arising out of any insolvency or receivership proceedings or a petition under
the United States bankruptcy laws or any other applicable insolvency laws or
statute of the United States of America or any State or Commonwealth thereof
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affecting Lessee, Lessor or any Lender or any enforcement or collection actions,
the transactions evidenced by the Operative Documents are loans made by the
Lenders as unrelated third party lenders to Lessee secured by the Sites.
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IN WITNESS WHEREOF, the undersigned have each caused this
Lease to be duly executed and delivered by their respective officers thereunto
duly authorized as of the day and year first above written.
MELLON FINANCIAL SERVICES
CORPORATION #4, as Lessor
By:_______________________________
Name Printed: Robert C. Carpenter
Title: Assistant Vice President
Address:
One Mellon Bank Center
Rm 151-4444
Pittsburgh, PA 15258-0001
Attention: Leasing Group
GENESIS ELDERCARE PROPERTIES, INC.,
as Lessee
By:_____________________________
Name Printed: _________________
Title: ________________________
Address:
148 West State Street
Kennett Square, PA 19348
Attn: George V. Hager, Jr.
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Lease Agreement
RECEIPT FOR COUNTERPART NO. 1
MELLON BANK, N.A., as Agent
By:________________________________
Name Printed: Carol Paige
Title: Vice President
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Lease Agreement
STATE OF PENNSYLVANIA )
) SS.:
COUNTY OF ______________ )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of _______________, State of Pennsylvania, this
____ day of October, 1996, by Carol Paige, as Vice President of MELLON BANK,
N.A., a national banking association, on behalf of the such national banking
association.
[Notarial Seal] _________________________
Notary Public
My commission expires:________________
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Lease Agreement
STATE OF PENNSYLVANIA )
) SS.:
COUNTY OF ________ )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of ______, State of Pennsylvania, this ____ day of
October, 1996, by ___________________, as _________ of GENESIS ELDERCARE
PROPERTIES, INC., a Pennsylvania corporation, on behalf of the corporation.
[Notarial Seal] _________________________
Notary Public
My commission expires: _____________________
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Lease Agreement
STATE OF PENNSYLVANIA )
) SS.:
COUNTY OF __________ )
The foregoing Lease Agreement was acknowledged before me, the undersigned
Notary Public, in the County of ______, State of Pennsylvania, this ____ day of
October, 1996, by Robert C. Carpenter, as Assistant Vice President of MELLON
FINANCIAL SERVICES CORPORATION #4, a Pennsylvania corporation, on behalf of the
corporation.
[Notarial Seal] _________________________
Notary Public
My commission expires: ____________________
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Lease Agreement
SCHEDULE I
to
LEASE AGREEMENT
DESCRIPTION OF INITIAL SITES
Atlantis Rehabilitation and Health Care Center
Old Congress Road, Lantana, Florida;
Bowman's Health Care Center
South Ridgewood, Ormand Beach, Florida;
Eagle Crest Nursing Center
Parental Home Road, Jacksonville, Florida;
Oakwood Rehabilitation and Health Care Center
South East Bay Street, Eustis, Florida;
Tierra Pines Health Care Center
Ulmerton Road, Largo, Florida;
Woodlands Nursing Center
North 46th Street, Tampa, Florida;
Williamsburg Health Care and Rehabilitation Center
Mount Vernon Avenue, Williamsburg, Virginia;
Winham
Main Street, Route 240, Crozet, Virginia;
Woodmont Health Care Center
Dairy Lane, Fredrickburg, Virginia
Attached hereto are legal descriptions for the above-described Sites.
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Lease Agreement
Atlantis
Legal Description
A tract of land in Section 6, Township 45 South, Range 43 East, Palm Beach
County, Florida, said parcel of land being specifically described as follows, to
wit:
BEGINNING at a point 33.00 feet West of the East line of said Section 6 and
40.00 feet South of the North line of said Section; thence bear South 00(degree)
10' 40" West, along a line parallel to and 33.00 feet West of, as measured at
right angles to, the East line of said Section 6, a distance of 257.00 feet;
thence North 89(degree) 55' 30" West, along a line parallel to the North line of
said Section, a distance of 350.20 feet; thence North 00(degree) 10' 40" East,
along a line parallel to the East line of said Section, a distance of 257 feet
to a point on the South right-of-way line of the Lake Worth Drainage District
Lateral No. 16; thence South 89(degree) 55' 30" East along said South
right-of-way line, said line being parallel to and 40.00 feet South of, as
measured at right angles to, the North line of said Section, a distance of
350.20 feet to the POINT OF BEGINNING.
Said lands situate, lying and being in Palm Beach County, Florida.
Tax Assessor's No. PCN 00-43-45-06-00-000-1051
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Lease Agreement
Bowman's
Legal Description
Lots 7, 8, 9, 10, 11 and 12, Block 2, HAND TRACT IN THE THOMAS FITCH GRANT,
according to the map thereof, as recorded in Map Book P, Page 1, of the Public
Records of Volusia County, Florida.
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Lease Agreement
Eagle Crest
Legal Description
That certain piece, parcel or tract of land, situate, lying and being a part of
Farm 10, as shown on the Plat of Love Grove Farms, as recorded in Plat Book 7,
page 3 of the current public records of Duval County, Florida, and being more
particularly described as follows: Beginning at the Southeast corner of those
lands shown on Plat of Sans Souci Estates Unit 2, as recorded in Plat Book 29
page 25 of said public records, said point also being the Southwest corner of
said Farm 10; thence North 2 degrees 06 minutes 20 seconds East along the East
line of said Sans Souci Estates, Unit 2, 342.62 feet; thence North 78 degrees 33
minutes 20 seconds East, 608.72 feet to the Southwesterly right of way line of
Dean Road (a 50-foot right of way as now established by possession and usage);
thence South 19 degrees 20 minutes 20 seconds East along said Southwesterly
right of way line of Dean Road, 215.28 feet to its intersection with the
Westerly right of way line of Parental Home Road (a 66-foot right of way as now
established); thence South 8 degrees 14 minutes 00 seconds West along said
Westerly right of way line of Parental Home Road, 286.04 feet to its
intersection with the South line of said Farm 10; thence North 87 degrees 56
minutes 10 seconds West along said South line of Farm 10, 639.95 feet to the
point of beginning.
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Lease Agreement
Oakwood
Legal Description
A tract of land located in the City of Eustis, Section 11, Township 19 South,
Range 26 East, Lake County, Florida, and being Lots 1 to 16, inclusive, of Block
34, in Pendryville, a subdivision in the City of Eustis, Florida, according to
the plat thereof recorded in Plat Book 1, Page 45, of the Public Records of Lake
County, Florida, and also being otherwise described as Lots 1 to 16, inclusive,
of Block 84, in the City of Eustis, Florida, according to the plat thereof
recorded in Plat Book 1, Page 79, Public Records of Lake County, Florida, and
being measured and described as follows:
Beginning at a concrete monument located at the intersection of the Southerly
edge of the right-of-way of Lemon Avenue (a 66-foot wide right-of-way) and the
Westerly edge of Eustis Street (a 66- foot wide right-of-way); thence running
Southerly along the Westerly edge of the right-of-way of Eustis Street, a
distance of 264.35 feet to a concrete monument at the point of intersection of
said Westerly edge of the right-of-way of Eustis Street and
the Northerly edge of the right-of-way of Ward Avenue (a 66-foot wide
right-of-way); thence running Westerly along a course making an interior angle
of 89(degree)59'36" with the preceding course, a distance of 263.96 feet along
the Northerly edge of the right-of-way of Ward Avenue to the point of
intersection of said Northerly edge of the right-of-way of Ward Avenue with the
Easterly edge of the right-of-way of Bay Street (a 66-foot wide right-of-way),
said point being marked by an "X" cut in a retaining wall; thence running
Northerly along a course making an interior angle of 90(degree)07'44" with the
preceding course, a distance of 264.29 feet along the Easterly edge of the
right-of-way of Bay Street, to the intersection of said Easterly right-of-way of
Bay Street, with the Southerly edge of Lemon Avenue, said intersecting point
being presently marked by an "X" cut in a sidewalk to an old residence; thence
running Easterly along a course making an interior angle of 89(degree)53'03"
with the preceding course, a distance of 264.59 feet along the Southerly edge of
the right-of-way of Lemon Avenue to the point of beginning.
5
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Lease Agreement
Tierra Pines
Legal Description
Parcel 1:
Commence at the Northeast corner of the Northwest 1/4 of Section 7, Township 30
South, Range 16 East, Pinellas County, Florida; thence North 87 deg 36 min 11
sec West along the North boundary of the Northwest 1/4 of said Section 7, 768.79
feet; thence South 00 deg 18 min 30 sec East, 75.00 feet Westerly of and
parallel to the East boundary of Lot 2 of Pinellas Groves Subdivision of the
Northwest 1/4 of said Section 7, as recorded in Plat Book 1, Page 55 of the
public records of Pinellas County, Florida, 72.08 feet to a Point of Beginning;
thence continue South 00 deg 18 min 30 sec East along the West boundary of a 50
foot wide non-exclusive easement recorded in O.R. Book 4636, Page 1802 of the
public records of Pinellas County, Florida, 606.00 feet; thence North 87 deg 36
min 11 sec West, 215.00 feet; thence North 00 deg 18 min 30 sec West, 606.00
feet; thence South 87 deg 36 min 11 sec East along the Southerly right-of-way
line of Ulmerton Road, 215.00 feet to the Point of Beginning.
Parcel 2:
Commence at the Northeast corner of the Northwest 1/4 of Section 7, Township 30
South, Range 16 East, Pinellas County, Florida; thence North 87 deg 36 min 11
sec West along the North boundary of the Northwest 1/4 of said Section 7, 743.76
feet; thence South 00 deg 18 min 30 sec East, 50.00 feet Westerly of and
parallel to the East boundary of Lot 2 of Pinellas Groves Subdivision of the
Northwest 1/4 of said Section 7, as recorded in Plat Book 1, Page 55 of the
public records of Pinellas County, Florida, 72.08 feet to a Point of Beginning;
thence continue South 00 deg 18 min 30 sec East along the centerline of a 50.00
foot wide non-exclusive easement recorded in O.R. Book 4636, Page 1802 of the
public records of Pinellas County, Florida, 606.00 feet; thence North 87 deg 36
min 11 sec West, 25.03 feet; thence North 00 deg 18 min 30 sec West, 606.00
feet; thence South 87 deg 36 min 11 sec East along the Southerly right-of-way
line of Ulmerton Road, 25.03 feet to the Point of Beginning.
TOGETHER WITH a non-exclusive easement for ingress, egress, utilities and
drainage, described as follows:
The Westerly 25.00 feet of the Easterly 50.00 feet of the Southerly 605.32 feet
of the Northerly 677.32 feet of Lot 2 of Pinellas Groves Subdivision of the
Northwest 1/4 of said Section
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Lease Agreement
7, Township 30 South, Range 16 East, as recorded in Plat Book 1, Page 55 of the
public records of Pinellas County, Florida.
7
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Lease Agreement
Woodlands
Legal Description
The South 1/2 of the Southeast 1/4 of the Northeast 1/4 of the Southwest 1/4 of
Section 4, Township 28 South, Range 19 East, LESS the East 25 feet thereof for
road right-of-way, all lying and being in Hillsborough County, Florida.
8
<PAGE>
Lease Agreement
Williamsburg
Legal Description
ALL those certain lots, pieces or parcels of land located in the City of
Williamsburg, Virginia, on the eastern most line of Mount Vernon Avenue,
together with all improvements thereon and appurtenances thereto belonging,
which are shown on a certain plat of survey dated March 10, 1989, by Harvey L.
Parks, Inc., entitled "PLAT OF TWO PARCELS OF LAND WITH IMPROVEMENTS SHOWN
THEREON, SITUATED ON THE EASTERN MOST LINE OF MOUNT VERNON AVENUE IN THE CITY OF
WILLIAMSBURG, VIRGINIA.", and being more particularly described as follows:
BEGINNING at a rod found on the northern line of Mount Vernon Avenue (55' R/W),
said rod being 196.91' from the intersection with the southern line of
Monticello Avenue, and running from said rod in a northerly direction N 49
degrees 37' 30" E a distance of 199.54' to a rod; thence S 40 degrees 22' 30" E
a distance of 580.62' to a rod; thence S 49 degrees 37' 30" W a distance of
193.75' to a rod on the northern right-of-way line of Mount Vernon Avenue;
thence along the northern right-of-way line of Mount Vernon Avenue along a curve
to the right with a radius of 322.50' a length of 63.59' to a rod; thence along
said right-of-way line N 40 degrees 22' 30" W a distance of 496.95' to a rod;
thence continuing along said right-of-way on a curve to the right with a radius
of 472.50' a length of 20.53' to a rod found, being the point and place of
beginning, containing 2.663 acres, more or less, all in the City of
Williamsburg, Virginia further described as Parcel No. 2 and Parcel No. 3, as
shown on plat of survey made by Harvey L. Parks, Inc., dated March 10, 1989, a
copy of which is attached to the Deed of Trust, recorded February 6, 1990, in
the Clerk's Office, Circuit Court, City of Williamsburg, Virginia, in Deed Book
90, at page 710, reference to which is made for a more particular description.
BEING the same property conveyed to The Industrial Development Authority of the
City of Hopewell, Virginia, by deed from United Health Services, Inc., a
Virginia corporation, dated October 14, 1976, recorded October 15, 1976, in the
Clerk's Office, Circuit Court, City of Williamsburg, Virginia, in Deed Book 54,
page 167.
9
<PAGE>
Lease Agreement
Windham
Legal Description
PARCEL ONE:
ALL that certain lot, piece or parcel of land, with all improvements thereon and
appurtenances thereto belonging, lying and being in White Hall District of
Albemarle County, Virginia, containing 0.856 acres according to plat entitled
"Plat Showing 0.856 Acre of Land With Improvements Shown, Situated On The
Western Line of State Route No. 240, Lying in Crozet, White Hall District,
Albemarle County, Virginia", made by Harvey L. Parks, Inc., dated March 15,
1989, and recorded in the Clerk's Office of the Circuit Court of Albermarle
County, Virginia, in Deed Book 1086, page 505.
BEGINNING at a rod found at the intersection of the northern property line of
Parcel 62 owned by National Health Care Affiliates, Inc., and the eastern right
of way line of High Street, running from said rod in a northerly direction N 26
degrees 12' 51" E a distance of 57.17' to a rod; thence S 74 degrees 17' 10" E a
distance of 186.00' to a rod; thence S 58 degrees 47' 06" E a distance of 99.11'
to a rod; thence S 65 degrees 06' 06" E a distance of 100.11' to a rod; thence S
37 degrees 06' 06" E a distance of 42.55' to a P.K. Nail found on the northern
line of State Route No. 240; thence along the northern line of State Route No.
240 S 32 degrees 18' 45" W a distance of 62.72' to a point; thence continuing
along the northern line of State Route No. 240 S 29 degrees 27' 54" W a distance
of 40.88' to a point on the northern boundary line of property owned by the VA.
National Bank (Parcel 60); thence N 64 degrees 36' 31" W a distance of 212.70'
to a rod; thence N 25 degrees 40' 17" E a distance of 31.48' to a rod; thence S
64 degrees 21' 49" E a distance of 30.00' to a rod; thence N 25 degrees 38' 11"
E a distance of 10.22' to a rod; thence S 64 degrees 21' 49" E a distance of
32.00" to a rod; thence N 25 degrees 38' 11" E a distance of 30.00' to a rod,
thence N 64 degrees 21' 49" W a distance of 125.00' to a rod; thence S 25
degrees 38' 11" W a distance of 29.16' to a rod; thence N 64 degrees 19' 43" W a
distance of 134.66' to a rod found, being the point and place of beginning,
containing 0.856 acre, more or less, all in Crozet, White Hall District of
Albemarle County, Virginia, as shown on plat of survey by Harvey L. Parks, Inc.,
dated March 15, 1989.
Together with a non-exclusive easement, with maintenance
10
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Lease Agreement
agreement, 10 feet in width for vehicular and pedestrian traffic, parking and
ingress and egress from State Route 240, recorded in the Clerk's Office of the
Circuit Court of Albermarle County, Virginia, in Deed Book, 779, page 239.
BEING the same property conveyed to the Industrial Development Authority of
Albemarle County, Virginia, by deed from Windham, Incorporated, a Virginia
corporation, dated January 1, 1980, recorded January 29, 1980, in the Clerk's
Office, Circuit Court, Albemarle County, Virginia, in Deed Book 688, page 476,
and leased to Windham, Incorporated by instrument dated January 1, 1980,
recorded in the Clerk's Office, Circuit Court, Albermarle County, Virginia, in
Deed Book 688, page 481. By Articles of Merger recorded May 21, 1984 in the
aforesaid Clerk's Office in Deed Book 799, page 341, Windham, Incorporated
merged into United Service Industries, Inc. By Certificate of Merger issued by
the Commonwealth of Virginia State Corporation Commission on February 10, 1984,
United Service Industries, Inc., a Virginia corporation merged into National
Health Care Affiliates, Inc., a Florida corporation, thereby vesting fee simple
title in the name of National Health Care Affiliates, Inc.
PARCEL TWO:
ALL that certain lot, piece or parcel of land, with all improvements thereon and
appurtenances thereto belonging, lying and being in White Hall District of
Albemarle County, Virginia, containing 0.2905 acre according to plat entitled
"Plat of 0.2905 Acre Of Land, With Improvements Shown, Situated On The Eastern
Line Of High Street, Lying in Crozet, White Hall District of Albemarle County,
Virginia", made by Harvey L. Parks, Inc., dated March 15, 1989, recorded in the
Clerk's Office of the Circuit Court of Albemarle County, Virginia, in Deed Book
1086, page 507.
BEGINNING at a spike found at the intersection of the southern line of High
Street and the northern property line of Va. National Bank (Parcel 60A), and
running from said spike along the southern line of High Street in a northerly
direction N 26 degrees 12' 51" E a distance of 44.91' to a pipe; thence S 64
degrees 19' 43" E a distance of 134.66' to a rod; thence N 25 degrees 38' 11" E
a distance of 29.16' to a rod; thence S 64 degrees 21' 49" E a distance of
125.00' to a rod; thence S 25 degrees 38' 11" W a distance of 30.00' to a rod;
thence N 64 degrees 21' 49" W a distance of 32.00' to a rod; thence S 25 degrees
38' 11" W a distance of 10.22' to a rod; thence N 64 degrees 21' 49" W a
distance of 30.00' to a rod; thence S 25 degrees 40' 17" W a distance of 31.48'
to a rod; thence N 65 degrees 01' 29" W a distance of 198.11' to a spike found,
being
11
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Lease Agreement
the point and place of beginning, containing 0.2905 acre, more or less, all in
Crozet, White Hall District of Albemarle County, Virginia, further described as
Parcel 62, as shown on plat of survey made by Harvey L. Parks, Inc., dated March
15, 1989, recorded in Deed Book 1086, page 507.
TOGETHER WITH a non-exclusive easement, with maintenance agreement, 10 feet in
width for vehicular and pedestrian traffic, parking and ingress and egress from
State Route 240, recorded in the Clerk's Office of the Circuit Court of
Albemarle County, Virginia, in Deed Book 779, page 239.
BEING the same real estate conveyed to Central Virginia Health Facilities, Inc.,
a Virginia corporation, by deed of exchange from Julia Sharp Vergara, divorced,
dated January 4, 1979, recorded in the Clerk's Office of the Circuit Court of
Albemarle County, Virginia, in Deed Book 664, page 615, and a portion conveyed
to Central Virginia Health Facilities, Inc., recorded in Deed Book 655, page
191. By Consent of Shareholder, dated June 29, 1979; Plan of Merger of Central
Virginia Health Facilities, Inc., with and into United Service Industries, Inc.,
dated June 30, 1979; and by Certificate of Merger issued by the Commonwealth of
Virginia State Corporation Commission on February 10, 1984, United Service
Industries, Inc., a Virginia corporation merged into National Health Care
Affiliates, Inc., a Florida corporation, thereby vesting fee simple title in the
name of National Health Care Affiliates, Inc., a Florida corporation.
PARCEL THREE:
ALL that certain lot of land situated in Albemarle County, Virginia, in Crozet,
fronting on State Route 240 parallel to the C & O Railroad and bounded on the
south by the land owned by the Industrial Development Authority of Albemarle
County and on the west by High Street, on the east by State Route 240 and on the
north by the C & O Railroad.
BEING a portion of the same property conveyed to The Miller Manual School of
Albemarle by the following deeds from:
(i) Abraham Wayland and Martha T. Wayland, dated September 10, 1894, recorded in
the Clerk's Office, Circuit Court, Albemarle County, Virginia, in Deed Book 102,
page 231; and
(ii) R.T.W. Duke, Commissioner of Circuit Court of Albemarle County, dated May
25, 1887, recorded June 13, 1887, in the Clerk's Office, Circuit Court,
Albemarle County, Virginia, in
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Lease Agreement
Deed Book 88, page 103.
Leased to National Health Care Affiliates by instrument dated January 1, 1979,
recorded in Deed Book 786, page 655.
13
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Lease Agreement
PARCEL FOUR:
ALL that certain lot, piece or parcel of land, with all improvements thereon and
appurtenances thereto belonging, lying and being in White Hill District of
Albemarle County, Virginia, containing 0.3927 acre according to plat entitled
"Plat Showing 0.3927 Acre Of Land With Improvements Shown Situated On The
Eastern Line Of High Street, Lying in Crozet, White Hill District of Albemarle
County, Virginia", made by Harvey L. Parks, Inc., dated March 15, 1989, recorded
in the Clerk's Office of the Circuit Court of Albemarle County, Virginia, in
Deed Book 1086, page 506.
BEGINNING at a rod found at the intersection of southern line of High Street and
the northern property line of Stanley P. Wilcox (Parcel 56) and running from
said rod in a northerly direction along the southern line of High Street N 32
degrees 06' 32" E a distance of 60.15' to a spike; thence S 57 degrees 40' 33" E
a distance of 102.86' to a rod; thence S 32 degrees 21' 53" W a distance of
48.93' to a P.K. set; thence S 57 degrees 38' 07" E a distance of 109.00' to a
P.K. set; thence N 32 degrees 21' 53" E a distance of 49.01' to a rod; thence S
57 degrees 40' 33" E a distance of 162.60 feet to a P.K. set on the northern
line of State Route No. 240; thence along the northern line of State Route No.
240 S 34 degrees 00' W a distance of 60.33' to a P.K. set; thence N 57 degrees
34' 43" W a distance of 215.56' to a spike set; thence N 57 degrees 44' 44" W a
distance of 156.91' to a rod found, being the point and place of beginning,
containing 0.3927 acre, more or less, all in Crozet, White Hall District of
Albemarle County, Virginia, as shown on plat of survey made by Harvey L. Parks,
Inc., dated March 15, 1989, recorded in Deed Book 1086, page 506.
TOGETHER WITH the right of way of ingress and egress over 10-foot strip as
described in deed recorded in Deed Book 170, page 370, which strip adjoins the
lot hereby conveyed on its southern boundary by instrument recorded in the
Clerk's Office, Circuit Court, Albemarle County, Virginia, in Deed Book 695,
page 232.
TOGETHER WITH perpetual non-exclusive easement, with maintenance agreement, for
vehicular and pedestrian traffic, parking and ingress and egress as recorded in
the Clerk's Office, Circuit Court, Albemarle County, Virginia, in Deed Book 695,
page 237.
TOGETHER WITH a non-exclusive easement, with maintenance agreement, 10-feet in
width for vehicular and pedestrian traffic, parking and ingress and egress from
State Route 240 recorded in the Clerk's Office, Circuit Court, Albemarle County,
Virginia, in
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Lease Agreement
Deed Book 779, page 239.
BEING a part of the same real estate conveyed to United Service Industries,
Inc., by the following deeds from:
(i) Virginia National Bank, a national banking association, dated April 25,
1983, recorded June 15, 1983, in the Clerk's Office, Circuit Court, Albemarle
County, Virginia, in Deed Book 766, page 29; and
(ii) Central Fidelity Bank Charlottesville, a Virginia corporation, dated June
13, 1980, recorded June 20, 1980, in the aforesaid Clerk's Office, in Deed Book
695, page 232.
By Certificate of Merger issued by the Commonwealth of Virginia State
Corporation Commission on February 10, 1984, United Service Industries, Inc., a
Virginia corporation merged into National Health Care Affiliates, Inc., a
Florida corporation, thereby vesting fee simple title in the name of National
Health Care Affiliates, Inc.
15
<PAGE>
Lease Agreement
Woodmont
Legal Description
All that certain tract or parcel of land, situate lying and being in Falmouth
District, Stafford County, Virginia, containing 8.770 acres, as shown on plat of
survey shown as Parcels 1 and 2 on plat of survey made by Potts, Minter &
Associates, P.C., dated May 31, 1996, and further described as:
Beginning at a point on the southern line of State Route 607, and from said
point and place of beginning along a curve to the right with a radius of 2754.87
feet and an arc length of 214.97 feet, having a chord bearing South
46(degree)27'37" West and a distance of 214.92 feet to a point; thence along a
curve to the right with a radius of 2277.50 feet, an arc length of 429.29, a
chord bearing South 54(degree)05'44" West, and a distance of 428.65 feet to a
point; thence, North 30(degree)30'14" West 40.00 feet to a point; thence along a
curve to the right with a radius of 2237.50 feet, an arc length of 668.34 feet,
a chord bearing South 68(degree)03'11" West, and a distance of 665.86 feet to a
point; thence, South 76(degree)36'37" West 218.25 feet to a point; thence North
13(degree)23'23" West 362.21 feet to a point; thence, north 66(degree)54'00"
East 209.00 feet to a point; thence, South 23(degree)06'00" East, 55.00 feet to
a point; thence, North 66(degree)54'00" East, 100.00 feet to a point; thence,
North 23(degree)06'00" West, 55.00 feet to a point; thence, North
66(degree)54'00" East, 364.44 feet to a point; thence South 37(degree)25'55"
East, 191.34 feet to a point; thence, along a curve to the left with a radius of
230.00 feet, and an arc length of 370.11 feet to a point; thence along a
non-tangent curve to the left with a radius of 248.41 feet, an arc length of
83.65 feet, a chord bearing North 18(degree)37'39" East 83.27 feet to a point;
thence, North 08(degree)58'45" East, 193.51 feet to a point; thence, along the
centerline of the old Route 607 South 81(degree)01'15" East, 80.01 feet to a
point; thence, continuing along said old Route 607 South 85(degree)03'45" East,
263.09 feet to a point and place of beginning 8.770 acres.
Parcel 1 is the same property conveyed to National Health Care Affiliates, Inc.,
by deed of Industrial Development Authority of Stafford County, Virginia, dated
April 1, 1989, recorded in Deed Book 669, at Page 469, in the Clerk's Office of
the Circuit Court of Stafford County, Virginia.
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Lease Agreement
Parcel 2 is part of the same property conveyed to United Health Services,
Incorporated, by deed from Woodmont, Incorporated, dated November 19, 1975,
recorded in Deed Book 281, page 492 in the aforesaid Clerk's Office. By Articles
of Amendment recorded in Deed Book 549, page 101, United Health Services,
Incorporated changed their name to United Service Industries, Incorporated. By
Articles of Merger recorded in Deed Book 458, page 158, United Service
Industries, Inc. merged into National Health Care Affiliates, Inc.
<PAGE>
EXHIBIT A
TO
LEASE AGREEMENT
FORM OF LEASE SUPPLEMENT AND MEMORANDUM OF LEASE AND AGREEMENT
THIS LEASE SUPPLEMENT AND MEMORANDUM OF LEASE AND AGREEMENT dated
_____________, 19__ (this "Lease Supplement") is between MELLON FINANCIAL
SERVICES CORPORATION #4, as Lessor (the "Lessor"), and GENESIS ELDERCARE
PROPERTIES, INC., a Pennsylvania corporation and a wholly-owned subsidiary of
Genesis Health Ventures, Inc., as Lessee (the "Lessee");
W I T N E S S E T H:
WHEREAS, Lessee and Lessor have heretofore entered into that certain
Amended and Restated Lease and Agreement dated as of October 7, 1996 (as
amended, supplemented, or otherwise modified from time to time, the "Lease").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings specified in the Lease; and
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement on each Site Acquisition Closing Date substantially in the form
hereof for the purpose of confirming the acceptance and lease of certain
Site(s), specifying the Rent applicable to such Site(s) and setting forth
certain other matters, all as required pursuant to the Lease;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Delivery and Acceptance. Lessor hereby delivers and leases
to, and confirms delivery and lease to, Lessee, and Lessee hereby
accepts delivery and leases, and confirms acceptance of delivery and
lease, from Lessor, under the Lease as hereby supplemented, of the
Site(s) listed on Schedule I hereto. The term "Site" includes, without
limitation, all of the right, title and interest of Lessor
<PAGE>
Lease Supplement
or Lessee in and to the following and any proceeds (including, without
limitation, insurance and condemnation proceeds) thereof:
(A) the real property described in Schedule I attached hereto
(the "Land"); all buildings, structures and other improvements now or
in the future located on the Land (the "Improvements"; the Improvements
and the Land are sometimes collectively referred to herein as the
"Property");
(B) all the estate, right, title, claim or demand whatsoever
of Lessor or Lessee, in possession or expectancy, in and to the
Property or any part thereof;
(C) all right, title and interest of Lessor in and to all of
the fixtures, furnishings and fittings of every kind and nature
whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in each case,
attachments, components, parts and accessories) currently owned or
subsequently acquired by the Mortgagor and now or subsequently attached
to, or contained in or used or usable in any way in connection with any
operation or letting of the Property (all of the foregoing in this
paragraph (C) being referred to as the "Fixtures");
(D) all right, title and interest of Lessor or Lessee in and
to all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances and
additions thereto and substitutions or replacements thereof (together
with, in each case, attachments, components, parts and accessories)
currently owned or subsequently acquired by Mortgagor and now or
subsequently attached to, or contained in or used or usable in any way
in connection with any operation or letting of the Property, including
but without limiting the generality of the foregoing, all screens,
awnings, shades, blinds, curtains, draperies, artwork, carpets, rugs,
storm doors and windows, furniture and furnishings, heating,
electrical, and mechanical equipment, lighting, switchboards, plumbing,
ventilating, air conditioning and air-cooling apparatus, refrigerating,
and incinerating equipment, escalators, refrigerators, elevators,
loading and unloading equipment and systems, stoves, ranges, laundry
equipment, cleaning systems (including window cleaning apparatus),
telephones, communication systems (including satellite dishes and
antennae), televisions, computers (excluding software), sprinkler
systems and other fire
2
<PAGE>
Lease Supplement
prevention and extinguishing apparatus and materials, security systems,
motors, engines, machinery, pipes, pumps, tanks, conduits, appliances,
fittings and fixtures of every kind and description (all of the
foregoing in this paragraph (D) being referred to as the "Equipment");
(E) all right, title and interest of Lessor or Lessee in and
to all substitutes and replacements of, and all additions and
improvements to, the Improvements and the Fixtures and Equipment,
subsequently acquired by Lessor or Lessee or constructed, assembled or
placed by Lessor or Lessee on the Land, immediately upon such
acquisition, release, construction, assembling or placement, including,
without limitation, any and all building materials whether stored at
the Property or offsite, and, in each such case, without any further
lease, mortgage, conveyance, assignment or other act by Lessor or
Lessee;
(F) all right, title and interest of Lessor or Lessee in, to
and under all books and records relating to or used in connection with
the operation of the Property or the Fixtures or any part thereof; and
all general intangibles related to the operation of the Improvements
now existing or hereafter arising; and
(G) all right, title and interest of Lessor or Lessee in and
to (to the extent assignable) (i) all consents, licenses, building
permits, certificates of occupancy and other governmental approvals
relating to construction, completion, occupancy, use or operation of
the Property or any part thereof and (ii) all plans and specifications
relating to the Property.
2. Warranty. Lessee hereby represents and warrants that no
event which would constitute a Casualty or an Event of Taking and no
notice of such Casualty or Event of Taking has been given to Lessee or
any of its Affiliates with respect to the Sites under the Lease has
occurred with respect to the Sites set forth on Schedule I hereto as of
the date hereof. Lessee hereby reaffirms each of the representations
and warranties set forth at Section 4.1 of the Participation Agreement
as if made on the date hereof, except to the extent any such
representation and warranty relates to an earlier date, including the
Sites set forth on Schedule I hereto are free and clear of all Liens
other than Permitted Liens.
3. Term, Applicable Percentage. The term of this
3
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Lease Supplement
Lease Supplement shall commence on the date hereof and end on the Lease
Termination Date. The Applicable Percentage on each Payment Date is set
forth in the appropriate portion of Schedule II.
4. Renewal Terms, Lessee's Cost and Estimated Sales Costs.
With respect to the Sites covered by this Lease Supplement and subject
to the consent of the Participants pursuant to Section 2.10 of the
Participation Agreement, Lessee shall have a five-year renewal option
to be exercised pursuant to Section 6.1 of the Lease. The estimated
sales costs for the Sites are set forth in Schedule II attached hereto.
5. Confirmation. Lessee hereby confirms its agreement, in
accordance with the Lease as supplemented by this Lease Supplement, to
pay Rent to Agent, for the benefit of Lessor, for the Sites leased
hereunder. Nothing herein shall reduce Lessee's obligation to make all
other payments required under the Lease, including those payments to be
made on the last day of the Lease Term pursuant to Article VI of the
Lease.
6. Incorporation into Lease. This Lease Supplement shall be
construed in connection with and as part of the Lease, and all terms,
conditions and covenants contained in the Lease, as supplemented by
this Lease Supplement, shall be and remain in full force and effect and
shall govern the Sites described in Schedule I hereto.
7. References. Any and all notices, requests, certificates and
other instruments executed and delivered concurrently with or after the
execution and delivery of this Lease Supplement may refer to the "Lease
Agreement, dated as of October 7, 1996", or may identify the Lease in
any other respect without making specific reference to this Lease
Supplement, but nevertheless all such references shall be deemed to
include this Lease Supplement, unless the context shall otherwise
require.
8. Recording. Lessor and Lessee agree that this Lease
Supplement shall be recorded at Lessee's sole cost and expense as
required under Section 21.19 of the Lease.
9. Counterparts. This Lease Supplement may be executed in any
number of counterparts, each executed counterpart constituting an
original but all together one and the same instrument.
4
<PAGE>
Lease Supplement
10. Nature of Transaction. (A) IT IS THE INTENT OF THE PARTIES
HERETO THAT: (i) THE TRANSACTION CONTEMPLATED HEREBY CONSTITUTES AN
OPERATING LEASE FROM LESSOR TO LESSEE FOR PURPOSES OF LESSEE'S
FINANCIAL REPORTING, (ii) THE TRANSACTION CONTEMPLATED HEREBY PRESERVES
OWNERSHIP IN THE SITES TO LESSEE FOR PURPOSES OF FEDERAL AND STATE TAX
AND BANKRUPTCY PURPOSES, (iii) LESSEE, PURSUANT TO THE LEASE, GRANTS A
SECURITY INTEREST OR LIEN, AS THE CASE MAY BE, IN THE SITES AND THE
OTHER COLLATERAL TO LESSOR, (iv) FOR PURPOSES OF FEDERAL AND STATE TAX
AND BANKRUPTCY PURPOSES, THE PAYMENT BY LESSEE OF BASIC RENT SHALL BE
TREATED AS PAYMENTS OF INTEREST, AND THE PAYMENT BY LESSEE OF ANY
AMOUNTS IN RESPECT OF THE LEASE BALANCE SHALL BE TREATED AS REPAYMENTS
OF PRINCIPAL, AND (v) THE MORTGAGE AND ASSIGNMENT OF LEASE CREATE A
LIEN AND SECURITY INTEREST IN LESSOR'S INTEREST IN AND TO THE SITES,
THE LEASE AND THE OTHER OPERATIVE DOCUMENTS, SUBJECT TO CERTAIN LIMITED
EXCEPTIONS. NEVERTHELESS, LESSEE ACKNOWLEDGES AND AGREES THAT NONE OF
LESSOR, AGENT OR ANY LENDER HAS PROVIDED OR WILL PROVIDE TAX,
ACCOUNTING OR LEGAL ADVICE TO LESSEE REGARDING THE OVERALL TRANSACTION
OR MADE ANY REPRESENTATIONS OR WARRANTIES CONCERNING THE TAX,
ACCOUNTING OR LEGAL CHARACTERISTICS OF THE OPERATIVE DOCUMENTS AND THAT
LESSEE HAS OBTAINED AND RELIED UPON SUCH TAX, ACCOUNTING AND LEGAL
ADVICE CONCERNING THE OPERATIVE DOCUMENTS AS IT DEEMS APPROPRIATE.
(B) SPECIFICALLY, WITHOUT LIMITING THE GENERALITY OF
SUBSECTION (A) OF THIS SECTION 10, BUT UNDERSTANDING THAT THE PARTIES'
CHARACTERIZATION IS NOT THE SOLE DETERMINANT OF THE ISSUE, THE PARTIES
HERETO INTEND AND AGREE THAT WITH RESPECT TO THE NATURE OF THE
TRANSACTIONS EVIDENCED BY THIS LEASE IN THE CONTEXT OF THE EXERCISE OF
REMEDIES UNDER THE OPERATIVE DOCUMENTS, RELATING TO AND ARISING OUT OF
ANY INSOLVENCY OR RECEIVERSHIP PROCEEDINGS OR A PETITION UNDER THE
UNITED STATES BANKRUPTCY LAWS OR ANY OTHER APPLICABLE INSOLVENCY LAWS
OR STATUTE OF THE UNITED STATES OF AMERICA OR ANY STATE OR COMMONWEALTH
THEREOF AFFECTING LESSEE, LESSOR OR ANY LENDER OR ANY ENFORCEMENT OR
COLLECTION ACTIONS, THE TRANSACTIONS EVIDENCED BY THE OPERATIVE
DOCUMENTS ARE LOANS MADE BY THE LESSOR AND THE LENDERS AS UNRELATED
THIRD PARTY LENDERS TO LESSEE SECURED BY THE SITES.
11. Grant and Foreclosure on Lessee's Estate. Lessee hereby
grants to ______________, as trustee (together with all successor
trustees, the "Trustee") for the benefit
5
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Lease Supplement
of _________________, IN TRUST, WITH POWER OF SALE, all of Lessee's
right, title and interest in and to the Sites listed on Schedule I and,
upon the occurrence of a Lease Event of Default, Lessor shall have the
power and authority, after proper notice and lapse of such time as may
be required by law, to cause Trustee to sell such Sites by notifying
Trustee of that election and depositing with Trustee this instrument
and receipts and evidence of expenditures made and secured hereby as
Trustee may reasonably require. Upon receipt of any such notice from
Lessor, Trustee shall cause to be recorded, published and delivered to
Lessee such Notice of Default and Election to Sell as is then required
by applicable statutory authority and by this instrument, which notice
shall set forth, among other things, the nature of the breach(es) or
default(s), the action(s) required to effect a cure thereof and the
time period within which that cure may be effected. If no cure is
effected within the statutory time limits following recordation of the
Notice of Default and Election to Sell and after Notice of Sale has
been given as required by the above-referenced statutes, Trustee may
without further notice or demand sell and convey the Sites in
accordance with the above-referenced statutes. The Sites may be sold as
a whole or in separate lots, parcels or items and in such order as
Lessor may direct, at public auction to the highest bidder for cash in
lawful money of the United States payable at the time of sale. Lessor
may purchase all or any part of the Sites at such sale. Lessee
acknowledges that sales for cash or on credit to a wholesaler, retailer
or user of the Sites, at a public or private auction, are all
commercially reasonable. Trustee shall deliver to such purchaser(s) a
good and sufficient deed or deeds conveying the property so sold, but
without any covenant or warranty express or implied. The recitals in
such deed of any matter or fact shall be conclusive proof of the
truthfulness thereof. Any Person, including Lessee, Trustee or Lessor,
may purchase at any sale. After deducting all costs, fees and expenses
of Lessor and Trustee, including costs of evidence of title in
connection with any sale, Lessor shall apply the proceeds of sale, in
the following order of priority, to payment of the following
(collectively, the "Obligations"): (i) first, all amounts expended by
or for the account of Lessor under the terms hereof and not then
repaid, with accrued interest at the Overdue Rate; and (ii) second, all
other amounts then due and owing hereunder including, without
limitation, all Accrued Variable Rent, Supplemental Rent, the full
amount of the Lease Balance as of the date of sale as if this Lease had
been terminated with respect to all of the Sites then
6
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Lease Supplement
subject to this Lease under Section 6.3, and all other amounts then
payable by Lessee under this Lease and the other Operative Documents,
with Lessor having the right to apply the proceeds of sale to the
amounts described above in this clause (ii) in such order, proportion
and priority as Lessor may elect in its sole and absolute discretion.
To the extent permitted by applicable statutes, Trustee may postpone
the sale of all or any portion of the Sites by public announcement at
the time and place of sale, and from time to time thereafter may again
postpone that sale by public announcement or subsequently noticed sale,
and without further notice may make such sale at the time fixed at the
last postponement or may, in its discretion, give a new notice of sale.
A sale of less than all of the Sites or any defective or irregular sale
made hereunder shall not exhaust the power of sale provided for herein,
and subsequent sales may be made hereunder until all of the Obligations
have been satisfied or the entire Sites sold, without defect or
irregularity. No action of Lessor or Trustee based upon the provisions
contained herein or contained in the applicable statutes, including,
without limitation, the giving of the Notice of Default and Election to
Sell or the Notice of Sale, shall constitute an election of remedies
which would preclude Lessor from pursuing judicial foreclosure before a
completed sale pursuant to the power of sale contained herein. Lessor
shall have the right, with the irrevocable consent of Lessee hereby
given and evidenced by the execution of this instrument, to obtain
appointment of a receiver by any court of competent jurisdiction
without further notice to Lessee, which receiver shall be authorized
and empowered to enter upon and take possession of the Sites, including
all personal property constituting a permanent part of the Site and
fixtures thereto used upon or in connection with the real property
herein conveyed (and any other personal property constituting a part of
the Site which Lessee acquired with the funds of Lessor or the
Lenders), to let the Sites, to receive all the rents, issues and
profits, if any, which may be due or become due in respect to the
leasing of the Sites to another party and apply the rents after payment
of all necessary charges and expenses to reduction of the Obligations
in such order, proportion and priority as Lessor may elect. At the
option of Lessor, the receiver shall accomplish entry and taking
possession of the Sites by actual entry and possession or by notice to
Lessee. The receiver so appointed by a court of competent jurisdiction
shall be empowered to issue receiver's certificates for funds advanced
by Lessor for the purpose of protecting the
7
<PAGE>
Lease Supplement
value of the Sites as security for the Obligations. The amounts
evidenced by receiver's certificates shall bear interest at the Overdue
Rate and may be added to the Obligations if Lessee or a junior
lienholder purchases the Sites at the trustee's sale. Trustee or any
successor acting hereunder may resign and thereupon be discharged of
the trusts hereunder upon thirty (30) days' prior written notice to
Lessor. Regardless of whether Trustee resigns, Lessor may, from time to
time, substitute a successor or successors to any Trustee named herein
or acting hereunder in accordance with any statutory procedure for such
substitution; or if Lessor, in its sole and absolute discretion, so
elects, and if permitted by law, Lessor may substitute such successors
or successors by recording, in the office of the recorder of the county
or counties where a Site is located, a document executed by Lessor and
containing the name of the original Lessee and Lessor hereunder, the
book and page where this instrument (or a memorandum hereof) is
recorded (and/or instrument number, as applicable) and the name of the
new Trustee, which instrument shall be conclusive proof of proper
substitution of such successor Trustee or Trustees, who shall, without
conveyance from the predecessor Trustee, succeed to the rights, powers
and duties hereunder. It is acknowledged that A POWER OF SALE HAS BEEN
GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW LESSOR TO TAKE
THE SITES AND SELL THEM WITHOUT GOING TO COURT IN A FORECLOSURE ACTION
UPON DEFAULT BY LESSEE UNDER THIS INSTRUMENT.
12. Governing Law. THIS LEASE SUPPLEMENT HAS BEEN DELIVERED
IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
EXCEPT THAT FORECLOSURE UPON THE SITES SUBJECT TO THIS LEASE SUPPLEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE SITE SUBJECT TO
THIS LEASE SUPPLEMENT IS LOCATED.
[remainder of page intentionally left blank]
8
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Lease Supplement
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Supplement
to be duly executed and delivered on the day and year first above written.
MELLON FINANCIAL SERVICES
CORPORATION, as Lessor
By___________________________
Name Printed:________________
Title:_______________________
Address:
One Mellon Bank Center
Rm 151-4444
Pittsburgh, PA 15258-0001
Attention: Leasing Group
GENESIS ELDERCARE PROPERTIES,
INC., as Lessee
By___________________________
Name Printed:________________
Title:_______________________
Address:
148 West State Street
Kennett Square, PA 19348
Attn: George V. Hager, Jr.
[Conform execution and acknowledgments to applicable state
requirements in state where applicable Site is located]
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Lease Supplement
STATE OF _______________ )
) SS.:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _______________, State of
____________, this ____ day of _______________, 19____, by____________________
___________________________, as _________________________ of GENESIS ELDERCARE
PROPERTIES, INC., a Pennsylvania corporation, on behalf of the corporation.
[Notarial Seal] _________________________
Notary Public
My commission expires:________________
[USE APPROPRIATE NOTARY FORMS FOR APPLICABLE STATE]
10
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Lease Supplement
STATE OF _______________ )
) SS.:
COUNTY OF ______________ )
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _______________, State of
____________, this ____ day of _______________, 19____, by___________________
___________________________, as _________________________ of MELLON FINANCIAL
SERVICES CORPORATION #4, on behalf of the Corporation.
[Notarial Seal] _________________________
Notary Public
My commission expires:________________
[USE APPROPRIATE NOTARY FORMS FOR APPLICABLE STATE]
11
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Lease Supplement
SCHEDULE I
TO
LEASE SUPPLEMENT
Sites
12
<PAGE>
Lease Supplement
SCHEDULE II
TO
LEASE SUPPLEMENT
Applicable Estimated Principal
Site Percentage Sales Costs Amortization Amount
- ---- ---------- ----------- -------------------
To be conformed to requirements of local law for each state.
<PAGE>
SECOND AMENDMENT TO AMENDED AND RESTATED
PARTICIPATION AGREEMENT
This SECOND AMENDMENT TO AMENDED AND RESTATED PARTICIPATION AGREEMENT,
dated as of March 7, 1997 (this "Amendment") is entered into among GENESIS
ELDERCARE PROPERTIES, INC., as Lessee; MELLON FINANCIAL SERVICES CORPORATION #4,
as Lessor; various financial institutions as Lenders and MELLON BANK, N.A., a
national banking association, as Agent for Lessor and the Lenders.
Recitals
A. Lessee, Lessor, Lenders and Agent entered into that certain Amended
and Restated Participation Agreement dated as of October 7, 1996, as amended by
that certain Amendment to Amended and Restated Participation Agreement dated as
of January 31, 1997 (as the same is hereby amended and as the same may be
further amended, modified or supplemented from time to time, the "Participation
Agreement"), evidencing a $150,000,000 synthetic lease facility (the "Synthetic
Lease Facility).
B. A certain Second Amended and Restated Credit Agreement, among
Genesis Health Ventures, Inc. and certain Subsidiaries thereof as Borrowers,
Mellon Bank, N.A. as Administrative Agent and Co-Syndication Agent, Citibank,
N.A. as Co-Syndication Agent, certain other Co-Agents named therein and certain
Lenders named therein was entered into on October 7, 1996. On October 11, 1996,
in connection with an acquisition by Genesis Health Ventures, Inc., certain
additional Subsidiaries became Borrowers thereunder (as so modified, the
"Existing Credit Agreement" and, as the same is hereby amended and as the same
may be further amended, modified or supplemented from time to time, the "Credit
Agreement"). Unless otherwise defined herein, terms are used herein as defined
in the Participation Agreement.
C. The Borrowers have requested that the total amount of the commitment
under the Existing Credit Agreement be increased from $300,000,000 to
$375,000,000. There will not be any increase in amount of the Synthetic Lease
Facility. However, in order to continue the proportionate relationship of each
Lender under the Credit Agreement and each Lender in the Synthetic Lease
Facility, the Existing Credit Agreement and the Participation Agreement and
other Operative Documents are being amended as of the date hereof to provide for
(a) the increase in the total commitment under the Existing Credit Agreement and
the inclusion of any additional Lenders, (b) the inclusion of any additional
Lenders under the Credit Agreement as additional Lenders in the Synthetic Lease
Facility, (c) a downward adjustment in existing interests in the Synthetic Lease
Facility to allow for appropriate allocations, and (d) a commensurate increase
in commitments under the Credit Agreement. The Lenders are willing to make such
changes to the Participation Agreement and other Operative Documents, subject to
the terms and conditions set forth below.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows.
Agreement
1. Amendments to Participation Agreement. The Participation Agreement
is hereby amended as of the Amendment Effective Date (as defined below) as
follows:
<PAGE>
a. Change in Commitment; New Schedule I-A. The individual
Commitment of each Lender under the Participation Agreement shall be amended by
deleting Schedule I to the Participation Agreement and replacing it with a new
Schedule I-A which shall be delivered by the Agent to each Lender, Lessor and
Lessee within ten days of the Amendment Effective Date. Said new Schedule I-A
shall specify the Amendment Effective Date, and shall reflect the revised
Commitments and revised percentage interest of the Lenders and the additional
Lenders:
b. Additional Lenders added to Notice and Funding Offices
Schedule; Amended Schedule II. Schedule II to the Participation Agreement is
hereby amended by adding notice and funding office information of the additional
Lenders to a revised Schedule II to be delivered by the Agent to each Lender,
Lessor and Lessee within ten days of the Amendment Effective Date.
c. Additional Definition: Amendment Effective Date. The following
new definition shall be added to Appendix 1 of the Participation Agreement in
its correct alphabetical location:
"Amendment Effective Date" shall have the meaning ascribed to such
term in Section 4 to the Second Amendment to Amended and Restated
Participation Agreement dated as of March 7, 1997.
d. Joinder of Additional Lenders. Each Person that shall agree
to be a Lender under the Participation Agreement shall execute a joinder
thereto, effective as of the Amendment Effective Date, in form and substance
satisfactory to the Agent and thereafter shall be a Lender thereunder and under
each Operative Document for all purposes as if it had been an original signatory
to the Participation Agreement.
e. New Schedule V; Commitments Outstanding. A new Schedule V
setting forth the outstanding amount of each Lender's (i) Total Commitment, (ii)
Transaction Costs Commitment and (iii) Acquisition and Construction Commitment,
as of the Amendment Effective Date shall be delivered by Agent to Lessor, Lessee
and each Lender within ten days of the Amendment Effective Date.
2. Representations and Warranties. In order to induce the Lenders and
the Agent to agree to amend the Participation Agreement, Lessee makes the
following representations and warranties, which shall survive the execution and
delivery of this Amendment:
(a) No Lease Event of Default has occurred and is continuing or
would exist immediately after giving affect to the amendments
contained herein; and
(b) Each of the representations and warranties set forth in the
Participation Agreement is true and correct in all material respects
both before and after giving effect to the amendments and
transactions contemplated hereby as though each such representation
and warranty were made at and as of the date hereof and as of the
Amendment Effective Date.
3. Notes. On the Amendment Effective Date, Lessor shall issue a
replacement Note to each existing Lender and a new Note to each new Lender. The
principal amount of each
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<PAGE>
Lenders' Note shall be equal to the amount of its Revised Commitment as
specified on Schedule I-A. All Advances made under the Synthetic Lease Facility
on or after the Amendment Effective Date will be made by all Lenders pro rata in
accordance with Schedule I-A. On April 24, 1997, each new Lender (i) will
deliver to Agent in immediately available funds, its Commitment Percentage of
the aggregate amount of the outstanding Loan, calculated as of the date
immediately preceding the Amendment Effective Date, as specified by Agent, and
(ii) the Agent will remit to each existing Lender, its Commitment Percentage of
the amounts received under clause (i).
4. Amendment Effective Date. The amendments set forth in Section 1
above shall be effective on the date (the "Amendment Effective Date") that each
of the following conditions is satisfied:
a. Execution of Amendment. Lessee, Lessor, Agent and the Lenders
shall have executed a counterpart to this Amendment.
b. Joinder of New Lenders. The additional Lenders, Agent and the
Lessee shall have executed a joinder to the Participation Agreement as set forth
in Section 1 (d) above.
c. Opinion. The Agent shall have received opinions of Ira C.
Gubernick, in-house counsel of Guarantor, and Blank, Rome, Comisky & McCauley as
to this Amendment and such other matters as the Agent may request.
d. Investment Letter. The Agent shall have received an Investor's
Letter substantially in the form of Exhibit G to the Participation Agreement
from each additional Lender.
e. Credit Agreement Amendment. The Credit Agreement shall have been
amended to provide for the inclusion of any new Lenders and the adjustment of
each Lender's interest therein.
f. Other Documents and Information. The Agent shall have received
such other documents and information as it shall reasonably request.
5. Counterparts. This Amendment may be executed in counterparts and by
different parties hereto in separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original and all of which, when taken
together, shall constitute one and the same instrument. A facsimile signature
shall be deemed to be the functional equivalent of a manually executed original
for all purposes.
6. Ratification. The Participation Agreement, as amended by this
Amendment, and the other Operative Documents are, and shall continue to be, in
full force and effect and are hereby in all respects confirmed, approved and
ratified.
7. Payment of Expenses. Without limiting other payment obligations of
Lessee set forth in the Operative Documents, Lessee agrees to pay all costs and
expenses incurred by the Agent in connection with the preparation, execution and
delivery of this Amendment and any other documents or instruments which may be
delivered in connection herewith, including, without limitation, the reasonable
fees and expenses of its counsel, Mayer, Brown & Platt.
-3-
<PAGE>
8. Authorization to Agents. Each Lender hereby authorizes the Agent to
take such action (including, without limitation, signing amendments to the other
Operative Documents) as it shall deem necessary or appropriate to carry out the
purposes of this Amendment.
9. Governing Law. This Amendment shall be construed in accordance
with, and governed by the laws of, the Commonwealth of Pennsylvania, without
regard to choice of law principles.
10. References. From and after the Amendment Effective Date, each
reference in the Participation Agreement to "this Agreement", "hereof",
"hereunder" or words of like import, and all references to the Participation
Agreement in any and all Operative Documents, other agreements, instruments,
documents, certificates and writings of every kind and nature, shall be deemed
to mean the Participation Agreement as modified and amended by this Amendment
and as the same may be further amended, modified or supplemented in accordance
with the terms thereof.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
GENESIS ELDERCARE PROPERTIES, INC., as Lessee
By:_______________________________
Name Printed: George V. Hager, Jr.
Title: Senior Vice President
MELLON FINANCIAL SERVICES CORPORATION #4, as Lessor
By:________________________________
Name Printed: Robert C. Carpenter
Title: Assistant Vice President
MELLON BANK, N.A., not in its individual capacity except as expressly
stated herein, but solely as Agent
By:________________________________
Name Printed: Carol Paige
Title: Vice President
MELLON BANK, N.A., as Lender
By:________________________________
Name Printed: Carol Paige
Title: Vice President
<PAGE>
CITIBANK, N.A., as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
NATIONSBANK, N.A., as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
FLEET NATIONAL BANK, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
CORESTATES BANK, N.A., as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
PNC BANK, NATIONAL ASSOCIATION, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
CREDIT SUISSE FIRST BOSTON, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
AMSOUTH BANK OF ALABAMA, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
BANQUE PARIBAS, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
CREDITANSTALT CORPORATE FINANCE, INC., as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
SIGNET BANK, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
THE SUMITOMO BANK, LIMITED, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
THE FIRST NATIONAL BANK OF MARYLAND, as Lender
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
EXECUTION COPY
AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
AMENDMENT NO. 1, dated as of March 7, 1997 by and among:
Genesis Health Ventures, Inc. and certain Subsidiaries identified on the
signature pages hereto as "Borrowers"; the institutions identified on the
signature pages hereto as "Lenders"; Mellon Bank, N.A. as Issuer of Letters of
Credit; Mellon Bank, N.A. as Administrative Agent and Co-Syndication Agent;
Citibank, N.A. as Co-Syndication Agent; and the other Co-Agents specified on the
signature pages hereto.
Background
A certain Second Amended and Restated Credit Agreement, among
Genesis Health Ventures, Inc. and certain Subsidiaries thereof as Borrowers,
Mellon Bank, N.A. as Administrative Agent and Co-Syndication Agent, Citibank,
N.A. as Co-Syndication Agent, certain other Co-Agents named therein and certain
Lenders named therein was entered into on October 7, 1996. On October 11, 1996,
in connection with an acquisition by Genesis Health Ventures, Inc., certain
additional Subsidiaries became Borrowers thereunder (as so modified, the
"Existing Credit Agreement" and, as the same is hereby amended and as the same
may be further amended, modified or supplemented from time to time, the "Credit
Agreement"). Unless otherwise defined herein, terms are used herein as defined
in the Existing Credit Agreement.
Also on October 7, 1996, Genesis Eldercare Properties, Inc.,
one of the Borrowers under the Existing Credit Agreement, entered into a certain
Amended and Restated Participation Agreement (the "Participation Agreement") and
related documents evidencing a $150,000,000 Synthetic Lease Facility. The
Participation Agreement and other Synthetic Lease Facility Documents (as defined
in the Credit Agreement) as amended or modified to (but not including) the date
hereof are collectively referred to herein as the "Existing Synthetic Lease
Facility Documents". Each of the Lenders under the Existing Credit Agreement are
participants in the Participation Agreement. Each of the Borrowers under the
Credit Agreement are guarantors of the Synthetic Lease Facility (as defined in
the Credit Agreement).
The Borrowers have requested that the total amount of the
commitment under the Existing Credit Agreement be increased from $300,000,000 to
$375,000,000. There will not be any increase in amount of the Synthetic Lease
Facility. However, in order to continue the proportionate relationship of each
Lender under the Credit Agreement and each participant in the Synthetic Lease
Facility, both the Existing Credit Agreement and the Existing Synthetic Lease
Facility Documents are being amended as of the date hereof to provide for (a)
the increase in the total commitment under the Existing Credit Agreement and the
inclusion of any new Lenders, (b) the inclusion of any new Lenders under the
Credit Agreement as participants in the Synthetic Lease Facility, (c) a downward
adjustment in existing interests in the Synthetic Lease Facility to allow for
appropriate allocations, and (d) a commensurate increase in commitments under
the Credit Agreement. The Lenders are willing to make such changes to the Credit
Agreement, subject to the terms and conditions set forth below.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows.
<PAGE>
Agreement
1. Amendments to Existing Credit Agreement. The Existing
Credit Agreement shall be, as of the Amendment Effective Date (as defined
below), amended in each of the following respects.
1.1 Change in Commitment; New Exhibit G. The total
Commitment of all Lenders under the Credit Agreement and the individual
Commitment of each Lender under the Credit Agreement shall be amended to be the
amounts set forth on a new Exhibit G which shall be delivered by the Agent to
each Lender and Borrower within ten days of the Amendment Effective Date. Said
new Exhibit G shall also specify the Amendment Effective Date and shall be added
as an additional Exhibit to the Credit Agreement. The information on Exhibit G
shall conform to the following criteria:
(a) As to each Lender that is a party to the Credit
Agreement prior to the Amendment Effective Date (an
"Existing Lender"), unless otherwise specifically agreed
to in a writing between such Existing Lender and the
Agent, (i) the sum of its revised Commitment on said
Exhibit G and its revised participation in the Synthetic
Lease Facility (after giving effect to the related
amendments to the Synthetic Lease Facility Documents)
shall be equal to (ii) the sum of such Existing Lender's
Initial Commitment under the Existing Credit Facility and
its initial participation interest in the Synthetic Lease
under the Existing Synthetic Lease Facility Documents;
(b) Each new Lender and each Existing Lender will
have the same percentage interest in the Credit Agreement
as such Lender/participant has in the Synthetic Lease
Facility; and
(c) The aggregate amount of the total Commitments
under the Credit Agreement shall not exceed Three Hundred
and Seventy-Five Million Dollars ($375,000,000). The
increased amount of the Commitments may be allocated
among such institutions as the Agent (in its sole
discretion) may determine.
1.2 Additional Definition: Amendment Effective Date. The
following new definition shall be added to Section 1.1 of the Existing Credit
Agreement in its correct alphabetical location:
"Amendment Effective Date" shall have the meaning
ascribed to such term in Amendment No. 1, dated as of
March 7, 1997 to this Agreement.
1.3 Amendment to Section 2.1: Initial Commitment. The
second sentence of Section 2.1(a) of the Existing Credit Agreement shall be
amended in its entirety to read as follows:
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<PAGE>
On the Amendment Effective Date, each Lender's Commitment
shall be equal to the amount set forth as its "Revised
Commitment" next to its name on Exhibit G attached
hereto, and shall be subject to adjustment pursuant to
the terms hereof.
1.4 Amendment to Exhibit F: Commitment Percentage.
Exhibit F to the Existing Credit Agreement shall be amended in its entirety to
read as set forth on a new Exhibit F to be delivered to the Lenders and the
borrowers by the Agent within ten days of the Amendment Effective Date. Said new
Exhibit F shall set forth the correct percentage interest of each Lender in the
total Commitment under the Credit Agreement after giving effect to the new
Commitment allocations set forth on Exhibit G.
1.5 Joinder of Additional Lenders. Each Person that
shall agree to be a Lender under the Credit Agreement shall execute a joinder
thereto, effective as of the Amendment Effective Date, in form and substance
satisfactory to the Agent and thereafter shall be a Lender thereunder and under
each Loan Document for all purposes as if it had been an original signatory to
the Credit Agreement.
1.6 Amendment to Section 2.7: Prepayments. In order to
allow for the prepayment of Loans bearing interest at the Euro-Rate Option prior
to the expiration of the applicable Funding Period subject to breakage costs,
Section 2.7 is amended by replacing the colon after the parenthetical phrase
"(subject, however, to Section 2.12(b) hereof)" with a period and by deleting
clauses (a) and (b) thereof.
2. Representations and Warranties. In order to induce the
Lenders and the Agent to agree to amend the Credit Agreement, each of the
Borrowers, jointly and severally, makes the following representations and
warranties, which shall survive the execution and delivery of this Amendment
No. 1:
(a) No Default has occurred and is continuing or would
exist immediately after giving affect to the amendments
contained herein; and
(b) Each of the representations and warranties set forth
in the Credit Agreement is true and correct in all
material respects both before and after giving effect to
the amendments and transactions contemplated hereby as
though each such representation and warranty were made at
and as of the date hereof and as of the Amendment
Effective Date.
3. Notes. On the Amendment Effective Date, the Borrowers
shall issue a replacement Note to each Existing Lender and a new Note to each
new Lender. The principal amount of each Lenders' Note shall be equal to the
amount of its "Revised Commitment" as specified on Exhibit G.
4. Amendment Effective Date. The amendments set forth in
Section 1 above shall be effective on the date (the "Amendment Effective Date")
that each of the following conditions is satisfied:
4.1 Execution of Amendment. The Issuer, each of the
Borrowers, the Lenders and the Agents shall have executed a counterpart to this
Amendment No. 1.
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<PAGE>
4.2 Joinder of New Lenders. The additional Lenders and
the Borrowers shall have executed a joinder to the Credit Agreement as set forth
in Section 1.5 above.
4.3 Opinion. The Agent shall have received an opinion of
Blank, Rome, Comisky & McCauley as to the enforceability of this Amendment No. 1
and such other matters as the Agent may request.
4.4 Fees. Each of the Existing Lenders shall have
received such amendment fees as are specified in the letter dated February 25,
1997 from Carol Paige, Vice President of Mellon Bank, N.A. as Agent to each
Existing Lender and all other amounts payable to it under the Loan Documents.
4.5 Amendment to Synthetic Lease Facility Documents. The
Existing Synthetic Lease Facility Documents shall have been amended to provide
for the inclusion of any new Lenders as participants thereunder and the
adjustment in each participant's interest therein to maintain the same
proportionate interest under the Credit Agreement and the Synthetic Lease
Facility after giving effect to this Amendment No. 1 and those amendments to the
Synthetic Lease Facility Documents. In addition, there shall have been
appropriate provisions made for payments in connection with the Synthetic Lease
Facility Documents to account for the necessary adjustments to the outstanding
amounts thereunder to effect the reallocation contemplated hereby.
4.6 Other Documents and Information. The Agent shall have
received such other documents and information as it shall reasonably request.
5. Counterparts. This Amendment No. 1 may be executed in
counterparts and by different parties hereto in separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original and all of
which, when taken together, shall constitute one and the same instrument. A
facsimile signature shall be deemed to be the functional equivalent of a
manually executed original for all purposes.
6. Ratification. The Credit Agreement, as amended by this
Amendment No. 1, and the other Loan Documents are, and shall continue to be, in
full force and effect and are hereby in all respects confirmed, approved and
ratified. Without limiting the generality of the foregoing, the undersigned
Borrowers, in their capacity as "Grantors" under the Pledge Agreement, confirm
that the security interest granted pursuant to the Pledge Agreement secures all
of the Secured Obligations (as defined in the Pledge Agreement) including,
without limitation, all repayment obligations in connection with loans made
under the new commitment amount and under any other new commitment amount from
time to time.
7. Payment of Expenses. Without limiting other payment
obligations of the Borrowers set forth in the Loan Documents, the Borrowers
hereby, jointly and severally, agree to pay all costs and expenses incurred by
the Agent in connection with the preparation, execution and delivery of this
Amendment No. 1 and any other documents or instruments which may be delivered in
connection herewith, including, without limitation, the reasonable fees and
expenses of its counsel, Drinker Biddle & Reath.
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<PAGE>
8. Authorization to Agents. Each Lender hereby authorizes
the Agent and the Collateral Agent to take such action (including, without
limitation, signing amendments to Loan Documents) as shall be consistent with
the purposes hereof as it shall deem necessary or appropriate to carry out the
purposes of this Amendment No. 1.
9. Governing Law. This Amendment No. 1 shall be construed in
accordance with, and governed by the laws of, the Commonwealth of Pennsylvania,
without regard to choice of law principles.
10. References. From and after the Amendment Effective Date,
each reference in the Credit Agreement to "this Agreement", "hereof",
"hereunder" or words of like import, and all references to the Credit Agreement
in any and all Loan Documents, other agreements, instruments, documents,
certificates and writings of every kind and nature, shall be deemed to mean the
Credit Agreement as modified and amended by this Amendment No. 1 and as the same
may be further amended, modified or supplemented in accordance with the terms
thereof. Further, each reference to the "Lenders", the "Notes", "Commitment",
"Initial Commitment", or "Commitment Percentage" shall be and mean a reference
to the same as modified in accordance with the provisions of this Amendment No.
1 and as the same may be further amended, modified or supplemented from time to
time in accordance with the terms of the Credit Agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment
No. 1 to be duly executed as of the date first above written.
GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation
By_______________________________________________________
Title: General Counsel-Corporate and Secretary
Address for notices:
Suite 100
148 West State Street
Kennett Square, PA 19348
Attention: Senior Vice President and Chief Financial
Officer
Telephone: 610-444-6350
Facsimile: 610-444-3365
BREVARD MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Healthcare, Inc., a Pennsylvania
corporation, its sole general partners
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<PAGE>
CATONSVILLE MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Health, Inc., a Pennsylvania corporation,
one of its general partners
EASTON MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Health, Inc., a Pennsylvania corporation,
its sole general partner
EDELLA STREET ASSOCIATES,
a Pennsylvania limited partnership
By: Genesis Health Ventures of Clarks Summit, Inc.,
its sole general partner
GENESIS PROPERTIES LIMITED PARTNERSHIP,
a Pennsylvania limited partnership
By: Genesis Health Ventures of Arlington, Inc.,
its sole general partner
GREENSPRING MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Healthcare, Inc., a Pennsylvania
corporation, its sole general partner
HAMMONDS LANE MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Healthcare, Inc., a Pennsylvania
corporation, one of its general partners
MERIDIAN/CONSTELLATION LIMITED PARTNERSHIP
By: Meridian Healthcare, Inc., general partner
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<PAGE>
MERIDIAN EDGEWOOD LIMITED PARTNERSHIP
By: Meridian Healthcare, Inc., a general partner
MERIDIAN PERRING LIMITED PARTNERSHIP
By: Meridian Healthcare, Inc., a general partner
MERIDIAN VALLEY LIMITED PARTNERSHIP
By: Meridian Healthcare, Inc., a general partner
MERIDIAN VALLEY VIEW LIMITED PARTNERSHIP
By: Meridian Healthcare, Inc., a general partner
MILLVILLE MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Healthcare, Inc., a Pennsylvania
corporation, its sole general partner
PHILADELPHIA AVENUE ASSOCIATES,
a Pennsylvania limited partnership
By: Philadelphia Avenue Corp., its sole general partner
RIVER STREET ASSOCIATES,
a Pennsylvania limited partnership
By: Genesis Health Ventures of Wilkes-Barre, Inc.,
its sole general partner
SEMINOLE MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Health, Inc., a Pennsylvania corporation,
its sole general partner
STATE STREET ASSOCIATES, L.P.,
a Pennsylvania limited partnership
By: State Street Associates, Inc. its sole general
partner
-7-
<PAGE>
THERAPY CARE SYSTEMS, L.P.
a Pennsylvania limited partnership
By: Genesis Eldercare Rehabilitation Services, Inc.
its sole general partner
VOLUSIA MERIDIAN LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Meridian Health, Inc., a Pennsylvania corporation,
its sole general partner
GENESIS PROPERTIES OF DELAWARE LTD PARTNERSHIP, L.P.,
a Delaware limited partnership
By: Genesis Properties of Delaware Corporation, a
general partner
McKERLEY HEALTH FACILITIES,
a New Hampshire general partnership
By: Meridian Health, Inc., a Pennsylvania corporation,
and Meridian Healthcare, Inc., a Pennsylvania
corporation, its general partners
NORTH CAPE CONVALESCENT CENTER ASSOCIATES, L.P.
a Pennsylvania limited partnership
By:__________________
On behalf of each of the foregoing
as General Counsel-Corporate and
Secretary of the general partner
GENESIS HEALTH VENTURES OF ARLINGTON, INC.,
a Pennsylvania corporation
GENESIS HEALTH VENTURES OF BLOOMFIELD, INC.,
a Pennsylvania corporation
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<PAGE>
GENESIS HEALTH VENTURES OF CLARKS SUMMIT, INC.,
a Pennsylvania corporation
GENESIS HEALTH VENTURES OF MASSACHUSETTS, INC.,
a Pennsylvania corporation
GENESIS HEALTH VENTURES OF NAUGATUCK, INC.,
a Pennsylvania corporation
GENESIS HEALTH VENTURES OF SALISBURY, INC.,
a Pennsylvania corporation
GENESIS HEALTH VENTURES OF WAYNE, INC.,
a Pennsylvania corporation
GENESIS HEALTH VENTURES OF WEST VIRGINIA, INC.,
a Pennsylvania corporation
GENESIS HEALTH VENTURES OF WINDSOR, INC.,
a Pennsylvania corporation
GENESIS IMMEDIATE MED CENTER, INC.,
a Pennsylvania corporation
GENESIS ELDERCARE HOME SERVICES, INC.
a Pennsylvania corporation
GENESIS ELDERCARE PHYSICIAN SERVICES, INC.,
a Pennsylvania corporation
HEALTHCARE RESOURCES CORP.,
a Pennsylvania corporation
KNOLLWOOD MANOR, INC.,
a Pennsylvania corporation
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<PAGE>
MERIDIAN HEALTH, INC.,
a Pennsylvania corporation
MERIDIAN HEALTHCARE, INC.,
a Pennsylvania corporation
PHILADELPHIA AVENUE CORPORATION,
a Pennsylvania corporation
GENESIS ELDERCARE STAFFING SERVICES INC.
a Pennsylvania corporation
STATE STREET ASSOCIATES, INC.,
a Pennsylvania corporation
SUBURBAN MEDICAL SERVICES, INC.
a Pennsylvania corporation
GENESIS ELDERCARE REHABILITATION SERVICES, INC.,
a Pennsylvania corporation
THERAPY CARE INC.,
a Pennsylvania corporation
THE TIDEWATER HEALTHCARE SHARED SERVICES GROUP, INC.,
a Pennsylvania corporation
WYNCOTE HEALTHCARE CORP.
a Pennsylvania corporation
ASCO HEALTHCARE, INC.,
a Maryland corporation
BRINTON MANOR, INC.,
a Delaware corporation
CONCORD HEALTHCARE CORPORATION,
a Delaware corporation
CRYSTAL CITY NURSING CENTER, INC.,
a Maryland corporation
EASTERN MEDICAL SUPPLIES, INC.,
a Maryland corporation
GENESIS HEALTH SERVICES CORPORATION,
a Delaware corporation
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<PAGE>
GENESIS HEALTHCARE CENTERS HOLDINGS, INC.,
a Delaware corporation
GENESIS HOLDINGS, INC.,
a Delaware corporation
GENESIS PROPERTIES OF DELAWARE CORPORATION,
a Delaware corporation
HILLTOP HEALTH CARE CENTER, INC.,
a Delaware corporation
KEYSTONE NURSING HOME, INC.,
a Delaware corporation
LINCOLN NURSING HOME, INC.,
a Delaware corporation
McKERLEY HEALTH CARE CENTERS, INC.,
a New Hampshire corporation
WAYSIDE NURSING HOME, INC.,
a Delaware corporation
PROFESSIONAL PHARMACY SERVICES, INC.,
a Maryland Corporation
MEDICAL SERVICES GROUP, INC.,
a Maryland Corporation
NEIGHBORCARE PHARMACIES, INC.,
a Maryland Corporation
DERBY NURSING CENTER CORPORATION,
a Connecticut Corporation
GENESIS ELDERCARE NATIONAL CENTERS INC.,
a Florida Corporation
GENESIS ELDERCARE NETWORK SERVICES, INC.,
a Pennsylvania Corporation
GENESIS ELDERCARE PROPERTIES, INC.,
a Pennsylvania Corporation
OAK HILL HEALTH CARE CENTER, INC.,
a Virginia Corporation
VERSALINK, INC.,
a Delaware Corporation
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<PAGE>
GERIATRIC & MEDICAL COMPANIES, INC.
a Delaware corporation
GERIATRIC & MEDICAL SERVICES, INC.
a New Jersey corporation
BURLINGTON WOODS CONVALESCENT CENTER, INC.
a New Jersey corporation
CRESTVIEW CONVALESCENT HOME, INC.
a Pennsylvania corporation
CRESTVIEW NORTH, INC.
a Pennsylvania corporation
DIVERSIFIED DIAGNOSTICS, INC.
a Pennsylvania corporation
GMC MEDICAL CONSULTING SERVICES, INC.
a Pennsylvania corporation
GERIATRIC AND MEDICAL INVESTMENTS CORP.
a Delaware corporation
GERIMED CORP.
a Pennsylvania corporation
GMS INSURANCE SERVICES, INC.
a Pennsylvania corporation
HCHS, INC.
a Pennsylvania corporation
HSS-PARA TRANSIT, INC.
a Pennsylvania corporation
INNOVATIVE PHARMACY SERVICES, INC.
a New Jersey corporation
LIFE SUPPORT AMBULANCE, INC.
a Pennsylvania corporation
LIFE SUPPORT MEDICAL, INC.
a Pennsylvania corporation
METRO PHARMACEUTICALS, INC.
a Pennsylvania corporation
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<PAGE>
UNITED HEALTH CARE SERVICES, INC.
a Pennsylvania corporation
VALLEY MEDICAL SERVICES, INC.
a Pennsylvania corporation
VALLEY TRANSPORT AMBULANCE SERVICE, INC.
a Pennsylvania corporation
VILLAS REALTY & INVESTMENT, INC.
a Pennsylvania corporation
WEISENFLUH AMBULANCE SERVICE, INC.
a Pennsylvania corporation
By: ___________________________________________________
On behalf of each of the foregoing as
General Counsel-Corporate and Secretary
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<PAGE>
Agents and Lenders:
MELLON BANK, N.A., as a Lender,
as Issuer, as Agent and as Co-Syndication Agent
By ____________________________________________________
Title: Vice President
CITIBANK, N.A., as a Lender and as Co-Syndication Agent
By ____________________________________________________
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as a Lender and as a Co-Agent
By ____________________________________________________
Title:
NATIONSBANK, N.A., as a Lender and as a Co-Agent
By ____________________________________________________
Title:
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<PAGE>
FLEET NATIONAL BANK
By ____________________________________________________
Title:
CORESTATES BANK, N.A.
By ____________________________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By ____________________________________________________
Title:
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
By ____________________________________________________
Title:
-15-
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By ____________________________________________________
Title:
CREDIT SUISSE FIRST BOSTON
By ____________________________________________________
Title:
By ____________________________________________________
Title:
AMSOUTH BANK OF ALABAMA
By ____________________________________________________
Title:
BANQUE PARIBAS
By ____________________________________________________
Title:
By ____________________________________________________
Title:
-16-
<PAGE>
CREDITANSTALT CORPORATE FINANCE, INC.
By ____________________________________________________
Title:
By ____________________________________________________
Title:
SIGNET BANK
By ____________________________________________________
Title:
THE SUMITOMO BANK, LIMITED
By ____________________________________________________
Title:
By ____________________________________________________
Title:
THE FIRST NATIONAL BANK OF MARYLAND
By ____________________________________________________
Title:
-17-
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 1st day of April, 1997, by and between
Michael R. Walker ("Employee") and Genesis Health Ventures, Inc., a Pennsylvania
corporation ("Employer").
BACKGROUND
Employee has been employed by Employer as its Chief Executive Officer
since the founding of the corporation. Employer and Employee desire to continue
Employee's employment and to amend and restate the existing employment agreement
between Employee and Employer dated April 1, 1994, all upon the conditions and
terms herein set forth.
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the mutual covenants set forth herein, Employee and Employer
agree as follows:
1. Employment and Duties. Employer shall continue to employ Employee as
Employer's Chairman and Chief Executive Officer during the term of employment
set forth in Section 2 hereof. Employee shall perform the duties of the Chairman
and Chief Executive Officer of Employer and shall provide to Employer such other
services befitting Employee's position as are requested of him from time to time
by the Board of Directors of Employer. Employee shall have supervision and
control over, and responsibility for, the business and affairs of Employer as
provided in the Bylaws of Employer, subject to the direction of Employer's Board
of Directors. Employee shall report only to the Board of Directors of Employer
and his powers and authority shall be superior to those of
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<PAGE>
any officer or employee of Employer. Employee shall devote his full time,
energy, skill and best efforts to the business and affairs of Employer provided,
however, that nothing herein shall preclude Employee from serving as a director,
trustee, officer of, or partner in, any other firm, trust, corporation or
partnership or from pursuing personal investments, as long as such activities do
not interfere with Employee's performance of his duties hereunder. In performing
his duties hereunder, Employee shall not be required to relocate outside a
radius of five (5) miles from the center of Kennett Square, Pennsylvania.
Employee agrees to continue to serve without additional compensation, as a
director of the Employer and any of its subsidiaries and in one or more
executive offices of any of the Employer's subsidiaries.
2. Term. The term of Employee's employment under this Agreement shall
be a three year period commencing on the date hereof and ending on March 31,
2000, unless further extended or sooner terminated in accordance with the other
provisions hereof (the "Term"). On March 31, 2000 and on the last day of each
contract year thereafter, the Term shall be automatically extended for one year.
The last day of the Term, as from time to time extended, is hereinafter referred
to as the "Expiration Date." The Employer or Employee may elect to terminate the
automatic extension of the Term set forth in this section by giving written
notice of such election not less than one (1) year prior to the end of the then
current term.
3. Compensation.
3.1 Base Salary. Employer shall pay to Employee as his base
compensation for all services rendered hereunder an annual base salary of
$600,000 per year ("Base Salary"), payable in accordance with Employer's
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<PAGE>
normal payroll practices for employees. Employer shall deduct or cause to be
deducted from the Base Salary all taxes and amounts required by law to be
withheld. Employee's Base Salary shall be reviewed by the Board of Directors no
less frequently than annually, with the first such review to be made within one
year after the date of this Agreement. Employer will cooperate with Employee to
defer up to 12% of Employee's then current Base Salary.
3.2 Benefits. During the Term, subject to the other provisions
of this Agreement, Employee shall be entitled to participate and shall be
included in any savings, 401(K), pension, profit-sharing, group medical or
similar plan adopted by Employer now existing, or established hereafter, to the
extent he is eligible under the general provisions thereof. In addition,
Employee shall be provided with disability insurance providing a disability
benefit consistent with Employer's Disability insurance plan and term life
insurance providing a $6,000,000 death benefit to Employee's designated
beneficiaries.
3.3 Incentive Compensation. In addition to his base
compensation, Employee shall be entitled to receive such non-cash incentive
compensation, including stock options, as may be determined from time to time by
the Board of Directors of Employer or the appropriate committee of the Board of
Directors.
3.4 Fringe Benefits.
3.4.1 Vacation. Employee shall be entitled to
five weeks of vacation during each year.
3.4.2 Reimbursement of Expenses. Employee is
authorized to incur ordinary, necessary and reasonable expenses in the course of
Employer's business. Employer shall reimburse Employee for such expenses upon
presentation by the Employee of an itemized account of such expenditures
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<PAGE>
in accordance with Employer's established policy, unless such expenses have been
paid directly by the Employer.
3.5 Entire Compensation. The compensation provided
for in this Section shall be the full consideration for the services to be
rendered by Employee to Employer hereunder.
4. Termination.
4.1 Notice of Termination. Any termination by Employer or by
Employee shall be communicated by written Notice of Termination to the other
party hereto. As used in this Agreement, "Notice of Termination" means a notice
specifying the termination provision in this Agreement relied upon and setting
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment under the provision specified. As
used in this Agreement, "Date of Termination" shall mean the date specified in
the Notice of Termination.
4.2 Grounds for Termination.
4.2.1 Termination upon Death. Employee's employment
with Employer and all of Employee's rights to compensation and benefits
hereunder shall automatically terminate upon his death, except that Employee's
heirs, personal representatives or estate shall be entitled to any unpaid
portion of his Salary and accrued benefits up to the Date of Termination and
shall also be entitled to reimbursement for any expenses incurred by Employee
hereunder. In addition, Employee's heirs, personal representatives or estate
shall be entitled to receive the full amount of Incentive Compensation, if any,
earned by Employee prior to death (determined in accordance with Section 3.3
hereof).
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<PAGE>
4.2.2 Termination upon Disability. If Employee
becomes disabled, Employee shall continue to receive all of his compensation and
benefits in accordance with Section 3 for a period of six (6) months following
the Onset of Disability (as defined in this Section 4.2.2). Any amounts due to
Employee under this Section 4.2.2 shall be reduced, dollar-for-dollar, by any
amounts received by Employee under any disability insurance policy or plan
provided to Employee by Employer. "Onset of Disability" means the first day on
which Employee shall be unable to attend to the regular affairs of Employer on a
full time basis by reason of physical or mental incapacity, sickness or
infirmity. If Employee's disability continues for more than twelve (12) months
after the Onset of Disability or for periods aggregating more than twelve (12)
months during any twenty-four (24) month period, then Employer shall have the
right to terminate Employee's employment immediately upon notice, and all of his
rights to compensation and benefits hereunder shall simultaneously terminate,
except that Employee shall be entitled to any unpaid portion of his Salary and
accrued benefits up to the Date of Termination and to any benefits which are to
be continued or paid after the Date of Termination in accordance with the terms
of the corresponding benefit plans.
4.2.3 Termination for Cause. At any time during the
Term, Employer may terminate Employee's employment hereunder for Cause (as
defined herein), effective immediately upon notice to Employee, if at a duly
convened meeting of the Board of Directors of which Employee was given
reasonable advance notice and at which Employee and his counsel had the
opportunity to be heard, a resolution was duly adopted by the affirmative vote
of not less than two-thirds of the entire membership of the Board finding that,
in the good faith judgment of the Board, (1) an event (which is described in the
resolution in reasonable detail) constituting Cause has occurred, and (2) either
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<PAGE>
Employee had a reasonable opportunity to take remedial action
but failed or refused to do so, or an opportunity to take remedial action would
not have been meaningful or appropriate under the circumstances. For purposes of
this Agreement, Cause shall mean: (1) Employee willfully breaches or fails to
diligently perform any or all of his duties under this Agreement (other than
such failure resulting from Employee's incapacity due to physical or mental
illness) and Employee continues to do so after demand for substantial
performance is delivered by the Employer that specifically identifies the manner
in which the Employer believes the Employee has not diligently performed his
duties under this Agreement, (2) Employee commits an act of dishonesty or breach
of trust, (3) Employee willfully violates or breaches any of the provisions of
this Agreement, (4) Employee's act or omission to act results in or is intended
to result directly in unjust gain to or personal enrichment of Employee at
Employer's expense, or (5) Employee is indicted for or convicted of a felony or
any crime involving larceny, embezzlement or moral turpitude.
Notwithstanding anything to the contrary contained herein, the
term "Cause" shall not include any act or omission to act of the Employee:
(1) if such act or omission has been approved by the Board of
Directors of Employer; or
(2) which is the result of bad judgment or negligence on the
part of the Employee.
On termination of this Agreement pursuant to this Section 4.2.3, all
rights to compensation and benefits of Employee shall cease as of the Date of
Termination, except Employee shall be entitled to any unpaid portion of his
Salary and benefits earned to the Date of Termination. The Employee shall have
the option to have assigned to him at no cost and with no apportionment of
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<PAGE>
prepaid premiums any assignable insurance policy owned by the Employer and
relating specifically to the Employee.
4.2.4 Termination without Cause. This Agreement may
be terminated by the Corporation upon thirty (30) days' prior written notice
without Cause being assigned therefor upon affirmative vote of a majority of the
members of the Board of Directors entitled to vote on the matter. On termination
of this Agreement without Cause, Employee shall be entitled to the payments he
would have received had the Agreement been terminated under the provisions of
Section 4.2.3 and shall, in addition, be entitled to severance compensation
equal to two times his then current Base Salary.
4.2.5 Termination for "Good Reason". Employee may,
upon thirty (30) days' prior written notice, terminate this Agreement for Good
Reason if (1) Employer elects to terminate the automatic extension of the Term,
(2) if Employer significantly changes Employee's duties or reduces Employee's
responsibility or authority, (3) Employer's principal office is moved to a
location outside a radius of five (5) miles from the center of Kennett Square,
Pennsylvania, or (4) Employee is removed from Employer's Board of Directors. If
Employee terminates this Agreement for Good Reason, he shall be entitled to the
payments he would have received under Section 4.2.3 and shall, in addition, be
entitled to receive severance compensation equal to two (2) times his then
current Base Salary.
4.3 Mitigation. Employee shall not be required to
mitigate the amount of any payment provided for in Section 4 by seeking
employment or otherwise. Employer shall not be entitled to set off against the
amounts payable to Employee hereunder any amounts earned by Employee in other
employment after termination of his employment with Employee hereunder or any
amounts which might have been earned by Employee in other employment had he
sought
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<PAGE>
such other employment. The amounts payable to Employee hereunder shall not be
treated as damages but as severance compensation to which Employee is entitled
by reason of termination of his employment in the circumstances contemplated by
this Agreement.
4.4 Procedure Upon Termination. On termination of employment
regardless of the reason, Employee shall promptly return to Employer all
documents (including copies) and other property of Employer, including without
limitation, customer lists, manuals, letters, materials, reports, and records in
his possession or control no matter from whom or in what manner acquired.
5. Employee's Covenants.
5.1 Discoveries. Employee shall communicate to Employer and
preserve as confidential information of Employer each discovery, idea, design,
invention and improvement relating in any manner to Employer's business, whether
or not patentable and whether or not reduced to practice, which is conceived,
developed or made by Employee, whether alone, or jointly with others, at any
time during the Term hereof (such discoveries, ideas, designs, inventions and
improvements are referred to as "Employee's Discoveries"). All of Employee's
Discoveries shall be Employer's exclusive property, and all of Employee's right,
title and interest therein are hereby irrevocably assigned to Employer. Employee
shall not, except with Employer's express prior written consent, or except in
the proper course of his employment with Employer, use any of Employee's
Discoveries for his own benefit or the benefit of any Person (as defined
herein), or disclose any of Employee's Discoveries to any outside Person through
publication or in any other manner.
For purposes of this Agreement, the term "Person" means a natural
person, corporation, partnership, trust, estate, joint venture, sole
proprietorship,
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<PAGE>
government (and any branch or subdivision thereof), governmental agency,
association, cooperative or other entity.
5.2 Nondisclosure. At all times during and after the Term,
Employee shall keep confidential and shall not, except with Employer's express
prior written consent, or except in the proper course of his employment with
Employer, directly or indirectly, communicate, disclose, divulge, publish, or
otherwise express, to any Person, or use for his own benefit or the benefit of
any Person, any trade secrets, confidential or proprietary knowledge or
information, no matter when or how acquired, concerning the conduct and details
of Employer's business, including without limitation names of customers and
suppliers, marketing methods, trade secrets, policies, prospects and financial
condition. For purposes of this Section 5.2, confidential information shall not
include any information which is now known by or readily available to the
general public or which becomes known by or readily available to the general
public other than as a result of any improper act or omission of Employee.
5.3 Non-competition. During the Term hereof and for a period
of two (2) years thereafter, Employee shall not, except with Employer's express
prior written consent, directly or indirectly, in any capacity, for the benefit
of any Person:
(1) Communicate with or solicit any Person who is or
during such period becomes a customer, supplier, employee, salesman, agent or
representative of Employer, in any manner which interferes or might interfere
with such Person's relationship with Employer, or in an effort to obtain such
Person as a customer, supplier, employee, salesman, agent, or representative of
any business in competition with Employer within 100 miles of any office or
facility owned, leased or operated by Employer.
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<PAGE>
(2) Establish, engage, own, manage, operate, join or
control, or participate in the establishment, ownership (other than as the owner
of less than 1% of the stock of a corporation whose shares are publicly traded),
management, operation or control of, or be a director, officer, employee,
salesman, agent or representative of, or be a consultant to, any Person in any
business in competition with Employer, at any location within 100 miles of any
office or facility owned, leased or operated by Employer, or act or conduct
himself in any manner which he would have reason to believe inimical or contrary
to the best interests of Employer.
5.4 Enforcement. Employee acknowledges that any breach by him
of any of the covenants and agreements of this Section 5 ("Covenants") will
result in irreparable injury to Employer for which money damages could not
adequately compensate Employer, and therefore, in the event of any such breach,
Employer shall be entitled, in addition to all other rights and remedies which
Employer may have at law or in equity, to have an injunction issued by any
competent court enjoining and restraining Employee and/or all other Persons
involved therein from continuing such breach. The existence of any claim or
cause of action which Employee or any such other Person may have against
Employer shall not constitute a defense or bar to the enforcement of any of the
Covenants. If Employer is obliged to resort to litigation to enforce any of the
Covenants which has a fixed term, then such term shall be extended for a period
of time equal to the period during which a material breach of such Covenant was
occurring, beginning on the date of a final court order (without further right
of appeal) holding that such a material breach occurred or, if later, the last
day of the original fixed term of such Covenant.
5.5 Consideration. Employee expressly acknowledges that the
Covenants are a material part of the consideration bargained for by Employer
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<PAGE>
and, without the agreement of Employee to be bound by the Covenants, Employer
would not have agreed to enter into this Agreement.
5.6 Scope. If any portion of any Covenant or its application
is construed to be invalid, illegal or unenforceable, then the other portions
and their application shall not be affected thereby and shall be enforceable
without regard thereto. If any of the Covenants is determined to be
unenforceable because of its scope, duration, geographical area or similar
factor, then the court making such determination shall have the power to reduce
or limit such scope, duration, area or other factor, and such Covenant shall
then be enforceable in its reduced or limited form.
6. Miscellaneous.
6.1 Notices. All notices, requests, demands, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if and when (1) delivered
personally, (2) mailed by first class certified mail, return receipt requested,
postage prepaid, or (3) sent by a nationally recognized express courier service,
postage or delivery charges prepaid, to the parties at their respective
addresses stated below or to such other addresses of which the parties may give
notice in accordance with this Section.
If to Employer, to:
Genesis Health Ventures, Inc.
148 West State Street, Suite 100
Kennett Square, PA 19348
Attention: Law Department
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<PAGE>
With a copy to:
Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Stephen E. Luongo, Esquire
If to Employee, to:
Michael R. Walker
228 North Garfield Street
Kennett Square, PA 19348
6.2 Entire Understanding. This Agreement, sets forth the
entire understanding between the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous, written, oral, expressed or
implied, communications, agreements and understandings with respect to the
subject matter hereof.
6.3 Modification. This Agreement shall not be amended,
modified, supplemented or terminated except in writing signed by both parties.
No action taken by Employer hereunder, including without limitation any waiver,
consent or approval, shall be effective unless approved by a majority of the
Board.
6.4 Prior Agreements. Employee represents to Employer (1) that
there are no restrictions, agreements or understandings whatsoever to which
Employee is a party which would prevent or make unlawful his execution of this
Agreement or his employment hereunder, (2) that his execution of this Agreement
and his employment hereunder shall not constitute a breach of any contract,
agreement or understanding, oral or written to which he is a party or by which
he is bound and (3) that he is free and able to execute this Agreement and to
enter into employment by Employer.
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<PAGE>
6.5 Termination of Prior Employment Agreements. All prior
employment agreements between Employee and Employer (and/or any of its
affiliates) are hereby terminated as of the date hereof as fully performed on
both sides.
6.6 Parties in Interest. This Agreement and all rights of
Employee hereunder shall inure to the benefit of, bind and be enforceable by
Employee and his heirs, personal representatives, estate and beneficiaries, and
Employer and its successors and assigns. This Agreement is a personal employment
contract of Employer, being for the personal services of Employee, and shall not
be assignable by Employee.
6.7 Severability. If any provision of this Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.
6.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one counterpart hereof.
6.9 Section Headings. Section and subsection headings in this
Agreement are inserted for convenience of reference only, and shall neither
constitute a part of this Agreement nor affect its construction, interpretation,
meaning or effect.
6.10 References. All words used in this Agreement shall be
construed to be of such number and gender as the context requires or permits.
6.11 Controlling Law. This Agreement is made under, and shall
be governed by, construed and enforced in accordance with, the substantive laws
of Pennsylvania applicable to agreements made and to be performed entirely
therein.
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<PAGE>
6.12 Settlement of Disputes. Any claims, controversies,
demands, disputes or differences between or among the parties hereto or any
persons bound hereby arising out of, or by virtue of, or in connection with, or
relating to this Agreement shall be submitted to and settled by arbitration in
Philadelphia Pennsylvania, before and in accordance with the rules then
obtaining of JUDICATE. In the event JUDICATE does not exist for settlement of
disputes at the time either or both of the parties desire to submit a claim,
controversy, demand, dispute or difference to arbitration, then such claim,
controversy, demand, dispute or difference shall be submitted to and settled by
arbitration in Philadelphia, Pennsylvania before a single arbitrator who shall
be knowledgeable in the field of business law and employment relations and such
arbitration shall be in accordance with the rules then obtaining of the American
Arbitration Association. The parties agree to bear joint and equal
responsibility for all fees of the arbitrator, abide by any decision rendered as
final and binding, and waive the right to submit the dispute to a public
tribunal for a jury or non-jury trial.
6.13 Approval and Authorizations. The execution and the
implementation of the terms and conditions of this Agreement have been fully
authorized by the Board.
6.14 Indulgences, Etc. Neither the failure nor delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall the single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
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<PAGE>
6.15 Legal Expenses. In the event that the Employee institutes
any legal action to enforce his rights under, or to recover damages for breach
of this Agreement, the Employee, if he is the prevailing party, shall be
entitled to recover from the Employer any actual expenses for attorney's fees
and disbursements incurred by him.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above mentioned, under Seal, intending to be legally bound
hereby.
EMPLOYER:
Genesis Health Ventures, Inc.
Attest:
_____________________ By: _________________________
Secretary President
(Corporate Seal)
EMPLOYEE:
______________________________
Michael R. Walker
<PAGE>
GENESIS HEALTH VENTURES, INC.
AMENDED AND RESTATED EMPLOYEE STOCK OPTION PLAN
1. Purpose of Plan
The purpose of this Amended and Restated Employee Stock Option
Plan (the "Plan") is to provide additional incentive to officers and key
employees of Genesis Health Ventures, Inc. (the "Company") and each present or
future parent or subsidiary corporation by encouraging them to invest in shares
of the Company's common stock, par value $.02 per share ("Common Stock"), and
thereby acquire a proprietary interest in the Company and an increased personal
interest in the Company's continued success and progress, to the mutual benefit
of directors, officers, employees and stockholders.
2. Aggregate Number of Shares
4,500,000 shares of the Company's Common Stock, shall be the
aggregate number of shares which may be issued under this Plan. Notwithstanding
the foregoing, in the event of any change in the outstanding shares of the
Common Stock of the Company by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Stock Option Committee,
hereinafter referred to, deems in its sole discretion to be similar
circumstances, the aggregate number and kind of shares which may be issued under
this Plan shall be appropriately adjusted in a manner determined in the sole
discretion of the Stock Option Committee. Reacquired shares of the Company's
Common Stock, as well as unissued shares, may be used for the purpose of this
Plan. Common Stock of the Company subject to options which have terminated
unexercised, either in whole or in part, shall be available for future options
granted under this Plan.
3. Class of Persons Eligible to Receive Options
All officers and key employees of, and consultants and
advisors to, the Company and any present or future Company parent or subsidiary
corporation are eligible to receive an option or options under this Plan,
provided that Incentive Stock Options (as described below) may be issued only to
employees. The individuals who shall, in fact, receive an option or options
shall be selected by the Stock Option Committee, in its sole discretion, except
as otherwise specified in Section 4 hereof. The maximum number of options which
may be granted to any participant in any one year is options for 750,000 shares
of Common Stock subject to appropriate adjustment in the event of any change in
the outstanding shares of the Common Stock of the Company by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the Stock
Option Committee deems in its sole discretion to be similar circumstances.
4. Administration of Plan
(a) This Plan shall be administered by the Stock Option
Committee (the "Committee") appointed by the Company's Board of Directors. The
Committee shall consist of a
<PAGE>
minimum of two and a maximum of seven members of the Board of Directors, each of
whom shall be a "Non-Employee Director" as defined in Rule 16b-3(b)(3) under the
Securities Exchange Act of 1934, as amended, of the Securities and Exchange
Commission (the "SEC") or any future corresponding rule. The Committee shall, in
addition to its other authority and subject to the provisions of this Plan,
determine which individuals are eligible to receive options under this Plan,
which individuals shall in fact be granted an option or options, whether the
option shall be an incentive stock option or a non-qualified stock option, the
number of shares to be subject to each of the options, the time or times at
which the options shall be granted, the rate of option exercisability, and,
subject to Section 5 hereof, the price at which each of the options is
exercisable and the duration of the option.
(b) The Committee shall adopt such rules for the conduct of
its business and administration of this Plan as it considers desirable. A
majority of the members of the Committee shall constitute a quorum for all
purposes. The vote or written consent of a majority of the members of the
Committee on a particular matter shall constitute the act of the Committee on
such matter. The Committee shall have the right to construe the Plan and the
options issued pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee or the Board of Directors
shall be liable for any act or omission (whether or not negligent) taken or
omitted in good faith, or for the exercise of an authority or discretion granted
in connection with the Plan to a Committee or the Board of Directors, or for the
acts or omissions of any other members of a Committee or the Board of Directors.
Subject to the numerical limitations on Committee membership set forth in
Section 4(a) hereof, the Board of Directors may at any time appoint additional
members of the Committee and may at any time remove any member of the Committee
with or without cause. Vacancies in the Committee, however caused, may be filled
by the Board of Directors, if it so desires.
5. Incentive Stock Options and Non-Qualified Stock Options
(a) Options issued pursuant to this Plan may be either
Incentive Stock Options granted pursuant to Section 5(b) hereof or Non-Qualified
Stock Options granted pursuant to Section 5(c) hereof, as determined by the
Committee. An "Incentive Stock Option" is an option which satisfies all of the
requirements of Section 422A of the Code and the regulations thereunder, and a
Non-Qualified Stock Option is an option which either does not satisfy all of
those requirements or the terms of the option provide that it will not be
treated as an Incentive Stock Option. The Committee may grant both an Incentive
Stock Option and a Non-Qualified Stock Option to the same person, or more than
one of each type of option to the same person. The option price for Incentive
Stock Options issued under this Plan shall be equal at least to the fair market
value (as defined below) of the Company's Common Stock on the date of the grant
of the option. The option price for Non-Qualified Stock Options issued under
this Plan shall be at least equal to the fair market value of the Common Stock
on the date of the grant of the option except that the
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<PAGE>
minimum option price may be equal to or greater than 85% of the fair market
value of the Company's Common Stock as of the date of the grant of the option if
the discount is expressly granted in lieu of a reasonable amount of salary or
cash bonus. If an Incentive Stock Option is granted to an individual who, at the
time the option is granted, owns shares of Common Stock equal to more than 10
percent of the total combined voting power of the Common Stock of the Company or
any subsidiary corporation of the Company (a "10% Stockholder"), the option
price shall not be less than 110 percent of the fair market value, as determined
by the Committee in accordance with its interpretation of the requirements of
Section 422A of the Code and the regulations thereunder, of the Company's Common
Stock on the date of grant of the option, and such option shall not be
exercisable after the expiration of five years from the date the option is
granted. The fair market value of the Company's Common Stock on any particular
date shall mean the last reported sale price of a share of the Company's Common
Stock on any stock exchange on which such stock is then listed or admitted to
trading, or on the NASDAQ National Market System, on such date, or if no sale
took place on such day, the last such date on which a sale took place, or if the
Common Stock is not then quoted on the NASDAQ National Market System, or listed
or admitted to trading on any stock exchange, the average of the bid and asked
prices in the over-the-counter market on such date, or if none of the foregoing,
a price determined by the Committee.
(b) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Incentive Stock Options issued pursuant to this Plan shall
be issued substantially in the form set forth in Appendix I hereof, which form
is hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Incentive Stock
Options shall not be exercisable after the expiration of ten years (five years
in the case of 10% Stockholders) from the date such options are granted, unless
terminated earlier under the terms of the option. At the time of the grant of an
Incentive Stock Option hereunder, the Committee may, in its discretion, modify
or amend any of the option terms contained in Appendix I for any particular
optionee, provided that the option as modified or amended satisfies the
requirements of Section 422A of the Code and the regulations thereunder. Each of
the options granted pursuant to this Section 5(b) is intended, if possible, to
be an "Incentive Stock Option" as that term is defined in Section 422A of the
Code and the regulations thereunder. In the event this Plan or any option
granted pursuant to this Section 5(b) is in any way inconsistent with the
applicable legal requirements of the Code or the regulations thereunder for an
Incentive Stock Option, this Plan and such option shall be deemed automatically
amended as of the date hereof to conform to such legal requirements, if such
conformity may be achieved by amendment.
(c) Subject to the authority of the Committee set forth in
Section 4(a) hereof, Non-Qualified Stock Options issued pursuant to this Plan
shall be issued substantially in the form set forth in Appendix II hereof, which
form is hereby incorporated by reference and made a part hereof, and shall
contain substantially the terms and conditions set forth therein. Non-Qualified
Stock Options shall expire ten years after the date they are granted, unless
terminated earlier under the option terms. At the time of granting a
Non-Qualified Stock Option hereunder, the Committee may, in its discretion,
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<PAGE>
modify or amend any of the option terms contained in Appendix II for any
particular optionee.
(d) Neither the Company nor any of its current or future
parent, subsidiaries or affiliates, nor their officers, directors, stockholders,
stock option plan committees, employees or agents shall have any liability to
any optionee in the event (i) an option granted pursuant to Section 5(b) hereof
does not qualify as an "Incentive Stock Option" as that term is used in Section
422A of the Code and the regulations thereunder; (ii) any optionee does not
obtain the tax treatment pertaining to an Incentive Stock Option; or (iii) any
option granted pursuant to Section 5(c) hereof is an "Incentive Stock Option."
6. Modification, Amendment, Suspension and Termination
Options shall not be granted pursuant to this Plan after
August 1, 2004. The Board of Directors reserves the right at any time, and from
time to time, to modify or amend this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board of Directors;
provided, however, that such action shall not affect options granted under the
Plan prior to the actual date on which such action occurred. If a modification
or amendment of this Plan is required by the Code or the regulations thereunder
to be approved by the stockholders of the Company in order to permit the
granting of "Incentive Stock Options" (as that term is defined in Section 422A
of the Code and regulations thereunder) pursuant to the modified or amended
Plan, such modification or amendment shall also be approved by the stockholders
of the Company in such manner as is prescribed by the Code and the regulations
thereunder. If the Board of Directors voluntarily submits a proposed
modification, amendment, suspension or termination for stockholder approval,
such submission shall not require any future modifications, amendments (whether
or not relating to the same provision or subject matter), suspensions or
terminations to be similarly submitted for stockholder approval.
7. Effectiveness of Plan
This Plan shall become effective on the date of its adoption
by the Company's Board of Directors, subject however to approval by the holders
of the Company's Common Stock in the manner as prescribed in the Code and the
regulations thereunder. Options may be granted under this Plan prior to
obtaining stockholder approval, provided such options shall not be exercisable
until stockholder approval is obtained.
8. General Conditions
(a) Nothing contained in this Plan or any option granted
pursuant to this Plan shall confer upon any employee the right to continue in
the employ of the Company or any affiliated or subsidiary corporation or
interfere in any way with the rights of the Company or any affiliated or
subsidiary corporation to terminate his employment in any way.
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<PAGE>
(b) Corporate action constituting an offer of stock for sale
to any employee under the terms of the options to be granted hereunder shall be
deemed complete as of the date when the Committee authorizes the grant of the
option to the employee, regardless of when the option is actually delivered to
the employee or acknowledged or agreed to by him.
(c) The terms "parent corporation" and "subsidiary
corporation" as used throughout this Plan, and the options granted pursuant to
this Plan, shall (except as otherwise provided in the option form) have the
meaning that is ascribed to that term when contained in Section 422A(b) of the
Code and the regulations thereunder, and the Company shall be deemed to be the
grantor corporation for purposes of applying such meaning.
(d) References in this Plan to the Code shall be deemed to
also refer to the corresponding provisions of any future United States revenue
law.
(e) The use of the masculine pronoun shall include the
feminine gender whenever appropriate.
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<PAGE>
APPENDIX I
INCENTIVE STOCK OPTION
To:__________________________________________________________________________
Name
__________________________________________________________________________
Address
__________________________________________________________________________
Date of Grant:____________________________________
You are hereby granted an option, effective as of the date hereof, to
purchase __________ shares of common stock, par value $.02 per share ("Common
Stock"), of Genesis Health Ventures, Inc. (the "Company") at a price of $___ per
share pursuant to the Company's Amended and Restated Employee Stock Option Plan
(the "Plan").
Your option may first be exercised on and after ________, but not
before that time. [On and after _________ and prior to _________, your option
may be exercised for up to % of the total number of shares subject to the option
minus the number of shares previously purchased by exercise of the option (as
adjusted for any change in the outstanding shares of the Common Stock of the
Company by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Stock Option Committee deems in its sole discretion to be
similar circumstances). Each succeeding year thereafter, your option may be
exercised for up to an additional ___% of the total number of shares subject to
the option minus the number of shares previously purchased by exercise of the
option (as adjusted for any change in the outstanding shares of the Common Stock
of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Stock Option Committee deems in its sole
discretion to be similar circumstances).](1) No fractional shares shall be
issued or delivered.
This option shall terminate and is not exercisable after [five/ten]
years from the date of its grant (the "Scheduled Termination Date"), except if
terminated earlier as hereafter provided.
You may exercise your option by giving written notice to the Secretary
of the Company on forms supplied by the Company at its then principal executive
office, accompanied by payment of the option price for the total number of
shares you specify that you wish to purchase. The payment may be in any of the
following forms: (a) cash, which
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(1) The bracketed portion of this paragraph should be included if the number
of shares which may be acquired upon exercise of the option will increase over
time.
<PAGE>
may be evidenced by a check; (b) certificates representing shares of Common
Stock of the Company, which will be valued by the Secretary of the Company at
the fair market value per share of the Company's Common Stock (as determined in
accordance with the Plan) on the last trading day immediately preceding the
delivery of such certificates to the Company, accompanied by an assignment of
the stock to the Company; or (c) any combination of cash and Common Stock of the
Company valued as provided in clause (b). Any assignment of stock shall be in a
form and substance satisfactory to the Secretary of the Company, including
guarantees of signature(s) and payment of all transfer taxes if the Secretary
deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by the Company or
a Company subsidiary corporation is terminated other than by reason of (i)
disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder, in which case your
option will terminate one year from the onset of disability, or death (but in no
event later than the Scheduled Termination Date), whether such termination be
voluntary or not. After the date your employment is terminated, as aforesaid,
you may exercise this option only for the number of shares which you had a right
to purchase and did not purchase on the date your employment terminated. If you
are employed by a Company subsidiary corporation, your employment shall be
deemed to have terminated on the date your employer ceases to be a Company
subsidiary corporation, unless you are on that date transferred to the Company
or another Company subsidiary corporation. Your employment shall not be deemed
to have terminated if you are transferred from the Company to a Company
subsidiary corporation, or vice versa, or from one Company subsidiary
corporation to another Company subsidiary corporation.
If you die while employed by the Company or a Company subsidiary
corporation, your legatee(s), distributee(s), executor or administrator, as the
case may be, may, at any time within one year after the date of your death (but
in no event later than the Scheduled Termination Date), exercise the option as
to any shares which you had a right to purchase and did not purchase during your
lifetime. If your employment by the Company or a Company subsidiary corporation
is terminated by reason of your becoming disabled (within the meaning of Section
22(e)(3) of the Code and the regulations thereunder), you or your legal guardian
or custodian may at any time within one year after the date of such termination
(but in no event later than the Scheduled Termination Date), exercise the option
as to any shares, which you have a right to purchase and did not purchase prior
to such termination. Your executor, administrator, guardian or custodian must
present proof of his authority satisfactory to the Company prior to being
allowed to exercise this option.
In the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Stock Option Committee deems in its sole
discretion to be similar circumstances, the number and kind of shares subject to
this option and the option price of such shares shall be
-2-
<PAGE>
appropriately adjustedin a manner to be determined in the sole discretion of the
Stock Option Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a stockholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the stockholders of the Company in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state or local regulatory bodies or
agencies and securities exchanges as the Company may deem necessary or
desirable; or
(c) During any period of time in which the Company deems that
the exercisability of this option, the offer to sell the shares optioned
hereunder, or the sale hereof, may violate a federal, state, local or securities
exchange rule, regulation or law, or may cause the Company to be legally
obligated to issue or sell more shares than the Company is legally entitled to
issue or sell.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgments and agreements as the
Company may, in its sole
-3-
<PAGE>
discretion, deem advisable to avoid any violation of federal, state, local or
securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to the Company that
the proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of an opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of the Company and you that this option shall, if
possible, be an "incentive stock option" as that term is used in Section 422A of
the Code and the regulations thereunder. In the event this option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "incentive stock option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between the Company and you with respect to the subject matter
hereof and no amendment, modification or waiver of this option, in whole or in
part, shall be binding upon the Company unless in writing or signed by the
President of the Company. This option and the performances of the parties
hereunder shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania.
-4-
<PAGE>
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
GENESIS HEALTH VENTURES, INC.
By:_____________________________________
I hereby acknowledge receipt of a copy of the foregoing stock option
and, having read it hereby signify my understanding of, and my agreement with,
its terms and conditions.
________________________________________ ________________________________
(Signature) (Date)
-5-
<PAGE>
APPENDIX II
NON-QUALIFIED STOCK OPTION
To:___________________________________________________________________________
Name
___________________________________________________________________________
Address
___________________________________________________________________________
Date of Grant:______________________________________
You are hereby granted an option, effective as of the date hereof, to
purchase _________ shares of common stock, par value $.02 per share ("Common
Stock"), of Genesis Health Ventures, Inc. (the "Company") at a price of $____
per share pursuant to the Company's Amended and Restated Employee Stock Option
Plan (the "Plan").
Your option may first be exercised on and after _______, but not before
that time. [On and after _______ and prior to ______, your option may be
exercised for up to ___% of the total number of shares subject to the option
minus the number of shares previously purchased by exercise of the option (as
adjusted for any change in the outstanding shares of the Common Stock of the
Company by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Stock Option Committee deems in its sole discretion to be
similar circumstances). Each succeeding year thereafter, your option may be
exercised for up to an additional % of the total number of shares subject to the
option minus the number of shares previously purchased by exercise of the option
(as adjusted for any change in the outstanding shares of the Common Stock of the
Company by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Stock Option Committee deems in its sole discretion to be
similar circumstances).](1) No fractional shares shall be issued or delivered.
This option shall terminate and is not exercisable after ten years from
the date of its grant (the "Scheduled Termination Date"), except if terminated
earlier as hereafter provided.
You may exercise your option by giving written notice to the Secretary
of the Company on forms supplied by the Company at its then principal executive
office,
- --------
The bracketed portion of this paragraph should be included if the number
of shares which may be acquired upon exercise of the option will increase over
time.
<PAGE>
accompanied by payment of the option price for the total number of shares you
specify that you wish to purchase. The payment may be in any of the following
forms: (a) cash, which may be evidenced by a check; (b) certificates
representing Common Stock of the Company which will be valued by the Secretary
of the Company at the fair market value per share of the Company's Common Stock
(as determined in accordance with the Plan) on the last trading day immediately
preceding the delivery of such certificates to the Company, accompanied by an
assignment of the stock to the Company; or (c) any combination of cash and
Common Stock of the Company valued as provided in clause (b). Any assignment of
stock shall be in a form and substance satisfactory to the Secretary of the
Company, including guarantees of signature(s) and payment of all transfer taxes
if the Secretary deems such guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you,
terminate three months after the date on which your employment by the Company or
a Company subsidiary corporation is terminated other than by reason of (i)
disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the regulations thereunder, in which case your
option will terminate one year from the onset of disability, or death (but in no
event later than the Scheduled Termination Date), whether such termination be
voluntary or not. After the date your service or employment is terminated, as
aforesaid, you may exercise this option only for the number of shares which you
had a right to purchase and did not purchase on the date you ceased to be a
director or your employment terminated. If you are employed by a Company
subsidiary corporation, your employment shall be deemed to have terminated on
the date your employer ceases to be a Company subsidiary corporation, unless you
are on that date transferred to the Company or another Company subsidiary
corporation. Your employment shall not be deemed to have terminated if you are
transferred from the Company to a Company subsidiary corporation, or vice versa,
or from one Company subsidiary corporation to another Company subsidiary
corporation.
If you die while employed by the Company or a Company subsidiary
corporation, your legatee(s), distributee(s), executor or administrator, as the
case may be, may, at any time within one year after the date of your death (but
in no event later than the Scheduled Termination Date), exercise the option as
to any shares which you had a right to purchase and did not purchase during your
lifetime. If your service with the Company or a Company parent or subsidiary
corporation is terminated by reason of your becoming disabled (within the
meaning of Section 22(e)(3) of the Code and the regulations thereunder), you or
your legal guardian or custodian may at any time within one year after the date
of such termination (but in no event later than the Scheduled Termination Date),
exercise the option as to any shares which you had a right to purchase and did
not purchase prior to such termination. Your executor, administrator, guardian
or custodian must present proof of his authority satisfactory to the Company
prior to being allowed to exercise this option.
-2-
<PAGE>
In the event of any change in the outstanding shares of the Common
Stock of the Company by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Stock Option Committee deems in its sole
discretion to be similar circumstances, the number and kind of shares subject to
this option and the option price for such shares shall be appropriately adjusted
in a manner to be determined in the sole discretion of the Stock Option
Committee.
This option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, tour legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a stockholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of exercise of this
option during any period of time in which the Company deems, in its sole
discretion, that such delivery may not be consummated without violating a
federal, state, local or securities exchange rule, regulation or law.
Notwithstanding anything to the contrary contained herein, this option
is not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the stockholders of the Company in the manner prescribed by the Code
and the regulations thereunder;
(b) Until this option and the optioned shares are approved
and/or registered with such federal, state and local regulatory bodies or
agencies and securities exchanges as the Company may deem necessary or
desirable; or
(c) During any period of time in which the Company deems that
the exercisability of this option, the offer to sell the shares optioned
hereunder, or the sale thereof, may violate a federal, state, local or
securities exchange rule, regulation or law, or may cause the Company to be
legally obligated to issue or sell more shares than the Company is legally
entitled to issue or sell.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
-3-
<PAGE>
(a) The optionee hereby agrees, warrants and represents that
he will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgments and agreements as the
Company may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the
optionee hereunder shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws. The shares have been acquired for
investment and may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement under
the Securities Act of 1933, as amended, and under any applicable state
securities laws or an opinion of counsel acceptable to the Company that
the proposed transaction will be exempt from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of an opinion of counsel acceptable to the Company that
said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
It is the intention of the Company and you that this option shall not
be an "incentive stock option" as that term is used in Section 422A of the Code
and the regulations thereunder.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between the Company and you with respect to the
-4-
<PAGE>
subject matter hereof and no amendment, modification or waiver of this option,
in whole or in part, shall be binding upon the Company unless in writing and
signed by the President of the Company. This option and the performances of the
parties hereunder shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.
Please sign the copy of this option and return it to the Company's
Secretary, thereby indicating your understanding of and agreement with its terms
and conditions.
GENESIS HEALTH VENTURES, INC.
By:_____________________________________
I hereby acknowledge receipt of a copy of the foregoing stock option and, having
read it hereby signify my understanding of, and my agreement with, its terms
and conditions.
__________________________________________ _________________________________
(Signature) (Date)
-5-
<PAGE>
Exhibit 11
GENESIS HEALTH VENTURES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
3/31/97 3/31/96
----------- -----------
<S> <C> <C>
Primary Earnings Per Share:
----------- -----------
Reported net income $ 13,494 $ 7,810
----------- -----------
Weighted average shares & CSE's: 36,372,903 25,306,685
----------- -----------
----------- -----------
Primary EPS - Net income $ 0.37 $ 0.31
=========== ===========
Fully Diluted Earnings Per Share:
----------- -----------
Reported net income $ 13,494 $ 7,810
----------- -----------
Interest expense, amortization and other costs
related to the assumed conversion of the
Convertible Debentures, net of tax 697
----------- -----------
Adjusted net income $ 13,494 $ 8,507
----------- -----------
Weighted average shares & CSE's:
Common shares 36,372,903 25,306,685
Additional option shares 1,790
Convertible Debenture shares 3,491,047
----------- -----------
Total 36,374,693 28,797,732
----------- -----------
----------- -----------
Fully diluted EPS - Net income $ 0.37 $ 0.30
=========== ===========
</TABLE>
<PAGE>
GENESIS HEALTH VENTURES
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
3/31/97 3/31/96
------------- -------------
<S> <C> <C>
Primary Earnings Per Share:
Reported earnings before debenture conversion expense
and extraordinary item $ 25,002 $ 14,355
Debenture conversion expense, net of tax (687)
Extraordinary item, net of tax (553)
------------ ------------
Reported net income $ 24,449 $ 13,668
------------ ------------
Weighted average shares & CSE's: 35,285,093 24,730,819
------------ ------------
Primary EPS before debenture conversion expense $0.71 $0.58
Primary EPS - Debenture conversion expense ($0.03)
Primary EPS - Extraordinary item, net of tax ($0.02)
------------ ------------
change in accounting principle
Primary EPS - Net income $ 0.69 $ 0.55
Fully Diluted Earnings Per Share:
Reported earnings before debenture conversion expense $ 25,002 $ 14,355
Debenture conversion expense, net of tax (687)
Extraordinary item, net of tax ($ 553)
------------ ------------
Reported net income 24,449 13,668
Adjustments to net income:
Interest expense, amortization and other costs
related to the assumed conversion of the
Convertible Debentures, net of tax 303 1,485
------------ ------------
Adjusted net income $ 24,752 $ 15,153
------------ ------------
Weighted average shares & CSE's:
Common shares 35,285,093 24,730,819
Additional option shares 92,881
Convertible Debenture shares 884,889 4,085,900
------------ ------------
Total 36,262,863 28,816,719
------------ ------------
Fully diluted EPS before debenture conversion expense $ 0.70 $ 0.55
Fully diluted EPS - Debenture conversion expense (0.02)
Fully diluted EPS - Extraordinary item, net of tax ($ 0.02)
============ ============
Fully diluted EPS - Net income $ 0.68 $ 0.53
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 13,835,000
<SECURITIES> 5,973,000
<RECEIVABLES> 233,518,000
<ALLOWANCES> (36,531,000)
<INVENTORY> 24,866,000
<CURRENT-ASSETS> 320,140,000
<PP&E> 633,540,000
<DEPRECIATION> (77,879,000)
<TOTAL-ASSETS> 1,341,213
<CURRENT-LIABILITIES> 128,737,000
<BONDS> 0
0
0
<COMMON> 699,000
<OTHER-SE> 582,267,000
<TOTAL-LIABILITY-AND-EQUITY> 1,341,213
<SALES> 273,263,000
<TOTAL-REVENUES> 273,263,000
<CGS> 225,188,000
<TOTAL-COSTS> 243,052,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,960,000
<INCOME-PRETAX> 21,251,000
<INCOME-TAX> 7,757,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,494,000
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
