<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1998
REGISTRATION NO. 333-57279
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
FOUNTAIN VIEW, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------
<TABLE>
<S> <C>
DELAWARE 95-4644784
(STATE OR OTHER JURISDICTION OF INCORPORATION OR OR-
GANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
AND SUBSIDIARY GUARANTORS
SUMMIT CARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-3656297
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SUMMIT CARE-CALIFORNIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-2269142
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SUMMIT CARE PHARMACY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-3747839
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SUMMIT CARE TEXAS EQUITY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4604050
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SUMMIT CARE TEXAS, NO. 2, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
TEXAS 95-4060847
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SUMMIT CARE TEXAS, NO. 3, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
TEXAS 74-2582813
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SUMMIT CARE MANAGEMENT TEXAS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
TEXAS 74-2850517
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SUMMIT CARE TEXAS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
TEXAS 95-4642711
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
FOUNTAIN VIEW HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4644785
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
AIB CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-3918421
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
ALEXANDRIA CONVALESCENT HOSPITAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4395382
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
BIA HOTEL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-3918420
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
BRIER OAK CONVALESCENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4212165
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
ELMCREST CONVALESCENT HOSPITAL
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4274740
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
FOUNTAINVIEW CONVALESCENT HOSPITAL
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-2506832
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
FOUNTAIN VIEW MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4199013
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
RIO HONDO NURSING CENTER
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4272737
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
LOCOMOTION HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4644786
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
LOCOMOTION THERAPY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-4644790
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
ON-TRACK THERAPY CENTER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 77-0447168
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
I.'N O, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-4560821
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
SYCAMORE PARK CONVALESCENT HOSPITAL
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 95-2260970
(STATE OR OTHER JURISDICTION OF INCORPO-
RATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
(Continued on next page)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Continued from previous page)
8051
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
--------------
11900 W. OLYMPIC BOULEVARD
SUITE 680
LOS ANGELES, CALIFORNIA 90064
(310) 571-0351
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT M. SNUKAL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FOUNTAIN VIEW, INC.
11900 W. OLYMPIC BOULEVARD, SUITE 680
LOS ANGELES, CALIFORNIA 90064
(310) 571-0351
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
WITH A COPY TO:
STEPHEN M. L. COHEN, ESQ.
CHOATE, HALL & STEWART
EXCHANGE PLACE
53 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 248-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and they are in compliance
with General Instruction G, check the following box: [_]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998
PROSPECTUS
OFFER TO EXCHANGE UP TO $120,000,000 OF 11 1/4%
SENIOR SUBORDINATED NOTES DUE 2008, SERIES B OF
FOUNTAIN VIEW, INC., WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL
OF ITS OUTSTANDING 11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
FOUNTAIN VIEW, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
Fountain View, Inc., a Delaware corporation (the "Company") hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus (as
the same may be amended or supplemented from time to time, this "Prospectus")
and the accompanying letter of transmittal (the "Letter of Transmittal" and,
together with this Prospectus, the "Exchange Offer"), to exchange up to an
aggregate amount of $120,000,000 of the Company's 11 1/4% Senior Subordinated
Notes Due 2008, Series B (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement of which this Prospectus is a part, which Exchange
Notes shall be guaranteed (the "Exchange Guarantees"), on a full and
unconditional basis, jointly and severally, by each of the Guarantors (as
defined) and all future Restricted Subsidiaries (as defined) of the Company, or
any of the Guarantors for a like principal amount of the Company's outstanding
11 1/4% Senior Subordinated Notes Due 2008 (the "Outstanding Notes"), of which
$120,000,000 in aggregate principal amount was issued on April 16, 1998 and is
outstanding as of the date hereof, which Outstanding Notes have been guaranteed
on a full and unconditional basis by the Guarantors (the "Outstanding
Guarantees" and, together with the Exchange Guarantees, the "Guarantees"). The
form and terms of the Exchange Notes and the Exchange Guarantees are identical
in all material respects to the form and terms of the Outstanding Notes and the
Outstanding Guarantees, except for certain transfer restrictions and
registration rights relating to the Outstanding Notes. The Exchange Notes will
be issued pursuant to, and entitled to the benefits of, the Indenture, dated as
of April 16, 1998, between the Company, the Guarantors and State Street Bank
and Trust Company of California, as trustee, governing the Outstanding Notes.
The Exchange Notes and the Outstanding Notes are hereinafter sometimes
collectively referred to as the "Notes".
The Company is a holding company, has no operations of its own and derives
substantially all of its revenue from its subsidiaries.
Holders of Outstanding Notes whose Outstanding Notes are not tendered and
accepted in the Exchange Offer will continue to hold such Outstanding Notes and
will be entitled to all the rights and benefits and will be subject to the
limitations applicable thereto under the Indenture. Following the consummation
of the Exchange Offer, the holders of Outstanding Notes will continue to be
subject to the existing restrictions on the transfer thereof and the Company
will have no further obligation to such holders to provide for the registration
under the Securities Act of the Outstanding Notes held by them. The Company
will not receive any proceeds from, and has agreed to pay all the expenses
incurred by it incident to, the Exchange Offer. No underwriter is being used in
connection with this Exchange Offer.
Except as otherwise indicated, the following description relates both to the
Outstanding Notes issued in the Note Offering and the Exchange Notes, together
with the Exchange Guarantees, to be issued in exchange for the Outstanding
Notes in the Exchange Offer. The form and terms of the Exchange Notes are the
same as the form and terms of the Outstanding Notes, except that the Exchange
Notes have been registered under the Securities Act and therefore will not bear
legends restricting the transfer thereof. The Outstanding Notes are and the
Exchange Notes will be general, unsecured obligations of the Company. There is
currently no indebtedness outstanding that is subordinated to the Notes.The
Outstanding Notes rank and the Exchange Notes will rank on the same level with
all future senior subordinated debt of the Company. The claims of the holders
of the Outstanding Notes are and the claims of the holders of the Exchange
Notes will be subordinated to Senior Debt (as defined). The Company is highly
leveraged. As of May 31, 1998, approximately $126 million of Senior Debt was
outstanding, including approximately $101 million of borrowings under the
Company's New Credit Facility (as defined herein). See "Capitalization" and
"Description of Other Indebtedness".
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, the Company believes that
Exchange Notes to be issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than (i)
a broker-dealer who purchasers such Exchange Notes from the Company to resell
<PAGE>
(Continued from previous page)
pursuant to Rule 144A or any other available exemption under the Securities
Act or (ii) any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes. However, the
Company has not sought and does not intend to seek its own no-action letter in
connection with the Exchange Offer and there can be no assurance that the
Commission would make a similar determination with respect to the Exchange
Offer. Eligible holders of Outstanding Notes wishing to accept the Exchange
Offer must represent to the Company that such conditions have been met. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes
for its account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. A broker-dealer
may nonetheless be deemed to be an "underwriter" under the Securities Act
notwithstanding such disclaimer. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of Exchange Notes received in exchange for
Outstanding Notes where such Outstanding Notes were acquired by such
Participating Broker-Dealer as a result of market making activities or other
trading activities, provided such Outstanding Notes do not constitute any
portion of an unsold allotment from the original sale of the Outstanding
Notes. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution".
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY HOLDERS OF OUTSTANDING NOTES AND PROSPECTIVE PURCHASERS OF
EXCHANGE NOTES.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is , 1998.
The Company will accept for exchange any and all validly tendered
Outstanding Notes not withdrawn prior to 5:00 p.m., New York City time, on
, 1998 unless the Exchange Offer is extended by the Company (the
"Expiration Date"); however, in no event shall the Exchange Offer be extended
beyond sixty (60) days after the date the registration statement of which this
Prospectus is a part is declared effective by the Commission. Tenders of
Outstanding Notes may be withdrawn at any time prior to the Expiration Date.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Outstanding Notes being tendered for exchange. However, the Exchange
Offer is subject to certain customary conditions which may be waived by the
Company and to the terms and provisions of the Registration Rights Agreement.
See "The Exchange Offer--Certain Conditions to the Exchange Offer".
<PAGE>
THE INITIAL PURCHASERS WHO PARTICIPATED IN THE OFFERING OF THE OUTSTANDING
NOTES MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT
THE PRICE OF THE NOTES. SPECIFICALLY, THE INITIAL PURCHASERS MAY BID FOR AND
PURCHASE OUTSTANDING NOTES AND EXCHANGE NOTES IN THE OPEN MARKET.
NEITHER THE COMPANY NOR THE INITIAL PURCHASERS ARE MAKING ANY REPRESENTATION
TO ANY OFFEREE OR PURCHASER OF THE NOTES REGARDING THE LEGALITY OF AN
INVESTMENT THEREIN BY SUCH OFFEREE OR PURCHASER UNDER APPROPRIATE LEGAL
INVESTMENT OR SIMILAR LAWS. THE EXCHANGE OFFER IS BEING MADE ON THE BASIS OF
THIS PROSPECTUS. ANY DECISION TO EXCHANGE NOTES IN THE EXCHANGE OFFER MUST BE
BASED ON THE INFORMATION CONTAINED HEREIN. EACH PROSPECTIVE PURCHASER OF THE
EXCHANGE NOTES MUST COMPLY WITH ALL APPLICABLE LAWS AND REGULATIONS IN FORCE
IN ANY JURISDICTION IN WHICH IT PURCHASES, OFFERS OR SELLS THE EXCHANGE NOTES
OR POSSESSES OR DISTRIBUTES THIS PROSPECTUS AND MUST OBTAIN ANY CONSENT,
APPROVAL OR PERMISSION REQUIRED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT OF
THE EXCHANGE NOTES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION
TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR SALES,
AND NEITHER THE COMPANY NOR THE INITIAL PURCHASERS SHALL HAVE ANY
RESPONSIBILITY THEREFOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES TO ANY PERSON IN ANY
JURISDICTION WHERE IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
----------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE NEW HAMPSHIRE SECRETARY OF STATE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
i
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise stated in this Prospectus, references to (a)
"Fountain View" shall mean Fountain View, Inc., a Delaware corporation and its
subsidiaries, other than Summit and its subsidiaries; (b) "Summit" shall mean
Summit Care Corporation, a California corporation and its subsidiaries; and (c)
the "Company" shall mean Fountain View and its subsidiaries, including Summit
and its subsidiaries and, in certain cases, refers to the historical
performance or operations of Fountain View and Summit, taken as a whole. All
references to a fiscal year refer to the twelve months ended June 30, in the
case of Summit, and December 31, in the case of Fountain View and the Company,
of the year referenced.
THE COMPANY
The Company is a leading operator of long-term care facilities and a leading
provider of a full continuum of post-acute care services, with a strategic
emphasis on sub-acute specialty medical care. Sub-acute care is generally
short-term, goal-oriented rehabilitation care intended for individuals who have
a specific illness, injury or disease, but who do not require many of the
services provided in an acute care hospital. Sub-acute care is typically
rendered immediately after, or in lieu of, acute hospitalization in order to
treat such specific medical conditions. Post-acute care is the provision of a
continuum of care to patients following discharge from an acute care hospital.
The Company operates a network of facilities in California, Texas and Arizona,
including 44 skilled nursing facilities ("SNFs") that offer sub-acute,
rehabilitative and specialty medical skilled nursing care, as well as six
assisted living facilities ("ALFs") that provide room and board and social
services in a secure environment. In addition to long-term care, the Company
provides a variety of high-quality ancillary services such as physical,
occupational and speech therapy in Company-operated facilities, unaffiliated
facilities and acute care hospitals. The Company also operates three
institutional pharmacies (one of which is a joint venture), which service acute
care hospitals as well as SNFs and ALFs both affiliated and unaffiliated with
the Company, an outpatient therapy clinic and a durable medical equipment
("DME") company. The Company consists of the combined operations of Fountain
View and Summit and operates 50 facilities with approximately 6,600 beds
serving Medicare, Medicaid, managed care, private pay and other patients.
THE TRANSACTIONS
On February 6, 1998, Fountain View, Summit, Heritage Fund II, L.P. and FV-SCC
Acquisition Corp., a wholly-owned subsidiary of Fountain View ("Acquisition"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") providing
for the acquisition of Summit by Fountain View. Pursuant to the Merger
Agreement, Acquisition offered (the "Tender Offer") to purchase all of the
outstanding shares of common stock of Summit (the "Summit Shares"), at a price
of $21.00 per share, net to the seller in cash. A copy of the Merger Agreement
is filed as an exhibit to the Schedule 14D-1 filed by Fountain View with the
Securities and Exchange Commission (the "Commission") in connection with the
Tender Offer. The Tender Offer expired on March 25, 1998 and Acquisition
purchased approximately 99% of the Summit Shares at the closing of the Tender
Offer on March 27, 1998.
Pursuant to the terms of the Merger Agreement, Acquisition merged with and
into Summit on April 16, 1998 (the "Merger"). Summit was the surviving
corporation in the Merger and became a wholly-owned subsidiary of Fountain
View.
1
<PAGE>
In order to consummate the purchase of Summit Shares in the Tender Offer and
the Merger, to refinance all then existing Fountain View funded indebtedness,
to redeem all outstanding options for Summit Shares, and to pay certain fees,
expenses and other costs arising in connection with such transactions, Fountain
View sold, in a transaction exempt from registration pursuant to Rule 144A and
Regulation S of the Securities Act, $120.0 million of the Outstanding Notes
(the "Note Offering"). The Company also entered into a new revolving credit
facility and term loan facilities (the "New Credit Facility") providing for
revolving credit borrowings of up to $30.0 million and term loan borrowings of
up to $85.0 million. In addition, Fountain View raised approximately
$97.0 million of new equity investments in the amounts of $90.6 million from
Heritage Fund II, L.P. and certain other co-investors, $5.0 million from Mr.
Snukal, Fountain View's Chief Executive Officer, and Sheila Snukal, Fountain
View's Executive Vice President and Mr. Snukal's wife ("Mrs. Snukal"), and
$1.4 million from Mr. Scott, Summit's Chairman and Chief Executive
Officer (collectively, the "Equity Investments"). The Company used the proceeds
of the Note Offering to repay certain indebtedness of Summit assumed in
connection with the Merger and to pay certain transaction fees and expenses.
See "Use of Proceeds".
The Tender Offer, the Merger, the establishment of the New Credit Facility,
the Equity Investments, the Note Offering and the application of the proceeds
therefrom are collectively referred to as the "Transactions".
Since the Transactions, senior management of the Company have owned
approximately 26.3% of the Company's outstanding common stock, on a fully-
diluted basis, and Heritage Partners, Inc. and its affiliates ("Heritage"),
along with certain co-investors, have owned approximately 72.7% of the
Company's outstanding common stock, on a fully-diluted basis. Heritage is a
Boston-based private equity firm with $530 million in capital under management,
specializing in the acquisition and equity-based recapitalization of private,
family-owned businesses. See "Management".
In August 1997, Heritage invested $14.0 million in cash in Fountain View in a
series of transactions (the "Fountain View Equity Transactions") which resulted
in Heritage obtaining a 49.9% ownership position in the common equity of
Fountain View and completing a $7.0 million preferred stock investment in
Fountain View at that time. See Note 3 to the audited financial statements of
Fountain View included elsewhere in this Prospectus.
2
<PAGE>
Set forth below is a diagram showing the post-Merger organizational structure
of Fountain View, Inc. and its subsidiaries (all subsidiaries are 100% owned,
unless otherwise indicated):
CHART APPEARS HERE
The diagram depicts:
(A) Fountain View as the owner of all of the outstanding stock of:
Summit Care Corporation, I'NO, Inc., Locomotion Holdings, Inc., On-Track
Therapy Center, Inc., Fountain View Holdings, Inc. and Sycamore Park
Convalescent Hospital;
(B) Summit Care Corporation as the owner of:
(i) all of the outstanding stock of Summit Care California, Inc., Summit
Care Pharmacy Inc., Summit Care Texas No. 2, Summit Care Texas
Management, Inc., and Summit Care Texas No. 3, and (ii) 82.8% of the
outstanding stock of Summit Care Texas Equity, Inc.
(C) Locomotion Holdings, Inc. as the owner of all the outstanding stock
Locomotion Therapy, Inc.
(D) Fountain View Holdings, Inc. as the owner of all the outstanding stock of;
AIB Corp., Alexandria Convalescent Hospital, Inc., BIA Hotel Corp., Brier
Oak Convalescent, Inc., Elmcrest Convalescent Hospital, Fountainview
Convalescent Hospital, Fountainview Management, Inc., Rio Hondo Nursing
Center
(E) Summit Care Texas No. 2, Inc. owning 17.2% of the outstanding stock of
Summit Care Texas Equity, Inc.
(F) Summit Care Texas Management, Inc. owning a 1% general partnership
interest in Summit Care Texas L.P.
(G) Summit Care Texas Equity, Inc. owning a 99% limited partnership interest
in Summit Care Texas L.P.
3
<PAGE>
THE FINANCINGS
The following table illustrates the sources and uses of funds for the
Transactions. See "Unaudited Pro Forma Financial Data".
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS
New Credit Facility(1)........................................ $100.0
11 1/4% Senior Subordinated Notes............................. 120.0
------
Total debt................................................ 220.0
------
Equity Investments:
Heritage and co-investors equity investments(2)............. 90.6
Fountain View management equity investment(3)............... 5.0
Summit management equity investment(4)...................... 1.4
------
Total equity.............................................. 97.0
------
Total sources of funds.................................... $317.0
======
USES OF FUNDS
Purchase of Summit Shares in the Tender Offer and the
Merger(5).................................................... $145.6
Refinancing of Fountain View indebtedness(6).................. 32.0
Refinancing of Summit indebtedness(7)......................... 108.9
Fees and expenses............................................. 30.5
------
Total uses of funds....................................... $317.0
======
</TABLE>
- --------
(1) The New Credit Facility provides for up to $30.0 million of revolving
credit borrowings (with a $4.0 million sublimit for letters of credit) and
up to $85.0 million of term loans and matures in 2004. As of May 31, 1998,
term loans in the aggregate amount of approximately $85.0 million and
revolving loans in the aggregate amount of approximately $16.0 million were
outstanding under the New Credit Facility, and $14.0 million of revolving
credit borrowings were then available to the Company.
(2) Represents only the new cash invested in Fountain View by Heritage and
certain co-investors in connection with the Transactions and excludes the
Fountain View shares held by Heritage prior to the Transactions.
(3) Represents only the new cash invested in Fountain View by Mr. Snukal and
Mrs. Snukal in connection with the Transactions and excludes the Fountain
View shares held by management prior to the Transactions.
(4) Represents the full amount of the after-tax proceeds that Mr. Scott
received from the cash-out in the Merger of all options to purchase Summit
Shares held by him (and a payment from the Company to cover a portion of
related taxes) and the full after-tax proceeds from payments under the
Summit Executive Incentive Plan received by him from the Company, but does
not include the issuance by Mr. Scott of a limited recourse promissory note
in consideration for certain of the Fountain View shares issued to him in
connection with the Transactions. See "Certain Relationships and Related
Transactions--Investment Agreement" and "--Payments to Certain
Stockholders".
(5) Represents the purchase of all Summit Shares in the Tender Offer and the
Merger, and the cash-out of options to purchase 909,500 Summit Shares which
Summit effected upon the effectiveness of the Merger.
(6) Reflects the total funded indebtedness of Fountain View outstanding
immediately prior to the Merger.
(7) Reflects total funded indebtedness of Summit (excluding mortgages, capital
leases and certain other indebtedness) outstanding immediately prior to the
Merger.
4
<PAGE>
RECENT DEVELOPMENTS
On May 4, 1998, Baylor Health Care System, a vertically integrated healthcare
system operating in Texas ("Baylor"), and Buckner Foundation ("Buckner"), a
subsidiary of Buckner Baptist Benevolences, a Texas social services
organization (collectively, the "Baylor Group"), purchased from Heritage shares
of Series A Preferred Stock of Fountain View and warrants to purchase shares of
Fountain View's Series C Common Stock for approximately $12.4 million. The
shares of Series A Preferred Stock purchased by the Baylor Group are entitled
to receive a cumulative dividend calculated to achieve a 12% annual rate of
return, and are subject to automatic redemption upon the completion of an
initial public offering of Fountain View's common stock. The shares represented
by the warrants issued to the Baylor Group currently represent approximately 5%
of Fountain View's diluted capital stock. Baylor is also entitled to have one
of its nominees serve on Fountain View's board of directors.
Baylor and Fountain View also entered into an agreement on May 4, 1998
primarily to develop and operate skilled nursing facilities within a mile of
the Baylor hospital campuses for which Baylor has the right to receive a
market-rate development and license fee in the form of cash or warrants.
Baylor, one of the nation's largest not-for-profit integrated health care
providers, operates a network of 50 hospitals, clinics and primary care
facilities in 19 cities throughout Northern Texas and Southern Oklahoma. Baylor
is based in Dallas-Fort Worth, Texas, where its hospitals represent 16% of all
hospital admissions in the Dallas-Forth Worth area.
For the three months ended March 31, 1998, net revenues would have totaled
$74.0 million pro forma for the Transactions. During the same period,
management estimates that pro forma occupancy would have been 88.6% (excluding
three Summit facilities which commenced operations or were renovated in 1996 or
later) and the Company's pro forma quality mix (which is total net revenues
less Medicaid net revenues) would have been 67.2%.
The Company was incorporated in Delaware in 1997. Its principal executive
offices are located at 11900 Olympic Boulevard, Suite 680, Los Angeles,
California 90064, and its telephone number is (310) 571-0351.
5
<PAGE>
THE EXCHANGE OFFER
The Outstanding Notes were sold by the Company on
April 16, 1998 to Goldman, Sachs & Co., Nesbitt
Burns Securities Inc., Paribas Corporation and
Sutro & Co., Incorporated (collectively, the
Outstanding Notes........... "Initial Purchasers") pursuant to a Purchase
Agreement, dated April 16, 1998 (the "Purchase
Agreement"). The Initial Purchasers subsequently
resold the Outstanding Notes in transactions not
registered under the Securities Act in reliance
upon exemptions from registration pursuant to
Rule 144A and Regulation S under the Securities
Act.
Registration Rights Pursuant to the Purchase Agreement, the Company
Agreement................... and the Initial Purchasers entered into the
Registration Rights Agreement, which grants the
holders of the Outstanding Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such exchange and
registration rights which terminate upon the
consummation of the Exchange Offer.
Securities Offered..........
$120,000,000 aggregate principal amount of 11
1/4% Senior Subordinated Notes due 2008, Series B
(the "Exchange Notes").
The Exchange Offer.......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Outstanding Notes that
are properly tendered and accepted. The Company
will issue Exchange Notes on or promptly after
the Expiration Date. As of the date hereof, there
is $120,000,000 aggregate principal amount of
Outstanding Notes outstanding. The terms of the
Exchange Notes are identical in all material
respects to the terms of the Outstanding Notes
for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes
will bear a Series B designation, are freely
transferable by holders thereof (other than as
provided herein), and are not subject to any
covenant restricting transfer absent registration
under the Securities Act. See "The Exchange
Offer". The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Outstanding Notes being tendered for exchange.
Based on no-action letters issued by the staff of
the Commission to third parties with respect to
similar transactions (e.g. Exxon Capital Holdings
Corp. (April 13, 1989), Morgan Stanley & Co.,
Inc. (June 2, 1993) and Shearman & Sterling (July
2, 1993)), the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Outstanding Notes may be offered for
resale, resold and otherwise transferred by
holders thereof (other than (i) a
6
<PAGE>
broker-dealer who purchases such Exchange Notes
from the Company to resell pursuant to Rule 144A
or any other available exemption under the
Securities Act, or (ii) a person that is an
"affiliate" of the Company within the meaning of
Rule 405 of the Securities Act) without
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in
the ordinary course of such holders' business and
such holders are not engaged in, have no
arrangement or understanding with any person to
participate in, and do not intend to engage in,
any distribution of the Exchange Notes. However,
the Company has not sought and does not intend to
seek a no-action letter with respect to the
Exchange Offer and there can be no assurance that
the staff of the Commission would make a similar
determination with respect to the Exchange Offer.
Each holder of Exchange Notes, other than a
broker-dealer, must represent that such
conditions have been met. In addition, each
broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes.
The Letter of Transmittal accompanying this
Prospectus states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. A
broker-dealer may nonetheless be deemed to be an
"underwriter" under the Securities Act
notwithstanding such disclaimer. This Prospectus,
as it may be amended or supplemented from time to
time, may be used by a broker-dealer in
connection with resales of Exchange Notes
received in exchange for Outstanding Notes where
such Outstanding Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities. Pursuant
to the Registration Rights Agreements, the
Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use
in connection with any such resale. See "The
Exchange Offer-- Purpose of the Exchange Offer"
and "Plan of Distribution".
By tendering Outstanding Notes in exchange for
Exchange Notes, each holder will represent to the
Company that: (i) it is not an affiliate of the
Company, (ii) it is not engaged in, and does not
intend to engage in, and has no arrangement or
understanding with any person to participate in,
a distribution of the Exchange Notes to be issued
in the Exchange Offer, and (iii) any Exchange
Notes to be received by it will be acquired in
the ordinary course of business. Any holder who
tenders in the Exchange Offer who is unable to
make the foregoing representations may not rely
on the position of the
7
<PAGE>
staff of the Commission enunciated in no-action
letters and, in the absence of an applicable
exemption, must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities
Act for which the holder is not indemnified by
the Company.
Expiration Date............. 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer--Expiration
Date; Extensions; Termination; Amendments".
Accrued Interest on the
Exchange Notes............. Each Exchange Note will bear interest from the
most recent date to which interest has been paid
on the Outstanding Notes or, if no interest has
been paid on such Outstanding Notes, from
April 16, 1998.
Exchange Date............... As soon as practicable after the close of the
Exchange Offer, the Company will accept for
exchange all Outstanding Notes properly tendered
and not validly withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal Rights".
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to the following
conditions: (A) an injunction, order or decree
shall not have been issued by any court or
governmental agency that would prohibit, prevent
or otherwise materially impair the ability of the
Company to proceed with the Exchange Offer; and
(B) there shall not have occurred a change in the
current interpretation of the staff of the
Commission which current interpretation permits
the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Outstanding
Notes to be offered for resale, resold and
otherwise transferred by holders thereof (other
than (i) a broker-dealer who purchases such
Exchange Notes directly from the Company to
resell pursuant to Rule 144A, Regulation S or any
other available exemption under the Securities
Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery provisions
of the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders have no
arrangement with any person to participate in the
distribution of Exchange Notes. The Company
reserves the right to terminate or amend the
Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition. The Exchange Offer is not conditioned
on any minimum aggregate principal amount
8
<PAGE>
of Outstanding Notes being tendered for exchange.
See "The Exchange Offer--Certain Conditions to
the Exchange Offer".
Consequences of Failure to
Exchange................... Any Outstanding Notes not tendered pursuant to
the Exchange Offer will remain outstanding and
continue to accrue interest. Such Outstanding
Notes will remain "restricted securities" under
the Securities Act, subject to the transfer
restrictions described herein. As a result, the
liquidity of the market for such Outstanding
Notes could be adversely affected upon completion
of the Exchange Offer. See "Risk Factors--
Consequences of Failure to Exchange the
Outstanding Notes".
Certain Federal Income Tax
Considerations............. The exchange of the Outstanding Notes for
Exchange Notes by tendering holders should not be
a taxable exchange for U.S. Federal income tax
purposes, and such holders should not recognize
any taxable gain or loss for U.S. Federal income
tax purposes as a result of such exchange. See
"Certain U.S. Federal Income Tax Consequences".
Use of Proceeds............. There will be no cash proceeds to the Company
from the Exchange Offer. See "Use of Proceeds".
Tendering Outstanding Each holder of Outstanding Notes wishing to
Notes....................... accept the Exchange Offer must complete, sign and
date a Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Outstanding
Notes and any other required documents, to the
Exchange Agent (as defined) at the address set
forth herein. See "Exchange Offer--Procedures for
Tendering Outstanding Notes".
Withdrawal Rights........... The tender of Outstanding Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the
Expiration Date, in accordance with the
procedures set forth in this Prospectus. See "The
Exchange Offer--Withdrawal Rights".
Untendered Outstanding Upon consummation of the Exchange Offer, the
Notes....................... holders of Outstanding Notes, if any, will have
no further rights under the Registration Rights
Agreement, except as provided herein. Holders of
Outstanding Notes whose Outstanding Notes are not
tendered or are tendered but not accepted in the
Exchange Offer will continue to hold such
Outstanding Notes and will be entitled to all the
rights and preferences and subject to the
limitations applicable thereto. Following
consummation of the Exchange Offer, the holders
of Outstanding Notes will continue to be subject
to the existing restrictions upon transfer
thereof and, except as provided herein, the
Company will have no further obligation to such
9
<PAGE>
holders to provide for the registration under the
Securities Act of the Outstanding Notes held by
them. To the extent that Outstanding Notes are
tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but
unaccepted Outstanding Notes could be adversely
affected.
Exchange Agent.............. State Street Bank and Trust Company of
California, N.A., is serving as Exchange Agent in
connection with the Exchange Offer. See "The
Exchange Offer--Exchange Agent".
Shelf Registration Under certain circumstances described in the
Statement................... Registration Rights Agreement, certain holders of
Outstanding Notes (including holders who are not
permitted to participate in the Exchange Offer or
who may not freely resell Exchange Notes received
in the Exchange Offer) may require the Company to
file and use its reasonable efforts to cause to
become effective, a shelf registration statement
under the Securities Act, which would cover
resales of Outstanding Notes by such holders. See
"The Exchange Offer--Purpose of the Exchange
Offer".
TERMS OF THE NOTES
Except as otherwise indicated, the following description relates both to the
Outstanding Notes issued pursuant to the Note Offering and to the Exchange
Notes to be issued in exchange for Outstanding Notes in connection with the
Exchange Offer. The Exchange Notes will be obligations of the Company
evidencing the same indebtedness as the Outstanding Notes, and will be entitled
to the benefits of the same Indenture. The form and terms of the Exchange Notes
are the same as the form and terms of the Outstanding Notes, except that the
Exchange Notes have been registered under the Securities Act and therefore will
not bear legends restricting the transfer thereof. For a more complete
description of the Notes see "Description of Notes". Throughout this
Prospectus, references to the "Notes" refer to the Exchange Notes and the
Outstanding Notes collectively.
Issuer...................... Fountain View, Inc.
Securities Offered..........
$120.0 million aggregate principal amount of 11
1/4% Senior Subordinated Notes due 2008, Series B
that have been registered under the Securities
Act. See "Description of Notes".
Maturity Date............... April 15, 2008
Guarantees..................
The Company's payment obligations under the Notes
are fully and unconditionally, jointly and
severally guaranteed on a senior subordinated
basis by each of the Company's current and future
Restricted Subsidiaries. As of the date of the
Indenture, all of the Company's Subsidiaries will
be Restricted Subsidiaries. The Outstanding
Guarantees are, and the Exchange Guarantees will
be, subordinated to all Senior Debt of the
Guarantors. See "Description of Notes--Subsidiary
Guarantees".
10
<PAGE>
The Outstanding Notes accrue interest at a rate
Interest on the Notes....... of 11 1/4% per annum from the Issue Date. The
Exchange Notes will accrue interest at a rate of
11 1/4% per annum from the Issue Date or from the
most recent date to which interest had been paid
on the Outstanding Notes.
Interest Payment Dates...... April 15 and October 15 of each year, commencing
October 15, 1998.
Optional Redemption......... Except as described below, the Notes are not
redeemable at the Company's option prior to April
15, 2003. From and after April 15, 2003, the
Notes will be subject to redemption at the option
of the Company, in whole or in part, at the
redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages (as
defined), if any, to the date of redemption.
In addition, prior to April 15, 2001, up to 35%
in aggregate principal amount of Notes will be
redeemable at the option of the Company from the
net proceeds of Public Equity Offerings (as
defined) by the Company, at a price of 111.25% of
the principal amount of the Notes, plus accrued
and unpaid interest and Liquidated Damages, if
any, to the date of redemption; provided that at
least $78.0 million in aggregate principal amount
of Notes remains outstanding immediately after
each such redemption; and provided, further, that
any such redemption occur within 60 days of the
date of the closing of such Public Equity
Offering.
Change of Control........... In the event of a Change of Control, Holders of
the Notes will have the right to require the
Company to repurchase their Notes, in whole or in
part, at a price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
date of repurchase.
Ranking.....................
The Notes constitute general, unsecured
obligations of the Company, subordinated in right
of payment to all Senior Debt of the Company,
ranked on the same level with all senior
subordinated debt of the Company and senior in
right of payment to all existing and future
subordinated debt of the Company, if any. The
claims of the Holders of the Notes will be
subordinated to Senior Debt, which, as of May 31,
1998, was approximately $126.0 million,
approximately $101.0 million of which was fully
secured borrowings under the New Credit Facility.
See "Description of Notes--Subordination" and
"Description of Other Indebtedness".
Restrictive Covenants....... The Indenture governing the Notes (the
"Indenture") contains certain covenants that,
among other things, limit the ability of the
Company and its Subsidiaries to incur additional
11
<PAGE>
Indebtedness (as defined herein) and issue
Disqualified Stock (as defined herein), pay
dividends or distributions or make investments or
make certain other Restricted Payments (as
defined herein), enter into certain transactions
with affiliates, dispose of certain assets, incur
liens securing on the same level and subordinated
indebtedness and engage in mergers and
consolidations. See "Description of Notes".
Use of Proceeds.............
The gross proceeds of $120.0 million from the
Note Offering along with the proceeds of equity
investments made by Heritage and members of
management were used to repay certain existing
indebtedness, pay certain fees and expenses in
connection with the Transactions, and for general
corporate purposes. No proceeds will be received
by the Company and the Guarantors from the
Exchange Offer. See "--The Financings" and "Use
of Proceeds".
COMPARISON OF EXCHANGE NOTES WITH OUTSTANDING NOTES
Freely Transferable......... Generally, the Exchange Notes will be freely
transferable under the Securities Act by holders
thereof other than any holder that is either an
affiliate of the Company or a broker-dealer that
purchased the Notes from the Company to resell
pursuant to Rule 144A, Regulation S or any other
available exemption. The Exchange Notes otherwise
will be substantially identical in all material
respects (including interest rate and maturity)
to the Outstanding Notes. See "The Exchange
Offer".
Registration Rights.........
The holders of Outstanding Notes currently are
entitled to certain registration rights pursuant
to the Registration Rights Agreement (the
"Registration Rights Agreement"), dated as of
April 16, 1998, among the Company, the Guarantors
and the Initial Purchasers. However, upon
consummation of the Exchange Offer, subject to
certain exceptions, holders of Outstanding Notes
who do not exchange their Outstanding Notes for
Exchange Notes in the Exchange Offer will no
longer be entitled to registration rights and
will not be able to offer or sell their
Outstanding Notes, unless such Outstanding Notes
are subsequently registered under the Securities
Act (which, subject to certain limited
exceptions, the Company will have no obligation
to do), except pursuant to an exemption from, or
in a transaction not subject to, the Securities
Act and applicable state securities laws. See
"Risk Factors--Consequences of Failure to
Exchange the Outstanding Notes" and "The Exchange
Offer--Purpose of the Exchange Offer".
Exchange Offer and Absence
of a Public Market for the The Exchange Notes will generally be freely
Notes...................... transferable (subject to the restrictions
discussed elsewhere herein) but
12
<PAGE>
will be new securities for which there will not
initially be a market. The Outstanding Notes are
eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages
("PORTAL") Market, the National Association of
Securities Dealers' ("NASD") screen-based
automated market for trading of securities
eligible for resale under Rule 144A. "PORTAL" or
"PORTAL Market" means the NASD's market for
designated foreign and domestic securities
through an automated quotation and communications
system that facilitates private offerings,
resales, trading, clearance and settlement by
PORTAL participants.
The PORTAL Market, as described by the NASD, is
an electronic screen based system, which
facilitates trading of SEC Rule 144A private
placements by qualified investors. The purpose of
PORTAL is to provide companies with increased
flexibility in raising capital by creating a
method for accessing a significant source of
funds. It also is intended to give U.S.
institutional investors another opportunity to
diversify their portfolios by making certain
foreign securities available for purchase in the
domestic market. PORTAL complements the
Commission's Rule 144A, which provides safe
harbor protections by exempting the private
placements of certain issuers from the
Commission's registration and disclosure
requirements and by allowing eligible
institutional investors to trade these securities
freely among themselves without having to observe
restrictions that, prior to the adoption of the
rule, otherwise delayed the trading of these
securities. The Company does not intend to apply
for a listing of the Exchange Notes on any
securities exchange or on any automated dealer
quotation system. See "Plan of Distribution".
FOR MORE COMPLETE INFORMATION REGARDING THE NOTES, SEE "DESCRIPTION OF
NOTES".
RISK FACTORS
Holders of Outstanding Notes and prospective purchasers of the Exchange Notes
should consider carefully all of the information set forth in this Prospectus
and, in particular, should evaluate the specific factors set forth under "Risk
Factors" for risks involved with an exchange or acquisition of the Exchange
Notes.
ADDITIONAL INFORMATION
For additional information regarding the Notes, see "The Exchange Offer",
"Description of Notes" and "Certain Federal Income Tax Consequences".
13
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
Set forth below is the pro forma financial information as of March 31, 1998
and December 31, 1997 and for the three months ended March 31, 1998 and for the
year ended December 31, 1997. Such pro forma data does not purport to represent
what the Company's actual results would have been if the Transactions had
occurred on the date indicated, nor does such information purport to project
the results of the Company for future periods. The summary unaudited pro forma
financial information below should be read in conjunction with the "Unaudited
Pro Forma Financial Data", "Selected Historical Financial and Other Data--
Fountain View", "Selected Historical Financial and Other Data--Summit" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1998 DECEMBER 31, 1997
-------------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue............................. $ 73,996 $287,144
Salaries and related benefits........... 34,318 135,248
Other operating costs................... 28,967 115,022
Depreciation and amortization........... 3,747 14,092
Rent expense............................ 1,706 6,754
Interest, net........................... 5,831 23,324
-------- --------
74,569 294,440
-------- --------
Loss before provision for income taxes
and extraordinary item................. (573) (7,296)
Income taxes benefit(1)................. 137 2,792
Extraordinary item, net of tax.......... (517) --
-------- --------
Net loss................................ $ (953) $ (4,504)
======== ========
OTHER FINANCIAL DATA
EBITDA(2)............................... $ 9,005 $ 30,120
Adjusted EBITDA(3)...................... 9,005 37,795
Adjusted EBITDA margin.................. 12.2% 13.2%
Adjusted EBITDAR(3)..................... $ 10,711 $ 44,549
Adjusted EBITDAR margin................. 14.5% 15.5%
Ratio of earnings to fixed charges(4)... -- --
Ratio of Adjusted EBITDA to net interest
expense................................ 1.5 1.6
Ratio of net debt to Adjusted EBITDA(5). 6.7 6.3
Net cash provided by operating
activities............................. $ 3,707 $ 34,984
OTHER DATA
Number of facilities (end of period).... 50 50
Total beds (end of period).............. 6,578 6,574
Patient days (in thousands)(6).......... 468 1,963
Average occupancy rate(7)............... 89% 89%
Percentage of revenues from:
Managed care, private pay and
Medicare............................. 67% 70%
Medicaid.............................. 33 30
BALANCE SHEET DATA (AT MARCH 31, 1998
AND
DECEMBER 31, 1997, RESPECTIVELY)
Cash and cash equivalents............... $ 3,640 $ 4,253
Working capital......................... 34,475 23,146
Total assets............................ 407,516 410,800
Total debt and capital leases, including
current maturities and excluding
mandatory redeemable preferred stock... 244,904 241,990
Stockholders' equity.................... 70,119 69,764
</TABLE>
14
<PAGE>
- --------
(1) In July 1997, Fountain View's predecessor, which was comprised of all of
Fountain View's operating units owned individually by certain controlling
stockholders, was merged with and into several companies formed by Fountain
View in connection with the Fountain View Equity Transactions. Prior to the
Fountain View Equity Transactions, most of such individually owned
corporations had elected to be taxed as cash-basis S-corporations. The pro
forma income tax benefit for the year ended December 31, 1997 includes a
charge in lieu of income taxes to indicate what the tax provision would
have been had Fountain View been taxed as a C-corporation for all of 1997
with a combined federal and state tax rate of 41%. See Note 3 to the
audited financial statements of Fountain View included elsewhere in this
Prospectus.
(2) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is a widely recognized financial indicator of a
company's ability to service or incur debt. EBITDA is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. In addition, EBITDA may not be comparable to similarly titled
measures of other companies. EBITDA may not be indicative of the historical
operating results of the Company, nor is it meant to be predictive of
future results of operations or cash flows.
(3) For the year ended December 31, 1997, adjusted EBITDA represents EBITDA
adjusted for certain non-recurring charges shown below. Adjusted EBITDAR
represents Adjusted EBITDA plus rent expense. EBITDAR is not a measurement
of operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. Similar to EBITDA, management views EBITDAR as a financial
indicator of a company's ability to service or incur debt. A majority of
Fountain View's nursing homes are leased, under operating leases, and not
owned. Accordingly, EBITDAR is used since the rent expense approximates the
interest and depreciation expense Fountain View may have incurred as if the
nursing homes were owned as opposed to leased:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
EBITDA..................................................... $30,120
Non-recurring charges(a)................................... 7,675
-------
Adjusted EBITDA............................................ $37,795
Rent expense............................................... 6,754
-------
Adjusted EBITDAR........................................... $44,549
=======
</TABLE>
(a) EBITDA is adjusted for the following non-recurring entries in
order to present comparable EBITDA with the preceding years
since these entries are only reflected in the results of
operations for the year ended December 31, 1997 for Fountain
View and for the six months ended December 31, 1997 for Summit.
In addition, the Company does not expect to incur similar costs
in the future. Non-recurring charges consist of: (1) $2,100 of
Medicare reserves taken by Summit due to adjustments proposed by
the Medicare intermediary during their audit of prior year cost
reports. The adjustments relate to issues not proposed by the
Medicare intermediary during previous audits and therefore the
one time impact relating to these adjustments for prior year
cost reports is all reflected in the results of operations for
the year ended December 31, 1997 when the cost reports were
audited and finalized with the Medicare intermediary; (2) $1,074
of retroactive workers' compensation, group and general
liability costs due to the recording of tail coverage insurance
expense at the time Summit converted from an occurrence based
insurance policy to a claims made insurance policy; (3) $983 of
incremental bad debt expense relating to 1996 and prior periods
recorded in 1997 resulting from a change in management's
methodology for determining the allowance for bad debt; the
change in methodology was made to convert Summit's allowance
methodology accounting practices to Fountain View's accounting
as a result of the acquisition; (4) termination of non-compete
agreements and consulting arrangements totaling $965 relating to
the Fountain View Equity Transactions; (5) certain transaction
expenses including discretionary employee bonuses totaling $872
paid upon completion of the Fountain View Equity Transactions;
(6) severance for an executive and other costs totaling $871,
the severance package was paid in connection with the
acquisition of Summit by Fountain View; and (7) $810 related to
an employee lawsuit settled in 1997 involving a specific type of
liability for which the Company currently maintains insurance
coverage (net of ongoing insurance costs).
(b) Management believes that as a consequence of the Transactions, the
Company will realize significant ongoing cost savings and revenue
enhancements. However there can be no assurance that these cost savings
or revenue enhancements will be realized. Management's estimate of the
ongoing cost reductions relating to the Transactions includes: (i)
certain reductions in facility-level operating expense items totaling
$1,451; (ii) $1,355 relating to the elimination of specifically
identified duplicative staff; (iii) $512 relating to reductions in
corporate expenses, including the elimination of certain public company
expenses; and (iv) a reduction in costs of supplies. Such amounts have
not been included in adjusted EBITDA or adjusted EBITDAR.
(4) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges by fixed charges. Fixed
charges consists of interest expense and one-third of operating rent
expense, which management believes is representative of the interest
component of rent expense. Earnings were not sufficient to cover fixed
charges. The amount of the shortfall approximated $7.3 million for the
proforma year ended December 31, 1997 and $0.6 million for the proforma
three months ended March 31, 1998.
15
<PAGE>
(5) Ratio of net debt to Adjusted EBITDA represents the ratio of total debt
less cash and cash equivalents to Adjusted EBITDA.
(6) "Patient days" refers to the total number of days of patient care provided
by the Company's facilities.
(7) Average occupancy rate has been adjusted to exclude three Summit facilities
which were not operational prior to 1996 or were significantly renovated
during 1997 such that beds were not available during the entire year. Such
facilities were deemed to be in a fill-up stage and, therefore, their
occupancies are not considered to be indicative of a mature facility.
Actual occupancy for the year ended December 31, 1997 including these
facilities was 87%. Also excludes Fountain View's ALF, which represented
less than 2% of Fountain View's total revenue during fiscal 1997.
16
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA--FOUNTAIN VIEW
The summary financial data of Fountain View as of December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997 are
derived from the audited financial statements included elsewhere herein. The
summary financial and other data as of December 31, 1993, 1994 and 1995, for
the two years in the period ended December 31, 1994 and for the three months
ended March 31, 1997 and 1998 have been derived from Fountain View's unaudited
financial statements included elsewhere herein and, in the opinion of
management, include all necessary adjustments for a fair presentation of such
information in conformity with generally accepted accounting principles. The
information set forth below should be read in conjunction with
"Capitalization", "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- -------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenue................... $41,061 $51,824 $55,836 $59,432 $ 67,905 $ 16,409 $ 20,078
Salaries and related benefits. 23,248 27,823 35,048 36,166 38,215 9,435 10,686
Other operating costs......... 10,884 14,886 13,454 14,614 17,990 3,556 5,584
Depreciation and amortization. 110 149 416 600 1,198 142 524
Rent expense.................. 4,002 4,017 3,946 3,896 3,775 941 983
Interest, net................. 307 355 332 278 1,164 20 851
------- ------- ------- ------- -------- --------- ---------
38,551 47,230 53,196 55,554 62,342 14,094 18,628
------- ------- ------- ------- -------- --------- ---------
Income before provision for
income taxes and
extraordinary item........... 2,510 4,594 2,640 3,878 5,563 2,315 1,450
Income tax benefit
(provision).................. (81) 43 (54) (78) (361) (33) (580)
Extraordinary item, net of
tax.......................... -- -- -- -- -- -- (517)
------- ------- ------- ------- -------- --------- ---------
Net income.................... $ 2,429 $ 4,637 $ 2,586 $ 3,800 $ 5,202 $ 2,282 $ 353
======= ======= ======= ======= ======== ========= =========
Basic and diluted earnings per
share before extraordinary
item(5)...................... $ 12.15 $ 23.19 $ 12.93 $ 19.00 $ 26.01 $ 11.41 $ 3.47
Basic and diluted loss per
share--
extraordinary item........... -- -- -- -- -- -- (2.06)
------- ------- ------- ------- -------- --------- ---------
Basic and diluted earnings per
share--net income............ $ 12.15 $ 23.19 $ 12.93 $ 19.00 $ 26.01 $ 11.41 $ 1.41
======= ======= ======= ======= ======== ========= =========
OTHER FINANCIAL DATA
EBITDA(1)..................... $ 2,927 $ 5,098 $ 3,388 $ 4,756 $ 7,925 $ 2,477 $ 2,825
EBITDA margin................. 7.1% 9.8% 6.1% 8.0% 11.7% 15.1% 14.1%
EBITDAR(1).................... $ 6,929 $ 9,115 $ 7,334 $ 8,652 $ 11,700 $ 3,418 $ 3,808
EBITDAR margin................ 16.9% 17.6% 13.1% 14.6% 17.2% 20.8% 19.0%
Capital expenditures.......... $ 8 $ 537 $ 665 $ 1,816 $ 2,570 $ 837 $ 655
Ratio of earnings to fixed
charges(2). . 2.5x 3.7x 2.6x 3.5x 3.3x 7.9x 2.2x
Net cash provided by (used in)
operating activities......... $(1,804) $ 908 $ 5,832 $ 1,059 $ 12,739 $ 6,651 $ (4,346)
OTHER DATA
Number of facilities (end of
period)...................... 9 9 9 9 9 9 50
Average licensed beds(3)...... 1,061 1,061 1,061 1,061 1,061 1,061 5,937
Total beds (end of period).... 1,227 1,227 1,227 1,227 1,227 1,227 6,578
Patient days (in thousands)... 337 345 341 344 346 81 106
Average occupancy rate(4)..... 87.0% 89.1% 88.1% 88.8% 89.3% 84.9% 86.6%
Percentage of revenues from:
Managed care, private pay
and Medicare............... 58.4% 65.1% 67.2% 69.7% 72.9% 72.8% 72.0%
Medicaid.................... 41.6 34.9 32.8 30.3 27.1 27.2 28.0
BALANCE SHEET DATA (END OF
PERIOD)
Cash and cash equivalents..... $ 465 $ 629 $ 2,355 $ 1,161 $ 2,551 -- 3,640
Working capital............... 8,266 11,140 10,334 13,566 10,021 -- 8,509
Total assets.................. 14,408 18,433 24,693 24,122 25,941 -- 396,116
Total debt, including current
maturities................... 6,758 7,359 6,764 666 30,076 -- 227,378
Shareholders' equity
(deficit).................... 5,570 9,399 9,957 16,601 (12,236) -- 70,119
</TABLE>
- -------
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is a widely recognized financial indicator of a
company's ability to service or incur debt. EBITDA is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash
17
<PAGE>
flows from operations, or other statement of operations or cash flow data
prepared in conformity with generally accepted accounting principles, or as
a measure of profitability or liquidity. In addition, EBITDA may not be
comparable to similarly titled measures of other companies. EBITDA may not
be indicative of the historical operating results of the Company, nor is it
meant to be predictive of future results of operations or cash flows.
EBITDAR represents EBITDA plus rent expense. EBITDAR is not a measurement
of operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. Similar to EBITDA, management views EBITDAR as a financial
indicator of a company's ability to service or incur debt. A majority of
Fountain View's nursing homes are leased, under operating leases, and not
owned. Accordingly, EBITDAR is used since the rent expense approximates the
interest and depreciation expense Fountain View may have incurred as if the
nursing home were owned as opposed to leased.
(2) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges by fixed charges. Fixed
charges consists of interest expense and one-third of operating rental
expense, which management believes is representative of the interest
component of rent expense.
(3) Excludes ALF beds.
(4) Excludes Fountain View's ALF, which represents less than 2% of total
revenue.
(5) Weighted average shares outstanding for the five years ended December 31,
1997 and for the three months ended March 31, 1997 has been computed based
on the 200,000 shares of Common Stock issued and outstanding in connection
with the Fountain View Equity Transaction. See note 2 to the consolidated
financial statements of Fountain View included elsewhere herein.
18
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA--SUMMIT
The summary financial data of Summit as of and for each of the five years in
the period ended June 30, 1997 are derived from Summit's audited financial
statements. The financial and other data for the six months ended December 31,
1996 and 1997 have been derived from Summit's unaudited financial statements
included elsewhere herein and, in the opinion of management, include all
necessary adjustments for a fair presentation of such information in conformity
with generally accepted accounting principles. The information set forth below
should be read in conjunction with "Capitalization", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net revenue............. $83,992 $ 97,599 $137,026 $176,062 $197,927 $95,088 $108,507
Salaries and related
benefits............... 40,044 45,962 63,171 78,233 89,577 43,386 47,742
Other operating costs... 29,998 34,655 49,206 70,696 89,932 41,750 45,736
Depreciation and
amortization........... 2,308 2,949 5,249 6,142 7,393 3,632 4,235
Rent expense............ 2,315 1,613 2,141 2,656 2,864 1,410 1,525
Interest, net........... 1,080 2,243 4,761 6,574 7,973 4,057 4,588
------- -------- -------- -------- -------- ------- --------
75,745 87,422 124,528 164,301 197,739 94,235 103,826
------- -------- -------- -------- -------- ------- --------
Income before provision
for income taxes....... 8,247 10,177 12,498 11,761 188 853 4,681
Income tax provision.... (3,224) (4,010) (4,987) (4,452) (119) (337) (1,849)
------- -------- -------- -------- -------- ------- --------
Net income.............. $ 5,023 $ 6,167 $ 7,511 $ 7,309 $ 69 $ 516 $ 2,832
======= ======== ======== ======== ======== ======= ========
OTHER FINANCIAL DATA
EBITDA(1)............... $11,635 $ 15,369 $ 22,508 $ 24,477 $ 15,554 $ 8,542 $ 13,504
EBITDA margin........... 13.9% 15.7% 16.4% 13.9% 7.9% 9.0% 12.4%
EBITDAR(1).............. $13,950 $ 16,982 $ 24,649 $ 27,133 $ 18,418 $ 9,952 $ 15,029
EBITDAR margin.......... 16.6% 17.4% 18.0% 15.4% 9.3% 10.5% 13.9%
Capital expenditures.... $29,901 $ 15,505 $ 9,004 $ 26,558 $ 24,075 $12,049 $ 6,706
Ratio of earnings to
fixed charges(2)....... 5.5x 4.7x 3.3x 2.6x 1.0x 1.2x 1.9x
Net cash provided by
operating activities... $ 4,186 $ 7,512 $ 7,014 $ 6,866 $ 18,015 $ 3,563 $ 7,793
OTHER DATA
Number of facilities
(end of period)........ 21 23 37 38 39 39 41
Average licensed beds... 2,696 2,876 4,197 4,816 5,078 5,065 5,154
Total beds (end of
period)................ 2,696 3,002 4,762 4,940 5,040 -- 5,347
Patient days (in
thousands)............. 858 908 1,316 1,514 1,573 783 827
Average occupancy rate.. 87.2% 86.5% 85.9% 85.9% 84.8% 84.0% 87.2%
Percentage of revenues
from:
Managed care and
private pay.......... 36.5% 34.0% 33.8% 31.9% 29.9% 30.5% 31.6%
Medicare.............. 28.3 30.3 29.5 34.7 39.7 39.1 36.7
Medicaid.............. 35.2 35.7 36.7 33.4 30.4 30.4 31.7
BALANCE SHEET DATA (END
OF PERIOD)
Cash and cash
equivalents............ $ 6,301 $ 21,613 $ 3,101 $ 2,658 $ 3,994 -- $ 1,702
Working capital......... 7,151 24,880 10,161 13,906 12,648 -- 11,384
Total assets............ 73,369 114,915 184,480 223,052 250,516 -- 267,420
Total debt and capital
leases, including
current maturities..... 30,331 32,025 89,788 110,374 121,452 -- 129,754
Shareholders' equity.... 31,337 66,361 73,813 81,286 81,412 -- 84,721
</TABLE>
- -------
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is a widely recognized financial indicator of a
company's ability to service or incur debt. EBITDA is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. In addition, EBITDA may not be comparable to similarly titled
measures of other companies. EBITDA may not be indicative of the historical
operating results of the Company, nor is it meant to be predictive of
future results of operations or cash flows. EBITDAR represents EBITDA plus
rent expense. EBITDAR is not a measurement of operating performance
computed in accordance with generally accepted accounting principles and
should not be considered as a substitute for operating income, net income,
cash flows from operations, or other statement of operations or cash flow
data prepared in conformity with generally accepted accounting principles,
or as a measure of profitability or liquidity. Similar to EBITDA,
management views EBITDAR as a financial indicator of a company's ability to
service or incur debt. A majority of Fountain View's nursing homes are
leased, under operating leases, and not owned. Accordingly, EBITDAR is used
since the rent expense approximates the interest and depreciation expense
Fountain View may have incurred as if the nursing homes were owned as
opposed to leased.
(2) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges by fixed charges. Fixed
charges consists of interest expense and one-third of operating rental
expense, which management believes is representative of the interest
component of rent expense.
19
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, holders
of the Outstanding Notes and prospective purchasers should carefully consider
the following risk factors before exchanging their Outstanding Notes or
purchasing the Exchange Notes offered hereby. This Prospectus includes
statements that may be considered "forward-looking". Although the Company
believes that its plans, intentions and expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that
could cause actual results to differ materially from the Company's forward-
looking statements are set forth below and elsewhere in this Prospectus. All
forward-looking statements attributable to the Company or persons acting on
its behalf are expressly qualified in their entirety by the cautionary
statements set forth below. See "Special Note Regarding Forward-Looking
Statements".
SUBSTANTIAL LEVERAGE
Significant Leverage as a Result of the Transactions.
In connection with the Transactions, the Company incurred a significant
amount of indebtedness, and, as a result, the Company is highly leveraged. As
of May 31, 1998, the Company had total funded indebtedness of approximately
$245.7 million, excluding mandatory redeemable preferred stock (of which
$120.0 million consists of the Notes and the balance consisting of
approximately $101.1 million of borrowings under the New Credit Facility and
approximately $24.6 million of mortgages, capital leases and other debt). The
Company's ratio of earnings to fixed charges was 1.03x for the five months
ended May 31, 1998. While the Indenture and the New Credit Facility contain
financial and other restrictive covenants that limit the ability of the
Company to borrow money, the Company is, under those provisions, still
permitted to incur substantial additional indebtedness in the future. See
"Capitalization", "Unaudited Pro Forma Financial Data" and "Description of
Notes".
Liquidity and Capital Revenues
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures
and any acquisitions will depend on its future performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of operations and anticipated cost savings and revenue
growth, management believes that cash flow from operations and available cash,
together with available borrowings under the New Credit Facility, will be
adequate to meet the Company's future liquidity needs for the next several
years. The Company may, however, need to refinance all or a portion of the
Notes on or prior to maturity. There can be no assurance that the Company's
business will generate sufficient cash flow from operations, that anticipated
revenue growth and operating improvements will be realized or that future
borrowings will be available under the New Credit Facility in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or to fund its other liquidity needs. In addition, there can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources of the Company Following the Transactions".
Effects of Leverage
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including, but not limited to: (i)
making it more difficult for the Company to satisfy its obligations with
respect to the Notes; (ii) increasing the Company's vulnerability to general
adverse economic and industry conditions; (iii) limiting the Company's ability
to obtain additional financing to fund future working capital, capital
expenditures, acquisitions and other general corporate requirements; (iv)
requiring the dedication of a substantial portion of the Company's cash flow
from
20
<PAGE>
operations to the payment of principal of, and interest on, its indebtedness,
thereby reducing the availability of such cash flow to fund working capital,
capital expenditures, or other general corporate purposes; (v) limiting the
Company's flexibility in planning for, or reacting to, changes in its business
and the healthcare industry; and (vi) placing the Company at a competitive
disadvantage with respect to less leveraged competitors. In addition, the
Indenture and the New Credit Facility contain financial and other restrictive
covenants that limit the ability of the Company to, among other things, borrow
additional funds. Failure by the Company to comply with such covenants could
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company. In addition, the degree to which the
Company is leveraged could prevent it from repurchasing all of the Notes
tendered to it upon the occurrence of a Change of Control. See "Description of
Notes--Repurchase at the Option of Holders--Change of Control" and
"Description of Other Indebtedness--New Credit Facility".
SUBORDINATION OF THE NOTES; GUARANTEES
The Notes and the Guarantees are subordinated in right of payment to all
current and future Senior Debt of the Company and the Guarantors. However, the
Indenture provides that the Company will not, and will not permit any of the
Guarantors to, incur or otherwise become liable for any indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes or any of the Guarantees. The
practical effect of these provisions is that any new indebtedness of the
Company or Guarantors will have to be classified as Senior Debt under the
Indenture in order for it to have a preference over the Notes (for a
definition of "Senior Debt" see "Description of Notes--Certain Definitions").
Upon any distribution to creditors of the Company or a Guarantor in a
liquidation or dissolution of the Company or a Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or a Guarantor or its property, the holders of Senior Debt will be
entitled to be paid in full before any payment may be made with respect to the
Notes. In addition, the subordination provisions of the Indenture provide that
payments with respect to the Notes will be blocked in the event of a payment
default on Senior Debt and may be blocked for up to 179 days each year in the
event of certain non-payment defaults on Senior Debt. In the event of a
bankruptcy, liquidation or reorganization of the Company or a Guarantor,
holders of the Notes will participate ratably with all holders of subordinated
indebtedness of the Company or such Guarantor that is deemed to be of the same
class as the Notes, and potentially with all other general creditors of the
Company, based upon the respective amounts owed to each holder or creditor, in
the remaining assets of the Company. In any of the foregoing events, there can
be no assurance that there would be sufficient assets to pay amounts due on
the Notes. As a result, holders of Notes may receive less, ratably, than the
holders of Senior Debt. As of May 31, 1998, approximately $126.0 million of
Senior Debt was outstanding, including approximately $101.0 million of
borrowings under the New Credit Facility, and approximately $14.0 million was
available for additional borrowings under the New Credit Facility. The
Indenture permits the incurrence of substantial additional indebtedness,
including Senior Debt, by the Company and its subsidiaries in the future. See
"Description of Other Indebtedness--New Credit Facility" and "Description of
Notes".
EFFECTS OF NON-COMPLIANCE WITH COVENANTS IMPOSED BY THE NEW CREDIT FACILITY
AND THE INDENTURE
Among other obligations, the New Credit Facility requires the Company to
satisfy certain tests and maintain specified financial ratios, including a
minimum fixed charge coverage ratio and a maximum leverage ratio. In addition,
the New Credit Facility restricts, among other things, the Company's ability
to incur additional indebtedness and to make acquisitions, investments and
capital expenditures beyond a certain level. A failure to comply with the
restrictions contained in the New Credit Facility could lead to an event of
default thereunder which could result in an acceleration of such indebtedness.
Such an acceleration would constitute an event of default under the Indenture
relating to the Notes. In addition, the Indenture restricts, among other
things, the Company's ability to incur additional indebtedness,
21
<PAGE>
make investments, sell assets, make certain payments and dividends or merge or
consolidate. A failure to comply with the restrictions in the Indenture could
result in an event of default under the Indenture. If, as a result thereof, a
default occurs with respect to Senior Debt, the subordination provisions of
the Indenture would likely restrict payments to holders of the Notes. See
"Description of Other Indebtedness--New Credit Facility" and "Description of
Notes--Subordination".
ENCUMBRANCES ON ASSETS TO SECURE NEW CREDIT FACILITY
In addition to being subordinated to all existing and future Senior Debt of
the Company, the Notes will not be secured by any of the Company's assets. The
Company's obligations under the New Credit Facility are secured by a first
priority pledge of and security interest in the common stock of the Company's
subsidiaries and in substantially all of the Company's assets, both tangible
and intangible, including the Company's personal property and real property.
If the Company becomes insolvent or is liquidated, or if payment under the New
Credit Facility is accelerated, the lenders under the New Credit Facility will
be entitled to exercise the remedies available to a secured lender under
applicable law. See "Description of Other Indebtedness--New Credit Facility".
ABILITY OF COMPANY TO OBTAIN FUNDS FROM SUBSIDIARIES
The Company is a holding company, has no operations of its own and derives
substantially all of its revenue from its subsidiaries. Holders of
indebtedness of, and trade creditors of, subsidiaries of the Company would
generally be entitled to payment of their claims from the assets of the
affected subsidiaries before such assets were made available for distribution
to the Company. As of May 31, 1998, the Company had approximately
$126.0 million of Senior Debt outstanding, including approximately $101.0
million of borrowings under the New Credit Facility, and approximately $14
million was available for additional borrowings under the New Credit Facility.
The Company's Subsidiaries would have had approximately $24.9 million of
Indebtedness, $46.2 million of trade payables and other liabilities and $15.0
million of mandatory redeemable preferred stock outstanding as of March 31,
1998, on a pro forma basis after giving effect to the Transactions. The
Indenture permits the incurrence of substantial additional indebtedness by the
Company and its subsidiaries and permits significant investments by the
Company in its subsidiaries. In the event of a bankruptcy, liquidation or
reorganization of a subsidiary, holders of any of such subsidiary's
indebtedness will have a claim to the assets of the subsidiaries that is prior
to the Company's interest in those assets.
FAILURE TO INTEGRATE BUSINESSES
The Company has no prior history as a combined entity and its operations
have not previously been managed on a combined basis. Prior to the
Transactions, Fountain View and Summit had been operated as separate entities.
The Company's future operations and earnings will be largely dependent upon
management's ability to successfully execute the Company's strategy. This will
require substantial attention from the Company's management team which, to
date, has operated on a combined basis for only a short period. In addition,
management will be required to apply its business strategy to an entity which
is significantly larger than the entities it previously managed. Additionally,
the need to focus management's attention on integration of the businesses and
implementation of the Company's post-combination strategy may limit the
Company's ability to successfully pursue other opportunities related to its
business for the foreseeable future. The historical financial statements and
pro forma financial statements presented in this Prospectus may not
necessarily be indicative of the results that would have been attained had the
Company operated on a combined basis.
FAILURE TO COMPLY WITH GOVERNMENT REGULATIONS
REGULATIONS GOVERNING HEALTH CARE FACILITIES
The federal government and the states in which the Company operates regulate
various aspects of the SNF, ALF, sub-acute and specialty medical care,
therapy, pharmacy and DME businesses. In
22
<PAGE>
particular, the operation of long-term care facilities and the provision of
specialty medical services are subject to federal, state and local laws
relating to the adequacy of medical care, resident rights, equipment,
personnel, operating policies, fire prevention, rate-setting and compliance
with building codes and environmental and other laws. Facilities which are not
in substantial compliance with such laws and do not correct deficiencies
within a certain time frame may be terminated from the Medicare and/or
Medicaid programs. While the Company endeavors to comply with all applicable
regulatory requirements, from time to time certain of the Company's SNFs have
been subject to various sanctions and penalties as a result of deficiencies
alleged by the Health Care Financing Administration ("HCFA") or state survey
agencies. While in certain instances denial of certification or licensure
revocation actions have been threatened, management believes that the Company
will not suffer any material adverse effect as a result thereof. There can be
no assurance, however, that the Company will not be subject to sanctions and
penalties in the future as a result of such actions.
REGULATIONS GOVERNING FINANCIAL ARRANGEMENTS BETWEEN HEALTH CARE PROVIDERS
The Company is also subject to federal and state laws that govern financial
and other arrangements between healthcare providers. These laws prohibit
certain direct and indirect payments or fee-splitting arrangements between
healthcare providers that are designed to induce or encourage the referral of
patients to, or the recommendation of, a particular provider for medical
products and services. Such laws include the anti-kickback provisions of the
federal Medicare and Medicaid Patient and Program Protection Act of 1987
(commonly referred to as the "Anti-Kickback Statute") and the physician self-
referral ban contained in the Omnibus Budget Reconciliation Act as expanded in
1993 (commonly referred to as "Stark II"). The Anti-Kickback Statute
provisions prohibit, among other things, the offer, payment, solicitation or
receipt of any form of remuneration in return for the referral of Medicare and
Medicaid patients. Stark II prohibits, in part, physicians from making any
Medicare or Medicaid referrals for certain "designated health services" to any
entity with which the physician has a "financial relationship". In addition to
these anti-kickback and self-referral prohibitions, there are various federal
and state laws prohibiting other types of fraud by healthcare providers,
including criminal provisions which prohibit filing false claims or making
false statements to receive payment or certification under Medicare and
Medicaid, or failing to refund overpayments or improper payments. Violation of
the Anti-Kickback Statute or the criminal false claims statute is a felony
punishable by up to five years imprisonment and/or $25,000 fines, while
violation of Stark II may result in the imposition of civil monetary penalties
of up to $15,000 for each prohibited service provided as well as restitution
of payments for such services. Civil provisions prohibit the knowing filing of
a false claim or the knowing use of false statements to obtain payment. The
penalties for such a violation are fines of not less than $5,000 nor more than
$10,000, plus treble damages, for each claim filed. In addition, some states
restrict certain business relationships between physicians and other providers
of healthcare services. Many states, including California, Texas and Arizona,
prohibit business corporations from providing, or holding themselves out as
providers of, medical care. Possible sanctions for violation of any of these
restrictions or prohibitions include loss of licensure or eligibility to
participate in reimbursement programs (including Medicare and Medicaid), asset
forfeitures and civil and criminal penalties. These laws vary from state to
state, are often vague and have seldom been interpreted by the courts or
regulatory agencies. Management believes the Company is in substantial
compliance with the foregoing statutes and regulations. However, there can be
no assurance that government officials responsible for enforcing these
statutes will not assert that the Company or certain transactions in which the
Company is involved are in violation of these statutes, possibly resulting in
the imposition of fines or penalties that may adversely affect the Company's
business, financial condition and results of operations.
ANTI-FRAUD INITIATIVES GOVERNING HEALTH CARE PROVIDERS
State and federal governments are devoting increasing attention and
resources to anti-fraud initiatives against healthcare providers. The Health
Insurance Portability and Accountability Act of 1996
23
<PAGE>
(the "Accountability Act") and the Balanced Budget Act of 1997 (the "Balanced
Budget Act") expand the penalties for healthcare fraud, including broader
provisions for the exclusion of providers from the Medicare and Medicaid
programs. Further, under Operation Restore Trust, a major anti-fraud
demonstration project, the Office of the Inspector General of the U.S.
Department of Health and Human Services (the "OIG"), in cooperation with other
federal and state agencies, has focused on the activities of SNFs, home health
agencies, hospices, and DME suppliers in certain states, including California
and Texas, in which the Company currently operates. Due to the success of
Operation Restore Trust, the project has been expanded to numerous other
states and to additional healthcare providers including providers of ancillary
nursing home services. While management believes that the Company's billing
practices are consistent with Medicare and Medicaid criteria, those criteria
are often vague and subject to interpretation. There can be no assurance that
aggressive anti-fraud enforcement actions will not adversely affect the
business of the Company.
The federal government has indicated that the implementation of an effective
compliance program is recommended for healthcare providers in order to
maximize a provider's ability to detect and prevent potential infractions of
applicable law and to address any infractions that may occur. Further, the
existence of an effective compliance program may be taken into account by the
government to reduce any fines or penalties incurred by the Company for
infractions or violations of applicable law. Although the Company does not
currently have a compliance program in place, the Company is in the process of
developing and implementing a compliance program. See "Business--Compliance
Program".
DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS
COST CONTAINMENT MEASURES IMPOSED BY THIRD PARTY PAYORS
On a pro forma basis, after giving effect to the Transactions the Company
derived approximately 36% and 31% for the twelve months ended December 31,
1997 of its net patient revenues from Medicare and Medicaid, respectively. The
Company expects to continue to derive a significant portion of its revenue
from such federal and state reimbursement programs. There can be no assurance
that the Company will achieve or improve this payor mix in the future. Both
governmental and private payor sources have instituted cost containment
measures designed to limit payments made to healthcare providers. Most
recently, the Balanced Budget Act requires the establishment of a prospective
payment system ("PPS") for Medicare SNFs under which facilities will be paid a
federal per diem rate for virtually all covered SNF services in lieu of the
current cost-based reimbursement rate. The cost-based system reimburses
providers for reasonable direct and indirect allowable costs incurred in
providing "routine costs" (as defined by the Medicare program) as well as
capital costs and ancillary costs. Management believes that the transition to
PPS will reward efficient providers and penalize those that are inefficient.
The law contains numerous other changes that will adversely affect payments to
Medicare and Medicaid providers. Further, the government has not yet set
reimbursement rates under PPS. There can be no assurance that the
implementation of PPS or other changes in the administration or interpretation
of government healthcare programs will not have any adverse effect on the
Company or that payments under government programs will remain at levels
comparable to present levels or will be sufficient to cover the costs
allocable to patients eligible for reimbursement under such programs.
POSSIBLE CURTAILING OF MEDICAID PAYMENTS AND OTHER REIMBURSEMENT PROGRAMS DUE
TO BUDGET CONSTRAINTS
In addition, prior to the enactment of the Balanced Budget Act, federal law
required state Medicaid programs to reimburse SNFs for the costs that are
incurred by efficiently and economically operated providers in order to meet
quality and safety standards. The Balanced Budget Act repealed this payment
standard, effective for services provided on or after October 1, 1997, thereby
granting states greater flexibility in establishing payment rates. There can
be no assurance that budget constraints or
24
<PAGE>
other factors will not cause states to reduce Medicaid reimbursement to SNFs
or that payments to SNFs will be made on a timely basis. Any such efforts to
reduce Medicaid payment rates or failure of states to meet their Medicaid
obligations on a timely basis would have a material adverse effect on the
Company.
Further, government reimbursement programs are subject to additional
statutory and regulatory changes, retroactive rate adjustments, administrative
ceilings and government funding restrictions, all
of which could materially decrease the rates paid to the Company for its
future services or the services for which the Company will be able to seek
reimbursement. Management cannot predict whether any of these additional
proposals will be adopted or, if adopted and implemented, what effect such
proposals would have on the Company. There can be no assurance that payments
under state or federal governmental programs will remain at levels comparable
to present levels or will be sufficient to cover the costs allocable to
patients eligible for reimbursement pursuant to such programs, particularly
with respect to individual state-administered Medicaid programs, which
generally provide lower reimbursement rates than the Medicare program. In
addition, there can be no assurance that the facilities to be operated by the
Company and the services and supplies to be provided by the Company will meet
or continue to meet the requirements for participation in such programs.
DELAYS IN RECEIVING REIMBURSEMENT
The Company's financial condition and results of operations may also be
affected by the revenue reimbursement process, which in the Company's industry
is complex and can involve lengthy delays between the time that revenue is
recognized and the time that reimbursement amounts are settled. The Company's
results of operations would be materially and adversely affected if the amount
actually received from third-party payors in any reporting period differed
materially from the amounts accrued in prior periods. The Company's financial
condition and results of operations may also be affected by the timing of
reimbursement payments and rate adjustments from third-party payors. See
"Business--Government Regulations".
MEDICARE AND MEDICAID AUDITS AND REFORM
The Company is subject to periodic audits by the Medicare and Medicaid
programs, and the payment agencies for these programs have various rights and
remedies against the Company if they assert that the Company has failed to
comply with program requirements. In 1997, one of Summit's facilities was the
subject of a Medicare billing audit by such a payment agency, resulting in a
finding that approximately $1,500,000 of charges (after cost report settlement
and subject to downward adjustment) for SNF services lacked a timely
certification of medical necessity by a physician. Summit is currently
repaying such charges against reimbursement of current claims. Government
agencies could seek to require the Company to repay any overcharges or amounts
billed in violation of program requirements, or could make deductions from
future amounts due to the Company. Such agencies could also impose fines,
criminal penalties or program exclusions. See "Business--Government
Regulations".
In addition, several states are considering various healthcare reforms,
including Medicaid managed care demonstration projects. Several states in
which the Company operates have applied for, or received, approval from the
U.S. Department of Health and Human Services for waivers from certain Medicaid
requirements that have generally been required for managed care projects.
Although these demonstration projects generally exempt institutional care,
including long-term care facilities, no assurance can be given that these
waiver projects ultimately will not change the reimbursement system for long-
term care from fee for service to managed care negotiated or capitated rates.
Furthermore, the Balanced Budget Act now allows states to mandate enrollment
in managed care systems without going through the federal waiver process
provided certain standards are met. Although the Company believes it will be
well-positioned to operate in a managed care environment, it is not possible
to predict which reforms of state healthcare systems will be adopted and the
effect, if any, that the reforms will have on the Company's business. See
"Business--Government Regulations".
25
<PAGE>
Current Medicare regulations applicable to transactions between related
parties, such as the Company's subsidiaries, are relevant to the amount of
Medicare reimbursement that the Company is entitled to receive for goods and
services that are charged to the Medicare program. Management believes that
the Company satisfies the requirements for exception to the related party
rules in transactions between its long-term care facilities and its therapy,
pharmacy and DME subsidiaries. If, however, the Company has failed, or in the
future fails, to satisfy regulations for the related party exception with
respect to inter-corporate transactions, the Medicare reimbursement that the
Company received or will receive could be reduced, and as a result, the
Company's financial condition could be materially and adversely affected. See
"Business--Government Regulations".
UNCERTAINTY OF HEALTHCARE LEGISLATION
In addition to extensive government healthcare regulations, there are
numerous initiatives on federal and state levels for comprehensive reforms
affecting the payment for and availability of healthcare services. Changes in
the law, new interpretations of existing laws, or changes in payment
methodology may have a dramatic effect on the definition of permissible or
impermissible activities, the relative costs associated with doing business
and the amount of reimbursement by the government. In addition, there can be
no assurance that currently proposed or future healthcare legislation or other
changes in the administration or interpretation of governmental healthcare
programs will not have an adverse effect on the Company. See "Business--
Government Regulations".
DEVELOPMENT OF MANAGED CARE CONTRACTS IN RESPONSE TO PRICING PRESSURES
The healthcare services industry is currently experiencing market-driven
reforms from forces within and outside the industry that are exerting pressure
on healthcare and related companies to reduce healthcare costs. These market-
driven reforms are resulting in industry-wide consolidation that is expected
to increase the downward pressure on healthcare service providers' margins, as
larger buyer and supplier groups exert pricing pressure on healthcare
providers. Given the increasing importance of managed care in the healthcare
industry and the continued cost containment pressures for Medicare and
Medicaid, the Company is focusing on developing managed care contracts.
Additionally, the Company is establishing a network of services to meet the
needs of managed care organizations. The success of the Company's managed care
strategy will depend in large part on its ability to increase demand for sub-
acute services among managed care organizations, to obtain favorable
agreements with managed care organizations and to manage effectively its
operations and healthcare delivery costs through various methods, including
utilization management and competitive pricing for purchased services. There
can be no assurance that pricing pressures faced by healthcare providers will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
HEALTHCARE INDUSTRY EXTREMELY COMPETITIVE
The Company operates in a highly competitive industry. The Company's SNFs
and ALFs are located in communities that also are served by similar facilities
operated by others. Some competing facilities provide services not offered by
the Company and some are operated by entities having greater financial and
other resources than the Company. In addition, some are operated by non-profit
organizations or government agencies supported by endowments, charitable
contributions, tax revenues and other sources not available to the Company.
Furthermore, cost containment efforts, which encourage more efficient
utilization of acute care hospital services, have resulted in decreased
hospital occupancy in recent years. As a result, a significant number of acute
care hospitals have converted portions of their facilities to other purposes,
including specialty and sub-acute units. In California, Texas and Arizona, a
certificate of need is no longer required in order to build or expand a SNF,
which is another factor increasing competition. However, in Texas, competition
is limited by
26
<PAGE>
restrictions on the number of beds that can be enrolled in the Medicaid
program. The Company also may encounter competition in acquiring or developing
new facilities. The Company's pharmacies and DME business also operate in
highly competitive environments and compete with regional and local
pharmacies, medical supply companies and pharmacies operated by other long-
term care chains or by other companies ranging from small local operators to
companies which are national in scope and distribution capability. The Company
also may encounter competition in connection with the provision of other
ancillary services, including physical, occupational and speech therapy.
GEOGRAPHIC CONCENTRATION; DEPENDENCE ON CERTAIN STATE MEDICAID PROGRAMS
Approximately 54% of the Company's properties are located in the State of
California and approximately 44% are located in the State of Texas.
Consequently, the Company will be dependent on the economies of California and
Texas, the supply and demand in these states for the services provided by the
Company, the regulatory environment in these states and, to a certain extent,
on the continued funding of and reimbursement rates paid under those states'
Medicaid programs. During both 1996 and 1997, payments received from state
Medicaid agencies accounted for approximately 31% of the Company's revenue.
The Company expects that the California and Texas Medicaid reimbursement
programs will continue to constitute a significant source of revenue for the
Company. Adverse changes in general economic factors affecting these states'
respective healthcare industries or in these states' laws and regulatory
environment, including Medicaid reimbursement rates, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
LIABILITY, INSURANCE AND LEGAL PROCEEDINGS
The provision of healthcare services entails an inherent risk of liability.
In recent years, participants in the long-term care industry have become
subject to an increasing number of lawsuits alleging malpractice or related
legal theories, many of which involve large claims and significant defense
costs. The Company currently maintains liability insurance intended to cover
such claims and the Company believes that its insurance is in keeping with
industry standards. There can be no assurance, however, that claims in excess
of the Company's insurance coverage or claims not covered by the Company's
insurance coverage (e.g. claims for punitive damages) will not arise. A
successful claim against the Company not covered by, or in excess of, the
Company's insurance coverage could have a material adverse effect upon the
Company's financial condition and results of operations. Claims against the
Company, regardless of their merit or actual outcome, may also have a material
adverse effect upon the Company's ability to attract patients or expand its
business and would require management to devote time to matters unrelated to
the operation of the Company's business. In addition, the Company's insurance
policies must be renewed annually. There can be no assurance that the Company
will be able to obtain liability insurance coverage in the future or that, if
such coverage is available, it will be available on acceptable terms.
DEPENDENCE ON KEY PERSONNEL
The Company's business is managed by a number of key personnel, the loss of
which could have a material adverse effect on the Company. In addition, as the
Company's business develops and expands, the Company believes that its future
success will depend greatly on its continued ability to attract and retain
highly skilled and qualified personnel. Currently the Company has entered into
employment agreements with Mr. Snukal and Mrs. Snukal, and with Mr. Scott. See
"Management". The Company maintains key-man insurance on Mr. Snukal in the
amount of $5.0 million. There can be no assurance that key personnel will
continue to be employed by the Company or that the Company will be able to
attract and retain qualified personnel in the future. Failure by the Company
to retain or attract such personnel could have a material adverse effect on
the Company.
27
<PAGE>
CONTROLLING STOCKHOLDERS
As a result of the Transactions, Heritage and certain members of senior
management of the Company or their affiliates own approximately 68.6% of the
outstanding voting stock of the Company. By virtue of such ownership, these
stockholders have the power to control all matters submitted to stockholders
of the Company and to elect a majority of the directors of the Company and its
subsidiaries.
CONFLICTS OF INTEREST
Circumstances may occur in which the interests of the controlling
stockholders conflict with the interests of the holders of the Notes. For
example, if the Company encounters financial difficulties or is unable to pay
certain of its debts as they mature, the interests of such controlling persons
might conflict with those of holders of the Company's indebtedness, including
the Notes. In addition, these stockholders may have an interest in pursuing
acquisitions, divestitures or other transactions that, in their judgment,
enhance their equity investment, even though such transactions might involve
risks to the holders of the Notes. See "Principal Stockholders", "Management"
and "Certain Relationships and Related Transactions".
POSSIBLE INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Notes at 101% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. Under the terms of the Stockholder Agreement, Heritage has the
right to cause a sale of the Company under certain circumstances, which would
constitute a Change of Control. See "Management--Stockholders Agreement".
However, there can be no assurance that sufficient funds will be available at
the time of any Change of Control to make any required repurchases of Notes
tendered or that restrictions in the New Credit Facility will allow the
Company to make such required repurchases. Notwithstanding these provisions,
the Company could enter into certain transactions, including certain
recapitalizations, that would not constitute a Change of Control but would
increase the amount of debt outstanding at such time. See "Description of
Notes--Repurchase at the Option of Holders".
EFFECT OF FRAUDULENT TRANSFER STATUTES ON VALIDITY OF NOTES AND GUARANTEES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the
Company, or any Guarantor, at the time it incurred the indebtedness evidenced
by the Notes or the Guarantees, (i) (a) was or is insolvent or rendered
insolvent by reason of such incurrence or (b) was or is engaged in a business
or transactions for which the assets remaining with the Company or any
Guarantor constituted unreasonably small capital or (c) intended or intends to
incur, or believed or believes that it would incur debts beyond its ability to
pay such debts as they mature, and (ii) received or receives less than
reasonably equivalent value or fair consideration for the incurrence of such
indebtedness, then the Notes or the Guarantees, could be voided, or claims in
respect of the Notes or the Guarantees could be subordinated to all other
debts of the Company or any Guarantor. In addition, the payment of interest
and principal by the Company or any Guarantor pursuant to the Notes could be
voided and required to be returned to the person making such payment, or to a
fund for the benefit of the creditors of the Company or any Guarantor.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or any Guarantor would be
considered insolvent if (i) the sum of its debts, including contingent
liabilities, were greater than the saleable value of all of its assets at a
fair valuation or if the present fair saleable value of its assets were less
than the amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute and
mature or (ii) it could not pay its debts as they become due.
28
<PAGE>
On the basis of historical financial information, recent operating history
and other factors, the Company and the Guarantors believe that neither the
Company nor any Guarantor will be insolvent, will have unreasonably small
capital for the business in which it is engaged or will incur debts beyond its
ability to pay such debts as they mature. There can be no assurance, however,
as to what standard a court would apply in making such determinations or that
a court would agree with the Company's and the Guarantors' conclusions in this
regard.
CONSEQUENCES OF FAILURE TO EXCHANGE THE OUTSTANDING NOTES
The Outstanding Notes have not been registered under the Securities Act or
any state securities laws, and therefore, may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant to
an exemption therefrom or in a transaction not subject thereto, and in each
case in compliance with certain other conditions and restrictions, including
the right of the Company and the Notes Trustee (as defined) in certain cases
to require the delivery of opinions of counsel, certifications and other
information prior to any such transfer. Outstanding Notes that remain
outstanding after the consummation of the Exchange Offer will continue to bear
a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Outstanding Notes that remain
outstanding will not be entitled to any rights to have such Outstanding Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement (subject to certain
limited exceptions). The Company currently intends to register under the
Securities Act Outstanding Notes that remain outstanding after consummation of
the Exchange Offer only if such Outstanding Notes are held by Initial
Purchasers or persons ineligible to participate in the Exchange Offer (other
than due solely to the status of such holder as an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act). If Outstanding Notes
are tendered and accepted in the Exchange Offer, the market for untendered
Outstanding Notes is likely to diminish; accordingly, holders who do not
tender their Outstanding Notes may encounter difficulties in selling such
notes following the Exchange Offer. The Exchange Notes and any Outstanding
Notes that remain outstanding after consummation of the Exchange Offer will
constitute a single series of debt securities under the Indenture and,
accordingly, will vote together as a single class for purposes of determining
whether holders of the requisite percentage in outstanding principal amount of
the Notes have taken certain actions or exercised certain rights under the
Indenture.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Outstanding Notes were issued to, and the Company believes are currently
owned by, a relatively small number of beneficial owners. The Outstanding
Notes have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes. See "--Consequences of Failure to Exchange". Although the
Exchange Notes will generally be permitted to be resold or otherwise
transferred by the holders (who are not affiliates of the Company) without
compliance with the registration and prospectus delivery requirements under
the Securities Act, they will constitute a new issue of securities with no
established trading market. If the Exchange Notes are traded after their
initial issuance, they may trade at a discount from their initial offering
price, depending upon prevailing interest rates, the market for similar
securities and other factors including general economic conditions and the
financial condition of the Company. The Company does not intend to apply for a
listing or quotation of the Exchange Notes on any securities exchange or stock
market. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Notes. The liquidity of, and trading
market for, the Notes also may be adversely affected by general declines in
the market for similar securities. Such a decline may adversely affect such
liquidity and trading markets independent of the financial performance of, and
prospects for, the Company.
29
<PAGE>
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. Subject to certain provisions set forth in the Registration
Rights Agreement, the Company has agreed that, for a period of up to 180 days
after the consummation of the Exchange Offer, it will make this Prospectus
available to any participating broker-dealer for use in connection with any
such resale. However, under certain circumstance, the Company has the right to
require that participating broker-dealers suspend the resale of Exchange Notes
pursuant to this Prospectus. Notwithstanding that the Company may cause the
resale of Exchange Notes pursuant to this Prospectus to be suspended, the
Company has no obligation to extend the 180-day period referred to above
during which participating broker-dealers are entitled to use this Prospectus
in connection with such resales. See "The Exchange Offer--Procedures for
Tendering Outstanding Notes" and "Plan of Distribution".
STATE LAWS REGARDING PROHIBITION OF CORPORATE PRACTICE OF MEDICINE
The Company is a general business corporation. Corporations such as the
Company are not permitted under certain state laws to practice medicine or
exercise control over the medical judgments or decisions of practitioners.
Corporate practice of medicine laws and their interpretations vary from state
to state and are enforced by the courts and by regulatory authorities with
broad discretion. The Company believes that it performs only non-medical
services, does not represent to the public or its clients that it offers
medical services and does not exercise influence or control over the practice
of medicine by the practitioners with whom it deals. Although the Company
believes its operations as currently conducted are in material compliance with
existing applicable laws, there can be no assurance that the Company's
structure will not be challenged as constituting the unlicensed practice of
medicine or that the enforceability of the agreements underlying this
structure will not be limited. If such a challenge were made successfully in
any state, the Company could be subject to civil and criminal penalties under
such state's law. Such results could have a material adverse effect upon the
Company.
POTENTIAL "YEAR 2000" PROBLEMS
It is possible that the Company's currently installed computer systems,
software products or other business systems, including certain date dependent
medical equipment, or those of the Company's vendors or third-party payors,
working either alone or in conjunction with other software or systems, will
not accept input of, store, manipulate and output dates for the years 1999,
2000 or thereafter without error or interruption (commonly known as the "Year
2000" problem). The Company intends to conduct a review of its business
systems, including its computer systems, and query its vendors and third-party
payors as to their progress in identifying and addressing problems that their
computer systems may face in correctly interrelating and processing date
information as the year 2000 approaches and is reached. However, there can be
no assurance that the Company will identify all such Year 2000 problems in its
computer systems or those of its vendors or third-party payors in advance of
their occurrence or that the Company will be able to successfully remedy any
problems that are discovered. The expenses of the Company's efforts to
identify and address such problems, or the expenses or liabilities to which
the Company may become subject as a result of such problems, could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, failure of the Company to identify and
remedy Year 2000 problems could put the Company at a competitive disadvantage
relative to companies that have corrected such problems.
30
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds of the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Outstanding Notes in like principal amount. The issuance of the Exchange Notes
in exchange for the surrender of the Outstanding Notes will not result in any
increase in the indebtedness of the Company.
The net proceeds of the sale of the Outstanding Notes were approximately
$114 million, after deducting discounts and commissions and expenses related
to the sale of the Outstanding Notes. The Company used the net proceeds of the
sale of the Outstanding Notes to consummate the Transactions, repay certain
existing indebtedness, pay certain fees and expenses in connection with the
Transactions and for general corporate purposes (see "Prospectus Summary--The
Financings").
CAPITALIZATION
The following table sets forth cash and cash equivalents and the
capitalization of Fountain View as of March 31, 1998, and of the Company on a
pro forma basis as of such date after giving effect to the Transactions. This
table should be read in conjunction with "Unaudited Pro Forma Financial Data",
"Selected Historical Financial and Other Data--Fountain View", "Selected
Historical Financial and Other Data--Summit", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-----------------
PRO
ACTUAL FORMA
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................. $ 3,640 $ 3,640
======== ========
New Credit Facility(1).................................... -- 100,000
Outstanding Notes......................................... -- 120,000
Fountain View existing indebtedness....................... 202,474 --
Mortgages, capital leases and other debt assumed.......... 24,904 24,904
-------- --------
Total debt.............................................. 227,378 244,904
Mandatory redeemable preferred stock...................... -- 15,000
Shareholders' equity...................................... 70,119 70,119
-------- --------
Total capitalization...................................... $297,497 $330,023
======== ========
</TABLE>
- --------
(1) The New Credit Facility provides for up to $30.0 million of revolving
credit borrowings (with a $4.0 million sublimit for letters of credit) and
up to $85.0 million of term loans and matures in 2004. As of May 31, 1998,
revolving credit loans in the aggregate amount of approximately $16
million and term loans in the aggregate amount of approximately $85
million were outstanding under the New Credit Facility, and $14 million of
revolving credit borrowings were available to the Company.
31
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data as of March 31, 1998 and
for the three months then ended and for the year ended December 31, 1997 have
been derived by the application of pro forma adjustments to the financial
statements of Fountain View and Summit included elsewhere in this Prospectus.
The pro forma statement of operations data for the three months ended March
31, 1998 give effect to the transactions as if they had occurred on January 1,
1998. The pro forma statement of operations data for the year ended December
31, 1997 give effect to (1) the Transactions and (2) the acquisition of
Briarcliff, a SNF acquired by Summit on December 1, 1997, as if each had
occurred as of January 1, 1997. The related pro forma balance sheet data give
effect to the Transactions as if they had occurred on March 31, 1998. The
adjustments are described in the accompanying notes.
The pro forma adjustments are based on available data and certain
assumptions that management believes are reasonable. The unaudited pro forma
financial data do not purport to represent what the Company's results of
operations actually would have been if the transactions described above had
been consummated as of the dates or for the periods indicated above, or what
such results will be for any future date or future period. The unaudited pro
forma data should be read in conjunction with "Selected Historical Financial
and Other Data--Fountain View", "Selected Historical Financial and Other
Data--Summit", "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and related notes
thereto included elsewhere in this Prospectus.
32
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
FOUNTAIN VIEW, FORMA PRO
INC. ADJUSTMENTS FORMA
-------------- ----------- --------
<S> <C> <C> <C>
ASSETS
Cash and equivalents............... $ 3,640 $ -- (1)(2)(3) $ 3,640
Accounts receivable, net........... 55,267 -- 55,267
Other current assets............... 22,202 -- 22,202
--------- -------- --------
Total current assets............. 81,109 -- 81,109
Land and land improvements......... 24.951 -- 24,951
Buildings and leasehold
improvements...................... 201,093 -- 201,093
Furniture and equipment............ 25,826 -- 25,826
Construction in progress........... 7,271 -- 7,271
--------- -------- --------
259,141 -- 259,141
Less accumulated depreciation...... (2,892) -- (2,892)
--------- -------- --------
256,249 -- 256,249
Notes receivable, net.............. 6,596 -- 6,596
Intangibles and other assets....... 52,162 11,400(4)(2) 63,562
--------- -------- --------
Total assets..................... $ 396,116 $ 11,400 $407,516
========= ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Payable to banks................... $ 4,192 $ -- $ 4,192
Accounts payable and accrued
liabilities....................... 53,917 (21,126)(3) 32,791
Employee compensation and benefits. 9,223 -- 9,223
Income taxes payable............... 428 -- 428
Current portion of long-term debt.. 4,840 (4,840)(3) --
--------- -------- --------
Total current liabilities........ 72,600 (25,966) 46,634
Long-term debt..................... 222,538 22,366 (2) 244,904
Deferred income taxes.............. 30,859 -- 30,859
Mandatory redeemable preferred
stock............................. -- 15,000 (1) 15,000
SHAREHOLDERS' EQUITY
Common stock..................... 11 -- 11
Paid-in capital.................. 103,948 -- 103,948
Retained earnings................ (33,840) -- (33,840)
--------- -------- --------
Total shareholders' equity....... 70,119 -- 70,119
--------- -------- --------
Total liabilities and
shareholders' equity............ $ 396,116 $ 11,400 $407,516
========= ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet.
33
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) Represents $15,000 of Mandatory Redeemable Preferred Stock purchased by
Heritage and subsequently sold by Heritage to Baylor and Buckner. The
preferred stock is subject to mandatory redemption for cash at the time of
an initial public offering.
<TABLE>
<S> <C>
Increase in cash resulting from purchase of Mandatory
Redeemable Preferred Stock by Heritage........................... $15,000
=======
Mandatory Redeemable Preferred Stock.............................. $15,000
=======
</TABLE>
(2) Represents distribution of proceeds from new borrowings:
<TABLE>
<S> <C>
New Credit Facility.............................................. $100,000
Senior Notes .................................................... 120,000
--------
Total new borrowings......................................... $220,000
========
Distribution of proceeds:
Pay-off old borrowings......................................... $197,634
Transactional costs [See (4) below] (a)........................ 11,400
Increase in cash (a)........................................... 10,966
--------
$220,000
========
</TABLE>
(a) Sum of these items represents incremental new borrowings of $22,366
(3) Net cash proceeds described in (1) and (2) above were utilized as follows:
<TABLE>
<S> <C>
Total net cash proceeds per (1) and (2) above..................... $25,966
=======
Net cash proceeds utilized to:
a. Reduce accounts payable........................................ $21,126
b. pay-off current portion of long-term debt...................... 4,840
-------
$25,966
=======
</TABLE>
(4) Represents transactional costs to be paid in connection with the proceeds
of the New Credit Facility and Senior Notes as follows:
<TABLE>
<S> <C>
Underwriter and financial advisory fees........................... $10,804
Legal, accounting and other fees.................................. 596
-------
$11,400
=======
</TABLE>
34
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BRIARCLIFF
11 MONTHS
FOUNTAIN SUMMIT CARE ENDED PRO FORMA
VIEW, INC. CORPORATION 11/30/97 TOTAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenue............. $67,905 $211,346 $7,893 $287,144 $ -- $287,144
Expenses:
Salaries and related
benefits............. 38,215 93,933 3,100 135,248 -- 135,248
Supplies.............. 8,293 20,040 644 28,977 -- 28,977
Purchased services.... 4,256 53,587 70 57,913 -- 57,913
Provision for doubtful
accounts............. 395 3,343 858 4,596 -- 4,596
Other expenses........ 5,046 16,948 1,542 23,536 -- 23,536
Depreciation and
amortization......... 1,198 7,996 688 9,882 4,210 (1) 14,092
Rent expense.......... 2,004 2,979 -- 4,983 -- 4,983
Rent expense to
related parties...... 1,771 -- -- 1,771 -- 1,771
Interest, net......... 1,164 8,504 11 9,679 13,645 (2) 23,324
------- -------- ------ -------- -------- --------
62,342 207,330 6,913 276,585 17,855 294,440
------- -------- ------ -------- -------- --------
Income (loss) before
provision for
income taxes........... 5,563 4,016 980 10,559 (17,855) (7,296)
Income tax benefit
(provision)............ (1,951) (1,631) (402) (3,984) 6,776 (3) 2,792
------- -------- ------ -------- -------- --------
Net income (loss)....... 3,612 2,385 578 6,575 (11,079) (4,504)
Preferred stock
dividends.............. -- -- -- -- (1,800)(4) (1,800)
------- -------- ------ -------- -------- --------
Net income (loss)
available to common
shareholders........... $ 3,612 $ 2,385 $ 578 $ 6,575 $(12,879) $ (6,304)
======= ======== ====== ======== ======== ========
Basic and diluted earn-
ings per share to com-
mon shareholders....... $ 18.06 $ (31.52)
======= ========
OTHER DATA:
EBITDA (as defined)(5).. $ 30,120
Adjusted EBITDA(6)...... 31,795
Adjusted EBITDA margin.. 13.2%
Adjusted EBITDAR(6)..... 44,549
Adjusted EBITDAR margin. 15.5%
Ratio of earnings to
fixed charges(7)....... --
Ratio of Adjusted EBITDA
to net interest
expense................ 1.6
Ratio of net debt to
Adjusted EBITDA(8)..... 6.3
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations
35
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUMMIT CARE
CORPORATION
PERIOD FROM
FOUNTAIN JANUARY 1 TO PRO FORMA
VIEW, INC. MARCH 26,1998 TOTAL ADJUSTMENTS PRO FORMA
---------- ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Patient Service
Revenues............... $20,078 $ 53,918 $ 73,996 $ -- $ 73,996
Other Revenues -- -- -- -- --
------- -------- -------- ------- --------
Total Revenue 20,078 53,918 73,996 -- 73,996
Expenses:
Salaries and benefits. 10,686 23,632 34,318 -- 34,318
Supplies.............. 2,218 5,165 7,383 -- 7,383
Purchased services.... 1,828 13,743 15,571 -- 15,571
Provision for doubtful
accounts............. 142 624 766 -- 766
Other expenses........ 1,396 3,851 5,247 -- 5,247
Rental................ 983 723 1,706 -- 1,706
Depreciation and
amortization......... 524 2,119 2,643 1,104 (1) 3,747
Interest, net of
Interest Income...... 851 2,604 3,455 2,376 (2) 5,831
------- -------- -------- ------- --------
18,628 52,461 71,089 3,480 74,569
------- -------- -------- ------- --------
Income before provision
for income taxes....... 1,450 1,457 2,907 (3,480) (573)
Income tax benefit
(provision)............ (580) (575) (1,155) 1,292 (3) 137
Extraordinary Item, net
of tax................. (517) -- -- -- (517)
------- -------- -------- ------- --------
Net income (loss)....... 353 882 1,235 ( 2,188) (953)
Preferred stock
dividends.............. -- -- -- (450)(4) (450)
------- -------- -------- ------- --------
Net income (loss)
available to common
shareholders........... $ 353 $ 882 $ 1,235 $(2,638) $ (1,403)
======= ======== ======== ======= ========
Basic and diluted earn-
ings per share avail-
able to common share-
holders before
extraordinary item..... $ 3.47 $ (3.53)
Basic and diluted loss
per share available to
common shareholders--
extraordinary item..... (2.06) (2.06)
------- --------
Basic and diluted
earnings per share to
common shareholders--
net income (loss) ..... $ 1.41 $ (5.59)
======= ========
OTHER DATA:
EBITDA (as defined)(5).. $ 9,005
Adjusted EBITDA......... 9,005
Adjusted EBITDA mar-
gin(6)................. 12.2%
Adjusted EBITDAR(6)..... 10,711
Adjusted EBITDAR margin. 14.5%
Ratio of earnings to
fixed charges(7)....... --
Ratio of Adjusted EBITDA
to net interest
expense................ 1.5
Ratio of net debt to Ad-
justed EBITDA(8)....... 6.7
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(1) Pro forma adjustments to reflect the step-up in basis of property, plant
and equipment and intangible assets, in connection with the Summit Care
Corporation acquisition:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
AMORTIZATION DECEMBER 31, ENDED
PERIOD 1997 MARCH 31, 1998
------------ -------------- --------------
<S> <C> <C> <C>
Increase in amortization of deferred
financing costs.................... 10 years $1,283 $ 320
Increase in amortization of
goodwill........................... 35 years 1,308 327
Increase in depreciation of
buildings, leaseholds and
equipment.......................... 5-35 years 1,619 457
------ ------
$4,210 $1,104
====== ======
(2) Reflects additional interest on debt as follows:
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1997 MARCH 31, 1998
------------ --------------
<S> <C> <C> <C>
Interest on the New Credit
Facility--Term Loan (8.44%)........ $ 7,171 $1,792
Interest on New Credit Facility--
Revolver (8.44%)................... 1,265 316
Interest on Notes offered hereby
(11.25%)........................... 13,500 3,375
Interest on capital leases and other
existing debt (various rates)...... 2,037 509
---------- ------
Total interest expense.............. 23,974 5,992
Net historical interest (gross of
interest expense).................. (10,329) (3,616)
---------- ------
Incremental interest................ $ 13,645 $2,376
========== ======
</TABLE>
Interest with respect to the New Credit Facility, for both the Term Loan
and the Revolver, is computed on a floating rate based on LIBOR plus 2.75%.
A 0.125% increase in the interest rate on the New Credit Facility would
result in additional interest expense of $125 and would reduce net income
by $74 for the year ended December 31, 1997.
(3) Represents incremental income tax benefit relating to amortization of
deferred financing costs, depreciation and interest expense at an
incremental rate of 41%.
(4) Represents the preferred stock dividend of 12% computed on the $15 million
of mandatory redeemable preferred stock.
(5) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is a widely recognized financial indicator of a
company's ability to service or incur debt. EBITDA is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. In addition, EBITDA may not be comparable to similarly
titled measures of other companies. EBITDA may not be indicative of the
historical operating results of the Company, nor is it meant to be
predictive of future results of operations or cash flows.
(6) For the year ended December 31, 1997, Adjusted EBITDA represents EBITDA
adjusted for certain non-recurring charges shown below. Adjusted EBITDAR
represents Adjusted EBITDA plus rent expense. EBITDAR is not a measurement
of operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a
37
<PAGE>
measure of profitability or liquidity. Similar to EBITDA, management views
EBITDAR as a financial indicator of a company's ability to service or incur
debt. A majority of Fountain View's nursing homes are leased, under
operating leases, and not owned. Accordingly, EBITDAR is used since the
rent expense approximates the interest and depreciation expense Fountain
View may have incurred as if the nursing homes were owned as opposed to
leased:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
EBITDA.................................................... $30,120
Non-recurring charges(a).................................. 7,675
-------
Adjusted EBITDA(b)........................................ 37,795
Rent expense.............................................. 6,754
-------
Adjusted EBITDAR(b)....................................... $44,549
=======
</TABLE>
(a) EBITDA is adjusted for the non-recurring entries in order to present
comparable EBITDA with the preceding years since these entries are only
reflected in the results of operations for the year ended December 31,
1997 for Fountain View and for the six months ended December 31, 1997
for Summit. In addition, the Company does not expect to incur similar
costs in the future. Non-recurring charges consist of: (1) $2,100 of
Medicare reserves taken by Summit due to adjustments proposed by the
Medicare intermediary during their audit of prior year cost reports.
The adjustments relate to issues not proposed by the Medicare
intermediary during previous audits and therefore the one time impact
relating to these adjustments for prior year cost reports is all
reflected in the results of operations for the year ended December 31,
1997 when the cost reports were audited and finalized with the Medicare
intermediary; (2) $1,074 of retroactive workers' compensation, group
and general liability costs due to the recording of tail coverage
insurance expense at the time Summit converted from an occurrence based
insurance policy to a claims made insurance policy; (3) $983 of
incremental bad debt expense relating to 1996 and prior periods
recorded in 1997 resulting from a change in management's methodology
for determining the allowance for bad debts; the change in methodology
was made to convert Summit's allowance methodology accounting practices
to Fountain View's accounting as a result of the acquisition; (4)
termination of non-compete agreements and consulting arrangements
totaling $965 relating to Fountain View Equity Transactions; (5)
certain transaction expenses including discretionary employee bonuses
totaling $872 paid upon completion of Fountain View Equity
Transactions; (6) severance for an executive and other costs totaling
$871, the severance package was paid in connection with the acquisition
of Summit by Fountain View; and (7) $810 related to an employee lawsuit
settled in 1997 involving a specific type of liability for which the
Company currently maintains insurance coverage (net of ongoing
insurance costs).
(b) Management believes that as a consequence of the Transactions, the
Company will realize significant ongoing cost savings and revenue
enhancements. However there can be no assurance that these cost savings
or revenue enhancements will be realized. Management's estimate of the
ongoing cost reductions relating to the Transactions includes: (i)
certain reductions in facility-level operating expense items totaling
$1,451; (ii) $1,355 relating to the elimination of specifically
identified duplicative staff; (iii) $512 relating to reductions in
corporate expenses, including the elimination of certain public company
expenses; and (iv) a reduction in costs of supplies. Such amounts have
not been included in adjusted EBITDA or adjusted EBITDAR.
(7) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges by fixed charges. Fixed
charges consists of interest expense and one-third of operating rental
expense, which management believes is representative of the interest
component of rent expense. Earnings were not sufficient to cover fixed
charges. The amount of the shortfall approximated $7.3 million for the pro
forma year ended December 31, 1997 and $0.6 million for the pro forma
three months ended March 31, 1998.
(8) Ratio of net debt to Adjusted EBITDA represents the ratio of total debt,
exclusive of mandatory redeemable preferred stock, less cash and cash
equivalents to Adjusted EBITDA.
38
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA--FOUNTAIN VIEW
Set forth below are selected historical financial data of Fountain View as
of December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997, which are derived from the audited financial
statements included elsewhere herein. The selected historical financial data
as of December 31, 1993, 1994 and 1995, for the two years in the period ended
December 31, 1994 and for the three months ended March 31, 1997 and 1998 have
been derived from Fountain View's unaudited financial statements included
elsewhere herein, and, in the opinion of management, include all necessary
adjustments for a fair presentation of such information in conformity with
generally accepted accounting principles. The selected historical financial
data below should be read in conjunction with "Capitalization", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- -------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net revenue............. $41,061 $51,824 $55,836 $59,432 $ 67,905 $ 116,409 $ 20,078
Salaries and related
benefits............... 23,248 27,823 35,048 36,166 38,215 9,435 10,686
Other operating costs... 10,884 14,886 13,454 14,614 17,990 3,556 5,584
Depreciation and
amortization........... 110 149 416 600 1,198 142 524
Rent expense............ 4,002 4,017 3,946 3,896 3,775 941 983
Interest, net........... 307 355 332 278 1,164 20 851
------- ------- ------- ------- -------- --------- --------
38,551 47,230 53,196 55,554 62,342 14,094 18,628
------- ------- ------- ------- -------- --------- --------
Income before provision
for income taxes and
extraordinary item..... 2,510 4,594 2,640 3,878 5,563 2,315 1,450
Income tax benefit
(provision)............ (81) 43 (54) (78) (361) (33) (580)
Extraordinary item, net
of tax................. -- -- -- -- -- -- (517)
------- ------- ------- ------- -------- --------- --------
Net income.............. $ 2,429 $ 4,637 $ 2,586 $ 3,800 $ 5,202 $ 2,282 $ 353
======= ======= ======= ======= ======== ========= ========
Basic and diluted
earnings per share
before extraordinary
item(5)................ $ 12.15 $ 23.19 $ 12.93 $ 19.00 $ 26.01 $ 11.41 $ 3.47
Basic and diluted loss
per
share--extraordinary
item................... -- -- -- -- -- -- (2.06)
------- ------- ------- ------- -------- --------- --------
Basic and diluted earn-
ings per
share--net income...... $ 12.15 $ 23.19 $ 12.93 $ 19.00 $ 26.01 $ 11.41 $ 1.41
======= ======= ======= ======= ======== ========= ========
OTHER FINANCIAL DATA
EBITDA(1)............... $ 2,927 $ 5,098 $ 3,388 $ 4,756 $ 7,925 $ 2,477 $ 2,825
EBITDA margin........... 7.1% 9.8% 6.1% 8.0% 11.7% 15.1% 14.1%
EBITDAR(1).............. $ 6,929 $ 9,115 $ 7,334 $ 8,652 $ 11,700 $ 3,418 $ 3,808
EBITDAR margin.......... 16.9% 17.6% 13.1% 14.6% 17.2% 20.8% 19.0%
Capital expenditures.... $ 8 $ 537 $ 665 $ 1,816 $ 2,570 $ 837 $ 655
Ratio of earnings to
fixed charges(2)....... 2.5x 3.7x 2.6x 3.5x 3.3x 7.9x 2.2x
Net cash provided by
(used in) operating
activities............. $(1,804) $ 908 $ 5,832 $ 1,059 $ 12,739 $ 6,651 $ (4,346)
OTHER DATA
Number of facilities
(end of period)........ 9 9 9 9 9 9 50
Average licensed
beds(3)................ 1,061 1,061 1,061 1,061 1,061 1,061 5,937
Total beds (end of
period)................ 1,227 1,227 1,227 1,227 1,227 1,227 6,578
Patient days (in
thousands)............. 337 345 341 344 346 81 106
Average occupancy
rate(4)................ 87.0% 89.1% 88.1% 88.8% 89.3% 84.9% 86.6%
Percentage of revenues
from:
Managed care, private
pay and medicare..... 58.4% 65.1% 67.2% 69.7% 72.9% 72.8% 72.0%
Medicaid.............. 41.6 34.9 32.8 30.3 27.1 27.2 28.0
BALANCE SHEET DATA (END
OF PERIOD)
Cash and cash
equivalents............ $ 465 $ 629 $ 2,355 $ 1,161 $ 2,551 -- 3,640
Working capital......... 8,266 11,140 10,334 13,566 10,021 -- 8,509
Total assets............ 14,408 18,433 24,693 24,122 25,941 -- 396,116
Total debt, including
current maturities..... 6,758 7,359 6,764 666 30,076 -- 227,378
Shareholders' equity
(deficit).............. 5,570 9,399 9,957 16,601 (12,236) -- 70,119
</TABLE>
- -------
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is a widely recognized financial indicator of a
company's ability to service or incur debt. EBITDA is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. In addition, EBITDA may not be comparable to similarly
titled measures of other companies. EBITDA may not be indicative of the
historical operating results of the Company, nor is it meant to be
predictive of future results of operations or cash flows. EBITDAR
represents EBITDA plus rent expense. EBITDAR is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. Similar to EBITDA, management views EBITDA as a financial
indicator of a company's ability to service or incur debt. A majority of
Fountain View's nursing homes are leased, under operating leases, and not
owned. Accordingly, EBITDAR is used since the rent expense approximates
the interest and depreciation expense Fountain View may have incurred as
if the nursing homes were owned as opposed to leased.
(2) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges by fixed charges. Fixed
charges consists of interest expense and one-third of operating rental
expense, which management believes is representative of the interest
component of rent expense.
(3) Excludes ALF beds.
(4) Excludes Fountain View's ALF, which represents less than 2% of total
revenue.
(5) Weighted average shares outstanding for the five years ended December 31,
1997 and for the three months ended March 31, 1997 has been computed based
on the 200,000 shares of Common Stock issued and outstanding in connection
with the Fountain View Equity Transactions. See note 2 to the consolidated
financial statements of Fountain View included elsewhere herein.
39
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OTHER DATA--SUMMIT
Set forth below are selected historical financial data of Summit as of and
for each of the five years in the period ended June 30, 1997, which are
derived from Summit's audited financial statements. The selected historical
financial data for the six months ended December 31, 1996 and 1997 have been
derived from Summit's unaudited financial statements included elsewhere herein
and, in the opinion of management, include all necessary adjustments for a
fair presentation of such information in conformity with generally accepted
accounting principles. The selected historical financial data below should be
read in conjunction with "Capitalization", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- -------- -------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net revenue............. $83,992 $ 97,599 $137,026 $176,062 $197,927 $95,088 $108,507
Salaries and related
benefits............... 40,044 45,962 63,171 78,233 89,577 43,386 47,742
Other operating costs... 29,998 34,655 49,206 70,696 89,932 41,750 45,736
Depreciation and
amortization........... 2,308 2,949 5,249 6,142 7,393 3,632 4,235
Rent expense............ 2,315 1,613 2,141 2,656 2,864 1,410 1,525
Interest, net........... 1,080 2,243 4,761 6,574 7,973 4,057 4,588
------- -------- -------- -------- -------- ------- --------
75,745 87,422 124,528 164,301 197,739 94,235 103,826
------- -------- -------- -------- -------- ------- --------
Income before provision
for income taxes....... 8,247 10,177 12,498 11,761 188 853 4,681
Income tax provision.... (3,224) (4,010) (4,987) (4,452) (119) (337) (1,849)
------- -------- -------- -------- -------- ------- --------
Net income.............. $ 5,023 $ 6,167 $ 7,511 $ 7,309 $ 69 $ 516 $ 2,832
======= ======== ======== ======== ======== ======= ========
OTHER FINANCIAL DATA
EBITDA(1)............... $11,635 $ 15,369 $ 22,508 $ 24,477 $ 15,554 $ 8,542 $ 13,504
EBITDA margin........... 13.9% 15.7% 16.4% 13.9% 7.9% 9.0% 12.4%
EBITDAR(1).............. $13,950 $ 16,982 $ 24,649 $ 27,133 $ 18,418 $ 9,952 $ 15,029
EBITDAR margin.......... 16.6% 17.4% 18.0% 15.4% 9.3% 10.5% 13.9%
Capital expenditures.... $29,901 $ 15,505 $ 9,004 $ 26,558 $ 24,075 $12,049 $ 6,706
Ratio of earnings to
fixed charges(2)....... 5.5x 4.7x 3.3x 2.6x 1.0x 1.2x 1.9x
Net cash provided by
operating activities .. $ 4,186 $ 7,512 $ 7,014 $ 6,866 $ 18,015 $ 3,563 $ 7,793
OTHER DATA
Number of facilities
(end of period)........ 21 23 37 38 39 39 41
Average licensed beds... 2,696 2,876 4,197 4,816 5,078 5,065 5,154
Total beds (end of
period)................ 2,696 3,002 4,762 4,940 5,040 -- 5,347
Patient days (in
thousands)............. 858 908 1,316 1,514 1,573 783 827
Average occupancy rate.. 87.2% 86.5% 85.9% 85.9% 84.8% 84.0% 87.2%
Percentage of revenues
from:
Managed care and
private pay.......... 36.5% 34.0% 33.8% 31.9% 29.9% 30.5% 31.6%
Medicare.............. 28.3 30.3 29.5 34.7 39.7 39.1 36.7
Medicaid.............. 35.2 35.7 36.7 33.4 30.4 30.4 31.7
BALANCE SHEET DATA (END
OF PERIOD)
Cash and cash
equivalents............ $ 6,301 $ 21,613 $ 3,101 $ 2,658 $ 3,994 -- $ 1,702
Working capital......... 7,151 24,880 10,161 13,906 12,648 -- 11,384
Total assets............ 73,369 114,915 184,480 223,052 250,516 -- 267,420
Total debt and capital
leases, including
current maturities..... 30,331 32,025 89,788 110,374 121,452 -- 129,754
Shareholders' equity.... 31,337 66,361 73,813 81,286 81,412 -- 84,721
</TABLE>
- -------
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is a widely recognized financial indicator of a
company's ability to service or incur debt. EBITDA is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. In addition, EBITDA may not be comparable to similarly
titled measures of other companies. EBITDA may not be indicative of the
historical operating results of the Company, nor is it meant to be
predictive of future results of operations or cash flows. EBITDAR
represents EBITDA plus rent expense. EBITDAR is not a measurement of
operating performance computed in accordance with generally accepted
accounting principles and should not be considered as a substitute for
operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability
or liquidity. Similar to EBITDA, management views EBITDA as a financial
indicator of a company's ability to service or incur debt. A majority of
Fountain View's nursing homes are leased, under operating leases, and not
owned. Accordingly, EBITDAR is used since the rent expense approximates
the interest and depreciation expense Fountain View may have incurred as
if the nursing homes were owned as opposed to leased.
(2) The ratio of earnings to fixed charges has been calculated by dividing
income before income taxes and fixed charges by fixed charges. Fixed
charges consists of interest expense and one-third of operating rental
expense, which management believes is representative of the interest
component of rent expense.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW--THE COMPANY
The Company's business consists of the combined operations of Fountain View
and Summit. At March 31, 1998, the Company operated 50 facilities in
California, Texas and Arizona with approximately 6,600 skilled nursing and
assisted living beds, three institutional pharmacies (one of which is a joint
venture), a contract therapy company, an outpatient therapy clinic and a DME
company.
The Company generates revenues by providing basic healthcare services and
specialty medical care. Basic healthcare services refer to (i) skilled nursing
care which consists of room and board, special nutritional programs, social
services, recreational activities and related medical services, and (ii)
assisted living services which consist of room and board, social activities
and assistance with activities of daily living such as dressing and bathing.
Specialty medical care includes services other than routine skilled nursing
care and are provided to patients who generally require more intensive
treatment and a higher level of acute care. Specialty medical care also
includes sub-acute services such as therapy, pharmacy and durable medical
equipment, which the Company provides to both affiliated and unaffiliated
facilities. Since the services comprising specialty medical care are
reimbursed at higher rates as compared to basic healthcare services, specialty
medical care generally represents the most profitable type of services offered
by the Company. On a pro forma basis for the twelve months ended December 31,
1997, specialty medical revenues represented 55% of total revenues.
The Company provides services to Medicare, Medicaid, managed care and
private pay patients. Government payors, such as state-administered Medicaid
programs, generally provide more restricted coverage and lower reimbursement
rates than private pay and managed care payors. On a pro forma basis for the
twelve months ended December 31, 1997, revenues from Medicare and Medicaid
payors represented 36% and 31% of total revenues, respectively. Management
believes the Company is well-positioned to benefit from the trend toward
increased enrollment in managed care organizations by providing sub-acute
specialty medical care on a cost-effective basis, offering managed care
organizations an attractive alternative to acute hospital care.
On a prospective basis, the Company will operate on a December 31 fiscal
year end. Summit's historical results of operations, which were based on a
June 30 fiscal year end, have not been restated for the purpose of any pro
forma financial presentation of the Company's historical operations.
In July 1997, Fountain View's predecessor, which was comprised of all of
Fountain View's operating units owned individually by certain controlling
stockholders, was merged with and into several companies formed by Fountain
View in connection with the Fountain View Equity Transactions. The Fountain
View Equity Transactions are described in more detail in Note 3 to the audited
financial statements of Fountain View contained elsewhere in this Prospectus.
41
<PAGE>
RESULTS OF OPERATIONS--FOUNTAIN VIEW
The following table presents Fountain View's results of operations for the
three months ended March 31, 1997 and 1998 and the three years ended December
31, 1997:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
------------------------------------------- ---------------------------------
DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
------------------------- ---------------- ------------------- ------------
1995 1996 1997 1997 1998 1995 1996 1997 1997 1998
------- ------- ------- -------- ------- ----- ----- ----- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. $55,836 $59,432 $67,905 16,409 20,078 100.0% 100.0% 100.0% 100.0% 100.0%
Salaries and related
benefits............... 35,048 36,166 38,215 9,435 10,686 62.8 60.9 56.3 57.5 53.2
Other operating costs... 13,454 14,614 17,990 3,556 5,584 24.1 24.5 26.5 21.7 27.8
Rent expense............ 3,946 3,896 3,775 941 983 7.1 6.6 5.5 5.7 4.9
Depreciation and
amortization........... 416 600 1,198 142 524 0.7 1.0 1.8 .9 2.6
Interest, net........... 332 278 1,164 20 851 0.6 0.5 1.7 .1 4.2
------- ------- ------- -------- ------- ----- ----- ----- ----- -----
$53,196 $55,554 $62,342 $ 14,094 $18,628 95.3% 93.5% 91.8% 85.9% 92.7%
------- ------- ------- -------- ------- ----- ----- ----- ----- -----
Income before provision
for income taxes and
extraordinary item..... 2,640 3,878 5,563 2,315 1,450 4.7 6.5 8.2 14.1 7.3
Income tax provision.... (1,079) (1,571) (1,951) 926 580 (1.9) (2.6) (2.9) .06 2.9
Extraordinary Item...... -- -- -- -- 517 -- -- -- -- 2.6
------- ------- ------- -------- ------- ----- ----- ----- ----- -----
Net income.............. $ 1,561 $ 2,307 $ 3,612 1,389 353 2.8% 3.9% 5.3% 14.0% 1.8%
======= ======= ======= ======== ======= ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<S> <C> <C> <C>
OCCUPANCY:
Average Licensed Beds...................................... 1,061 1,061 1,061
Patient Days (in thousands)................................ 341 344 346
Average Occupancy.......................................... 88.1% 88.8% 89.3%
</TABLE>
QUARTER ENDED MARCH 31, 1998 COMPARED TO QUARTER ENDED MARCH 31, 1997 (DOLLARS
IN THOUSANDS)
Net revenue increased $3,669 or 22.4% from $16,409 for the quarter ended
March 31, 1997 to $20,078 for the quarter ended March 31, 1998. The increase
occurred due to the following:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------- -------
<S> <C> <C>
1. Increased census days and revenue rates..................... $ 1,691 46.1%
2. Rehabilitative and other specialty services................. (1,208) (32.9)
3. Acquisition of Summit Care.................................. 3,186 86.8
------- -----
$ 3,669 100.0%
======= =====
</TABLE>
Average occupancy was 86.6% in the first quarter ended March 31, 1998 and
84.9% in the first quarter ended March 31, 1997. Excluding the Summit
acquisition, the average occupancy was 86.4% in the first quarter ended March
31, 1998. The Company's quality mix (total net revenues less Medicaid net
revenues) was 72.0% in the first quarter ended March 31, 1998 and 72.8% in the
first quarter ended March 31, 1997.
42
<PAGE>
Expenses, consisting of salaries and benefits, supplies, purchased services,
provision for doubtful accounts and other expenses as a percent of net
revenues increased from 79.2% of net revenues in the first quarter ended March
31, 1997 to 81.0% in the first quarter ended March 31, 1998. Expenses
increased $3,279 or 25.2% from $12,991 in the first quarter ended March 31,
1997 to $16,270 in the first quarter ended March 31, 1998 for the following
reasons:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------ -------
<S> <C> <C>
1. Salaries and benefits....................................... $ (102) (3.1)%
2. Rehabilitative and other specialty services................. (36) (1.1)
3. Other expenses.............................................. 644 19.6
4. Acquisition of Summit Care.................................. 2,773 84.6
------ -----
$3,279 100.0%
====== =====
</TABLE>
Income before rent, rent to related parties, depreciation and amortization
and interest expense increased $390 or 11.4% from $3,418 in the first quarter
ended March 31, 1997 to $3,808 in the first quarter ended March 31, 1998 and
was 19.0% of net revenues in the first quarter ended March 31, 1998 compared
to 20.8% in the first quarter ended March 31, 1997.
Rent, rent to related parties, depreciation and amortization and interest
expense increased $1,255 or 113.8% from $1,103 in the first quarter ended
March 31, 1997 to $2,358 in the first quarter ended March 31, 1998.
Substantially all of this increase was due to higher depreciation costs
related to renovation expenditures and an increase in interest expense as a
result of the Fountain View Equity Transactions.
The Company's effective tax rate was 40.0% of income in the first quarter
ended March 31, 1998. In the first quarter ended March 31, 1997 the Company
was organized as a Subchapter S Corporation for tax purposes and only recorded
state income taxes. On a proforma basis, the Company has recorded a charge in
lieu of income taxes to arrive at a combined proforma effective tax rate of
40.0%. Net income before the extraordinary item and after the proforma charge
in lieu of income taxes, decreased $519 or 37.4% from $1,389 in the first
quarter ended March 31, 1997 to $870 in the first quarter ended March 31,
1998.
PROFORMA FINANCIAL PERFORMANCE
On a proforma basis (as if the acquisition of Summit occurred on January 1,
1997), the Company's revenues increased from $68.5 million in the first
quarter ended March 31, 1997 to $74.0 million in the first quarter ended March
31, 1998, or 8.0%. The increase in revenues can be attributed to the
following: (1) $2.4 million related to the acquisition of a skilled nursing
facility in Texas on December 1, 1997, (2) $1.5 million related to the fill-up
of new facilities and bed additions completed during the last half of 1997,
(3) $2.7 million related to increased census days and revenue rates, (4) $0.1
million related to the pharmacy operations, and (5) a reduction of $1.2
million related to the therapy operations due to the replacement of certain
established contracts with new contracts, which require additional time to
reach their full potential.
Proforma earnings before interest, taxes, depreciation and amortization
(EBITDA) increased slightly from $8.9 million in the first quarter of 1997 to
$9.0 million in the first quarter of 1998. The EBITDA margin decreased between
periods as increases in revenue were offset by increases in wage and salary
expenses and lower margins at the therapy operations due to the ramp up of its
new contracts.
43
<PAGE>
Selected statistics are shown below:
<TABLE>
<CAPTION>
INCREASE
1998 1997 (DECREASE)
----- ----- -----------
<S> <C> <C> <C>
Facilities in operation at:
March 31.......................................... 50 9 41
Nursing center beds at:
March 31.......................................... 5,937 1,061 4,876
Assisted living beds at:
March 31.......................................... 641 166 475
Total beds at:
March 31.......................................... 6,578 1,227 5,351
Total occupancy:
First quarter..................................... 86.6% 84.9% 1.7%
Nursing center occupancy:
First quarter..................................... 89.4% 89.8% (0.4)%
Assisted living center occupancy:
First quarter..................................... 67.4% 53.7% 13.7%
Percentage of revenues from private, managed care
and Medicare (quality mix):
First quarter..................................... 72.0% 72.8% (0.8)%
Percentage of revenues from Medicaid:
First quarter..................................... 28.0% 27.2% 0.8%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $3,640 in cash and cash equivalents and
working capital of $8,509. During the quarter ended March 31, 1998, the
Company's cash and cash equivalents increased by $1,089.
Net cash provided by operating activities decreased $10,997 from $6,651 of
net cash provided in the first quarter of 1997 to $4,346 net cash used in the
first quarter of 1998. Net cash used by operating activities during the first
quarter ended March 31, 1998 was primarily due to an increase in accounts
receivable.
Long-term debt consisted of mortgage and capital lease indebtedness of
$24,798, a credit facility of $62,730, $17,000 in borrowings on the Company's
bank line of credit and $122,850 in senior secured debt totaling $227,378 at
March 31, 1998.
1997 COMPARED TO 1996 (DOLLARS IN THOUSANDS)
Net revenue increased from $59,432 in 1996 to $67,905 in 1997, an increase
of $8,473 or 14.3%. The increase in net revenue is due in part to growth in
the skilled nursing business, driven by occupancy, improving quality mix, and
the increase in provision of services by Medi-Cal sub-acute units in two
facilities. During 1997, Medi-Cal sub-acute per diem reimbursement rates were
approximately three times higher than Medi-Cal SNF per diem reimbursement
rates. Fountain View's quality mix (percentage of revenues from Medicare,
Medi-Cal sub-acute, managed care, private pay patients and therapy) as a
percentage of total revenues increased from 69.7% in 1996 to 72.9% in 1997.
The increase in net revenue was also attributable to increased revenues
generated by Fountain View's Locomotion Therapy subsidiary.
Expenses consisting of salaries, benefits, supplies, purchased services,
provision for doubtful accounts and other operating costs increased from
$50,780 in 1996 to $56,205 in 1997, an increase
44
<PAGE>
of $5,425 or 10.7%, and as a percentage of net revenue, decreased from 85.4%
in 1996 to 82.8% in 1997. Salary and related benefit expenses increased
primarily as the result of four separate increases in federal and state
minimum wage levels between October 1, 1996 and December 31, 1997 as well as
discretionary employee bonuses paid during 1997. However, salary and related
benefit expenses decreased as a percentage of net revenue from 60.9% in 1996
to 56.3% in 1997, reflecting the revenue benefit of improvement in Fountain
View's quality mix relative to the level of increased salary expenses
associated therewith. Other operating costs increased as the result of the
termination of non-compete agreements and consulting agreements relating to
the Fountain View Equity Transactions totaling $965, $810 (net of ongoing
insurance costs) of settlement costs associated with an employee lawsuit
involving a specific type of liability for which the Company currently
maintains insurance coverage, and $415 of other charges related to the
Fountain View Equity Transactions.
Rent expense, depreciation and amortization and interest expense, net of
interest income, was $6,137 in 1997 compared to $4,774 in 1996, an increase of
$1,363 or 28.6%. The increase was primarily due to increased depreciation
costs related to renovation expenditures during 1996 and 1997 and an increase
in interest expense as a result of the Fountain View Equity Transactions.
Fountain View's pro forma effective tax rate was 40% in both 1996 and 1997.
Prior to the Fountain View Equity Transactions, the entities comprising
Fountain View were owned individually by certain controlling stockholders, and
were primarily formed as S-corporations. The pro forma effective tax rate
represents the estimated taxes had such companies been taxed as C-
corporations.
1996 COMPARED TO 1995 (DOLLARS IN THOUSANDS)
Net revenue increased from $55,836 in 1995 to $59,432 in 1996, an increase
of $3,596 or 6.4%. The increase in net revenue relates primarily to revenues
generated by Medi-Cal sub-acute units established in two facilities and a
transitional care unit opened in one facility during 1996. Net revenue also
increased as the result of higher revenues from managed care patients, which
are typically reimbursed at higher rates than Fountain View's private or
Medicaid patients.
Expenses consisting of salaries, benefits, supplies, purchased services,
provision for doubtful accounts and other expenses increased from $48,502 in
1995 to $50,780 in 1996, an increase of $2,278 or 4.7%. However, salary and
related benefit expenses decreased from 62.8% in 1995 to 60.9% in 1996 as a
percentage of net revenue, reflecting the benefit of an increase in revenues
from managed care patients relative to the level of increased salary expenses
associated therewith.
Rent expense, depreciation and amortization and interest expense, net of
interest income, was $4,774 in 1996 compared to $4,694 in 1995, an increase of
$80 or 1.7%.
Fountain View's pro forma effective tax rate was 40% in both 1995 and 1996.
Prior to the Fountain View Equity Transactions, the entities comprising
Fountain View were owned individually by certain controlling stockholders and
were primarily formed as S-corporations. The pro forma effective tax rate
represents the estimated taxes had such companies been taxed as C-
corporations.
HISTORIC LIQUIDITY AND CAPITAL RESOURCES (DOLLARS IN THOUSANDS)
Cash and cash equivalents were $2,551 as of December 31, 1997, and working
capital was $10,021. This compares to cash and cash equivalents of $1,161 and
working capital of $13,566 as of December 31, 1996. Working capital declined
primarily as a result of the Fountain View Equity Transactions and payment of
a $43,700 distribution to certain controlling stockholders in August 1997.
Proceeds of $14,000 from an investment by Heritage and $32,500 in bank
borrowings financed the $43,700 distribution and payment of related
transaction costs.
45
<PAGE>
Cash generated from operating activities increased to $12,739 in 1997
compared to $1,059 in 1996 and $5,832 in 1995. The increased level of cash
from operating activities in 1997 as compared to 1996 reflects differences in
the timing of receiving payments on accounts receivable, primarily managed
care and Medicare balances. Receivables increased by $3,757 in 1996, and
decreased by $2,908 in 1997. The combination of the increase in receivables in
1996 and decrease in 1997 resulted in a variance of $6,665 in cash from
operations between such periods. In addition, accounts payable and accrued
expenses increased by $2,772 in 1997 compared to an increase in 1996 of $421.
In 1997, $2,570 of cash was used for the acquisition of leasehold
improvements and purchases of equipment compared to $1,816 and $665 used in
1996 and 1995, respectively, for the acquisition of leaseholds and equipment.
Cash used in financing activities was $7,604 in 1997 compared to $438 in
1996 and $3,159 in 1995. In 1997, $32,500 of new bank borrowings and $14,000
of proceeds from an investment by Heritage were used to repay $6,065 in bank
borrowings and $48,118 in total distributions to certain stockholders
inclusive of the $43,700 distribution made in connection with the Fountain
View Equity Transactions.
RESULTS OF OPERATIONS--SUMMIT
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996 (DOLLARS IN THOUSANDS)
Net revenues increased $13,419 or 14.1% from $95,088 for the six months
ended December 31, 1996 to $108,507 for the six months ended December 31,
1997. The increase occurred due to the following:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------- -------
<S> <C> <C>
1. Increased census days and revenue rates.................. $ 4,874 36.3%
2. Special charge to Medicare revenues...................... 4,000 29.8
3. New beds opened in fiscal years 1997 and 1998............ 3,973 29.6
4. Pharmacy operations...................................... 1,406 10.5
5. Rehabilitative and other specialty services.............. (834) (6.2)
------- -----
$13,419 100.0%
======= =====
</TABLE>
In December 1996, Summit recorded a special charge of $4,000 against
Medicare revenues as a result of adjustments proposed by Medicare in
connection with an audit of fiscal 1995, which would have an effect on
revenues for that fiscal year, fiscal 1996 and the six months ended December
31, 1996. Average occupancy was 87.2% in the six months ended December 31,
1997 and 84.0% in the six months ended December 31, 1996. Excluding newly
constructed beds, the average occupancy was 90.3% in the six months ended
December 31, 1997 and 85.9% in the six months ended December 31, 1996.
Summit's quality mix (revenues from Medicare, managed care and private pay
patients, including pharmacy revenue) as a percentage of gross revenues was
68.3% in the six months ended December 31, 1997 and 69.6% in the six months
ended December 31, 1996.
Expenses, consisting of salaries and benefits, supplies, purchased services,
provision for doubtful accounts and other expenses as a percent of net
revenues, before the effect of the special charge, increased from 85.9% of net
revenues in the six months ended December 31, 1996 to 86.1% in the six months
ended December 31, 1997. Total salaries and employee related benefits were
44.0% of net revenues in the six months ended December 31, 1997 compared to
43.8% of net revenues, before the effect of the special charge, in the six
months ended December 31, 1996.
46
<PAGE>
Expenses increased $8,342 or 9.8% from $85,136 in the six months ended
December 31, 1996 to $93,478 in the six months ended December 31, 1997 for the
following reasons:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------ -------
<C> <S> <C> <C>
1. Expenses relating to new beds opened in fiscal years
1997 and 1998.......................................... $3,232 38.7%
2. Salaries and benefits................................... 2,776 33.3
3. Other expenses.......................................... 1,540 18.5
4. Rehabilitative and other specialty services............. 794 9.5
------ -----
$8,342 100.0%
====== =====
</TABLE>
Income before rental, depreciation and amortization and interest expense,
net of interest income, increased $5,077 or 51.0% from $9,952 in the six
months ended December 31, 1996 to $15,029 in the six months ended December 31,
1997 and was 13.9% of net revenues in the six months ended December 31, 1997
compared to 10.5% in the six months ended December 31, 1996 (and 14.1% of net
revenues before the special charge to revenues).
Rent, depreciation and amortization and interest expense, net of interest
income, increased by $1,249 or 13.7% from $9,099 in the six months ended
December 31, 1996 to $10,348 in the six months ended December 31, 1997.
Substantially all of this increase was due to interest expense related to
higher debt and depreciation expense related to capital additions.
Summit's effective tax rate was 39.5% of income in the six months ended
December 31, 1997 and in the six months ended December 31, 1996. Net income
increased $2,316 from $516 in the six months ended December 31, 1996 to $2,832
in the six months ended December 31, 1997. The net income of $516 for the six
months ended December 31, 1996 included $2,420 for the special charge
described earlier. Net income before the special charge, decreased $104 or
3.5% from $2,936 in the six months ended December 31, 1996 to $2,832 in the
six months ended December 31, 1997.
1997 COMPARED TO 1996 (DOLLARS IN THOUSANDS)
Net revenues increased $21,865 or 12.4% from $176,062 in fiscal 1996 to
$197,927 in fiscal 1997. The increase occurred due to the following:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------- -------
<S> <C> <C>
1. Rehabilitative and other specialty services.............. $ 7,553 34.6%
2. New beds opened in fiscal years 1996 and 1997............ 12,450 56.9
3. Increased census days and revenue rates.................. 5,647 25.8
4. Pharmacy operations...................................... 2,315 10.6
5. Special charge to Medicare revenue....................... (6,100) (27.9)
------- -----
$21,865 100.0%
======= =====
</TABLE>
The special charge to Medicare revenues reflects the result of adjustments
proposed by Medicare in connection with an audit of fiscal 1995, which would
have an effect on revenues for that fiscal year, fiscal 1996 and fiscal 1997.
Average occupancy was 84.8% in the fiscal year ended June 30, 1997 compared to
85.9% in the fiscal year ended June 30, 1996. Excluding newly constructed
beds, the average occupancy was 87.0% in the fiscal year ended June 30, 1997
and 86.4% in the fiscal year ended June 30, 1996. Summit's quality mix
(revenues from Medicare, managed care and private pay patients, including
pharmacy revenue) patients as a percentage of gross revenues was 69.6% in the
fiscal year ended June 30, 1997 and 66.6% in the fiscal year ended June 30,
1996.
Expenses, consisting of salaries and benefits, supplies, purchased services,
provision for doubtful accounts and other expenses as a percent of net
revenues, before the effect of the special charge,
47
<PAGE>
increased from 84.6% of net revenues in the fiscal year ended June 30, 1996 to
88.0% in the fiscal year ended June 30, 1997. Total salaries and employee
related benefits were 43.9% of net revenues, before the effect of the special
charge, in the fiscal year ended June 30, 1997 compared to 44.4% of net
revenues in the fiscal year ended June 30, 1996. Purchases of rehabilitative
and other specialty services were 25.3% of net revenues, before the effect of
the special charge, in the fiscal year ended June 30, 1997 compared to 21.6%
of net revenues in the fiscal year ended June 30, 1996. Expenses increased
$30,580 or 20.5% from $148,929 in the fiscal year ended June 30, 1996 to $179,
509 in the fiscal year ended June 30, 1997 for the following reasons:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------- -------
<C> <S> <C> <C>
1. Rehabilitative and other specialty services............ $ 8,680 28.4%
2. Expenses relating to new beds opened in fiscal years
1996 and 1997......................................... 11,529 37.7
3. Salaries and benefits.................................. 6,612 21.6
4. Other expenses......................................... 3,759 12.3
------- -----
$30,580 100.0%
======= =====
</TABLE>
Income before rental, depreciation and amortization and interest expense,
net of interest income, decreased $8,715 or 32.1% from $27,133 in the fiscal
year ended June 30, 1996 to $18,418 in the fiscal year ended June 30, 1997 and
was 9.3% of net revenues in the fiscal year ended June 30, 1997 (and 12.0% of
net revenues before the special charge to revenues) compared to 15.4% in the
fiscal year ended June 30, 1996.
Rental, depreciation and amortization and interest expense, net of interest
income, increased by $2,858 or 18.6% from $15,372 in the fiscal year ended
June 30, 1996 to $18,230 in the fiscal year ended June 30, 1997. The increase
was primarily due to depreciation of additions to property and equipment and
interest expense related to higher long-term debt.
Summit's effective tax rate was 63.3% of income in the fiscal year ended
June 30, 1997 compared to 37.9% of income in the fiscal year ended June 30,
1996. The increase in the effective tax rate was primarily due to certain
permanent differences between book income and taxable income. Net income was
$69 for the fiscal year ended June 30, 1997, a decrease of $7,240 or 99.1%
from $7,309 for the fiscal year ended June 30, 1996.
1996 COMPARED TO 1995 (DOLLARS IN THOUSANDS)
Net revenues increased $39,036 or 28.5% from $137,026 in fiscal 1995 to
$176,062 in the fiscal year 1996. The increase occurred due to the following:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------- -------
<S> <C> <C>
1. Acquisitions in fiscal year 1995.......................... $13,228 33.9%
2. Rehabilitative and other specialty services............... 11,527 29.5
3. Increased census days and revenue rates................... 8,017 20.5
4. New beds opened in fiscal years 1995 and 1996............. 3,614 9.3
5. Pharmacy operations....................................... 2,650 6.8
------- -----
$39,036 100.0%
======= =====
</TABLE>
Average occupancy was 85.9% in the fiscal years ended June 30, 1996 and
1995, and new beds were opened in both fiscal years. Excluding acquisitions
and newly constructed beds, the average occupancy was 88.4% in the fiscal year
ended June 30, 1996 and 89.0% in the fiscal year ended June 30, 1995. Summit's
quality mix (revenues from Medicare, managed care and private pay patients,
including pharmacy revenue) as a percentage of gross revenues was 66.6% in the
fiscal year ended June 30, 1996 and 63.3% in the fiscal year ended June 30,
1995.
48
<PAGE>
Expenses, consisting of salaries and benefits, supplies, purchased
services, provision for doubtful accounts and other as a percent of net
revenues increased from 82.0% of net revenues in the fiscal year ended June
30, 1995 to 84.6% in the fiscal year ended June 30, 1996. Total salaries and
employee related benefits were 44.4% of net revenues in the fiscal year ended
June 30, 1996 compared to 46.1% of net revenues in the fiscal year ended June
30, 1995. Expenses increased $36,552 or 32.5% from $112,377 in the fiscal year
ended June 30, 1995 to $148,929 in the fiscal year ended June 30, 1996 for the
following reasons:
<TABLE>
<CAPTION>
AMOUNT PERCENT
------- -------
<C> <S> <C> <C>
1. Rehabilitative and other specialty services............ $10,906 29.8%
2. Acquisitions in fiscal year 1995....................... 10,454 28.6
3. Salaries and benefits.................................. 7,592 20.8
4. Expenses relating to new beds opened in fiscal years
1995 and 1996......................................... 3,202 8.8
5. Other expenses......................................... 4,398 12.0
------- -----
$36,552 100.0%
======= =====
</TABLE>
Income before rental, depreciation and amortization and interest expense,
net of interest income, increased $2,484 or 10.1% from $24,649 in the fiscal
year ended June 30, 1995 to $27,133 in the fiscal year ended June 30, 1996 and
was 15.4% of net revenues in the fiscal year ended June 30, 1996 compared to
18.0% in the fiscal year ended June 30, 1995.
Rental, depreciation and amortization and interest expense, net of interest
income, increased by $3,221 or 26.5% from $12,151 in the fiscal year ended
June 30, 1995 to $15,372 in the fiscal year ended June 30, 1996. Substantially
all of this increase was due to depreciation and amortization, rent and
interest expense related to acquisitions and newly constructed beds in fiscal
years 1995 and 1996.
Summit's effective tax rate was 37.9% of income in the fiscal year ended
June 30, 1996 and 39.9% of income in the fiscal year ended June 30, 1995. Net
income after taxes decreased $202 or 2.7% from $7,511 in the fiscal year ended
June 30, 1995 to $7,309 in the fiscal year ended June 30, 1996.
HISTORIC LIQUIDITY AND CAPITAL RESOURCES (DOLLARS IN THOUSANDS)
At June 30, 1997, Summit had $3,994 in cash and cash equivalents and working
capital of $12,648. For the fiscal year ended June 30, 1997, Summit's cash and
cash equivalents increased by $1,336 over the prior year.
Net cash provided by operating activities increased $11,149 from $6,866 for
the fiscal year ended June 30, 1996 to $18,015 for the fiscal year ended June
30, 1997. Net cash provided by operating activities, plus proceeds of $15,000
in new long-term debt (see description below) were used principally for
capital expenditures of $24,075 for new and existing centers, the net
reduction of loans outstanding on the line of credit of $1,000, the purchase
of a lease option for $2,022, and the acquisition of a 50% interest in an
institutional pharmacy for $1,565.
Accounts receivable, less allowance for doubtful accounts, increased $5,819
due to increased total revenues in the fiscal year ended June 30, 1997
compared to the prior year, primarily in Medicare and managed care revenues.
At June 30, 1997, Summit's average accounts receivable days outstanding were
41, compared to 39 at June 30, 1996.
For the fiscal year ended June 30, 1997, Summit added $24,075 to its
property and equipment. These additions were primarily for the completion of a
210-bed SNF in Fort Worth, Texas, at a cost of
49
<PAGE>
$2,300, construction of a 66-bed ALF in Orange, California, at a cost of
$3,525, and the renovation of buildings and replacement of furniture and
equipment at the remaining centers and the pharmacies, at a cost of $18,250.
These additions to property and equipment were primarily financed with funds
from $15,000 of Senior Secured Notes issued in July 1996 and with cash
generated from operations. The $15,000 funding represents the second and last
issuance of the $70,000 Senior Secured Notes. The initial funding of $55,000
occurred in December 1995.
Summit believes that it has sufficient cash flow from its existing
operations and from its bank line of credit to service long-term debt due
within one year of $6,997 (Summit intends to borrow this amount against its
bank line of credit which has a revolver extending to September 30, 1998
followed by a three-year payment period), to make normal recurring capital
replacements, additions and improvements to existing centers of approximately
$9,100 planned for the next twelve months, to develop properties costing
approximately $3,000 over the next twelve months, to purchase a 111-bed center
for $1,871 in accordance with a purchase option in a lease and to meet other
long-term working capital needs and obligations. The loans outstanding on the
line of credit at June 30, 1997 were $5,000. Summit expects, on a selective
basis, to pursue expansion of its existing centers and the acquisition or
development of additional centers in markets where demographics and
competitive factors are favorable.
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY FOLLOWING THE TRANSACTIONS
(DOLLARS IN THOUSANDS)
Interest payments on the Notes and any borrowings under the New Credit
Facility will represent significant liquidity requirements for the Company.
Any future borrowings under the New Credit Facility will bear interest at
floating rates and will require interest payments on varying dates depending
on the interest rate option selected by the Company. See "Description of Other
Indebtedness--New Credit Facility".
The Company's remaining liquidity demands will be primarily for capital
expenditures and working capital needs. The Company expects to spend
approximately $4.5 million on capital projects in 1998, with approximately
$4.0 million of that amount representing maintenance-related capital
expenditures. The Company currently expects to spend a similar amount on
capital expenditures in fiscal 1999. The New Credit Facility and the Indenture
will impose restrictions on the Company's investments.
The Company's primary sources of liquidity are expected to be cash flows
from operations and borrowings under the New Credit Facility. See "Description
of Other Indebtedness--New Credit Facility". Approximately $15.0 million is
available to be drawn by the Company under the New Credit Facility. In
addition, the Company has approximately $15.0 million in revolving credit
loans and $85.0 million in term loans outstanding under the New Credit
Facility. See "Description of Other Indebtedness--New Credit Facility".
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures
and any acquisitions will depend on its future performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of operations and anticipated cost savings and revenue
growth, management believes that cash flow from operations and available cash,
together with available borrowings under the New Credit Facility, will be
adequate to meet the Company's future liquidity needs for at least the next
several years. The Company may, however, need to refinance all or a portion of
the principal of the Notes on or prior to maturity. There can be no assurance
that the Company's business will generate sufficient cash flow from
operations, that
50
<PAGE>
anticipated revenue growth and operating improvements will be realized or that
future borrowings will be available under the New Credit Facility in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or to fund its other liquidity needs. In addition, there can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Risk Factors".
51
<PAGE>
BUSINESS
THE COMPANY
The Company is a leading operator of long-term care facilities and a leading
provider of a full continuum of post-acute care services, with a strategic
emphasis on sub-acute specialty medical care. The Company operates a network
of facilities in California, Texas and Arizona, including 44 SNFs that offer
sub-acute, rehabilitative and specialty medical skilled nursing care, as well
as six ALFs that provide room and board and social services in a secure
environment. In addition to long-term care, the Company provides a variety of
high-quality ancillary services such as physical, occupational and speech
therapy in Company-operated facilities, unaffiliated facilities and acute care
hospitals. The Company also operates three institutional pharmacies (one of
which is a joint venture), which service acute care hospitals as well as SNFs
and ALFs both affiliated and unaffiliated with the Company, an outpatient
therapy clinic and a DME company. The Company operates 50 facilities with
approximately 6,600 beds serving Medicare, Medicaid, managed care, private pay
and other patients.
Both Fountain View and Summit have demonstrated records of revenue growth,
increasing average census (occupancy) levels and improvements in quality mix
(defined as non-Medicaid revenues). During the five fiscal years ended 1997,
revenues for Fountain View and Summit increased at compound annual growth
rates of 13.1% and 27.1%, respectively. During the same period, average census
levels at Fountain View facilities increased from 87.0% to 89.3%, quality mix
increased from 58.4% to 72.9% and net income increased from $2.4 million to
$5.2 million. Average census levels at Summit facilities (excluding three
facilities which commenced operations or were renovated in 1996 or later)
increased from 87.2% for the year ended June 30, 1993 to 88.7% for the six
months ended December 31, 1997, quality mix increased from 64.8% to 69.6%
during the four fiscal years ended 1997 and net income was $5.0 million for
the year ended June 30, 1993 and $2.8 million for the six months ended
December 31, 1997. Pro forma for the Transactions, the Company would have had
revenues of $74.0 million, an average census level of 88.6% (excluding three
Summit facilities which commenced operations or were renovated in 1996 or
later), a quality mix of 67.2% and a net loss of $953,000 for the three months
ended March 31, 1998.
Management believes that the Company's strong operating performance has been
supported by the Company's ability to (i) provide high-quality, high-acuity
care, (ii) utilize an efficient cost structure, (iii) operate a network of
attractive, modern facilities, (iv) maintain a leading market position and
(v) capitalize on the extensive experience of its management.
The Company intends to pursue a strategy of further increasing its revenues
and profitability by capitalizing on the relative strengths of Fountain View
and Summit. In implementing its strategy, the Company expects to (i) further
increase the proportion of revenues derived from high-acuity specialty medical
services, (ii) broaden the implementation of its cost-effective operating
model, (iii) expand its ancillary services businesses, (iv) pursue controlled
expansion through construction and acquisition-related growth, and (v)
capitalize on benefits derived from the Transactions.
COMPANY HISTORY
Fountain View was founded in 1964 and originally operated two nursing homes
in Los Angeles, California. Fountain View has expanded the size and scope of
its core long-term care business by acquiring facilities and by introducing
ancillary services to existing operations. Since 1982, the business has grown
from two facilities to nine, with each facility providing a broad array of
specialty medical care. Fountain View was one of the first operators of long-
term care facilities to receive a contract with Medi-Cal to provide sub-acute
care and currently has 36 beds in two facilities dedicated to providing Medi-
Cal patients with sub-acute services (which are eligible for significantly
higher per diem reimbursement rates than standard Medi-Cal per diem
reimbursement rates). Fountain View's
52
<PAGE>
nine facilities have a total of 1,227 beds, of which 1,061 are dedicated to
serving skilled nursing patients and 166 of which comprise an ALF. Each of
Fountain View's facilities is located in close proximity to a hospital,
facilitating patient referrals. Many of Fountain View's skilled nursing
patients have been discharged from acute care hospitals and require medically
complex treatments. Fountain View has placed strategic emphasis on providing
higher-acuity care while simultaneously developing a cost-effective operating
model. Fountain View, through Locomotion Therapy, also provides physical,
occupational and speech therapy to unaffiliated nursing homes and acute care
hospitals as well as several Fountain View facilities. Fountain View also owns
an outpatient therapy clinic company and a DME business.
Summit was incorporated in 1981 as a wholly-owned subsidiary of Summit
Health Ltd., an operator of acute care hospitals. Summit provides diversified
nursing, specialty medical and sub-acute care at 36 owned or leased SNFs as
well as assisted living services at five ALFs located in California, Texas and
Arizona. Summit currently operates 36 SNFs with a total of 4,872 beds. Within
its SNFs, Summit has established separate units for specialty medical and sub-
acute care dedicated to patients requiring complex services such as
chemotherapy, pulmonary and cardiac care, wound care, respiratory therapy and
intensive physical, occupational and speech therapies. Summit also operates
five ALFs with a total of 475 beds which include certain beds designated as
specialty beds, primarily for early-stage Alzheimer's residents. Summit also
operates two institutional pharmacies in Southern California and owns a 50%
interest in a pharmacy in Texas through a joint venture. The pharmacies
provide pharmaceutical products and services to all of Summit's facilities as
well as to unaffiliated SNFs, ALFs and acute care hospitals in Southern
California and Texas, including certain Fountain View facilities.
INDUSTRY
In 1997, nursing home spending was approximately $85 billion and is expected
to reach more than $100 billion by the year 2000, representing an average
annual increase of approximately 6.1%. Demand for long-term care facilities is
expected to continue to increase substantially as the result of cost
containment initiatives, demographic and social trends as well as industry
consolidation.
COST CONTAINMENT INITIATIVES. During the past several years, Medicare
managed care enrollment has grown to more than 14% nationwide. The trend
toward managed care in the Medicare population is particularly evident in
California, where approximately 35% of Medicare enrollees were participating
in a managed care program during 1996. Cost containment initiatives developed
by managed care plans have contributed to shorter hospital stays for acute
care patients. Because acute care patients often still require medically
complex treatments following discharge from a hospital, management believes
that SNFs will experience increased demand for high-acuity services, which are
typically eligible for higher reimbursement rates. In addition, management
believes that certain SNFs will further develop the ability to offer
attractive rates to third-party payors for high-acuity specialty medical
services primarily as the result of the significantly lower overhead costs
generated by SNFs relative to acute care hospitals and hospital-based SNFs.
Labor costs are also generally lower in SNFs than in hospitals, which
typically have higher staffing ratios, higher salary structures, and
significantly more administrative personnel, including nursing staff resources
not fully dedicated to providing care.
DEMOGRAPHIC TRENDS. Demand for long-term care services rises meaningfully
among persons over the age of 75, an age group that has been growing and is
projected to continue growing significantly faster than the overall population
according to the United States Bureau of the Census. This increase in the
elderly portion of the population reflects, among other things, improvements
in medical technology, disease prevention, nutrition and overall health
maintenance. The segment of the population over 85 years of age, which
comprises the largest percentage of long-term care residents, is the fastest-
growing segment of the population and is projected to increase by more than
19.4% from approximately 3.6 million or 1.4% of the domestic population in
1995 to approximately 4.3 million or
53
<PAGE>
1.6% of the domestic population in the year 2000. By 2010, the population of
this segment is expected to be approximately 5.7 million, representing more
than a 58% increase from 1995.
SOCIAL TRENDS. Two-income families often experience significant challenges
in providing home care for elderly relatives. Management believes that ALFs
will continue to experience increased demand as working families seek
attractive alternatives to home care for the elderly. Additionally, management
believes demand for higher-acuity services in long-term care facilities has
contributed to the perception of SNFs as an increasingly attractive
alternative to a wide range of potential patients.
INDUSTRY CONSOLIDATION. Currently, approximately 1.7 million people receive
care in approximately 17,000 long-term care facilities in the United States.
Market share data indicates that the industry is highly fragmented, with the
30 largest operators accounting for less than 25% of total beds. Management
believes that consolidation initiatives by industry participants have been
structured to achieve economies of scale and to create networks of facilities
that can be effectively marketed to managed care organizations. As a result,
management expects that consolidation will continue among smaller local
operators which lack sophisticated management information systems, high-acuity
services necessary to remain attractive to acute patients and the ability to
maintain strict compliance with complex regulations which govern the long-term
care industry.
COMPANY STRENGTHS
ABILITY TO PROVIDE HIGH-QUALITY AND HIGH-ACUITY CARE. Management believes
that the Company's strong operating performance has been supported by the
Company's ability to provide a broad range of high-quality, high-acuity
services which are generally more profitable than routine healthcare services.
Pro forma for the Transactions, revenues from sub-acute and specialty medical
care would have represented 55% of the Company's total revenues for the year
ended December 31, 1997. The Company currently serves Medicare, Medicaid,
managed care, private pay and other patients by providing a continuum of sub-
acute and specialty medical care, which consists of ventilator services,
tracheotomy care, multiple intravenous therapy, chemotherapy,
enteral/parenteral nutrition, end-stage renal disease care, blood
transfusions, dialysis, wound care, rehabilitation services, pharmacy services
and the provision of durable medical equipment. In addition, both Fountain
View and Summit have responded to the increased demand for Alzheimer's care by
broadening their specialty medical care to include Alzheimer's units in a
total of 21 facilities.
Management believes that the Company's facilities provide services similar
to those provided in acute care hospitals for approximately 40% to 60% of the
costs generated by acute care hospitals in providing such services. As a
result, management believes the Company will increase revenues by continuing
to attract managed care payors and is well-positioned to benefit from growing
managed care enrollment levels.
EFFICIENT OPERATOR AND COST-EFFECTIVE PROVIDER. Management believes it has
developed significant expertise in delivering high-quality, high-acuity care
through the implementation of an efficient and cost-effective operating model.
Developed within the Fountain View network of facilities, management believes
this model has produced high levels of efficiency and facility-level EBITDAR
through the application of specific operating initiatives. EBITDAR is not a
measurement of operating performance computed in accordance with generally
accepted accounting principles and should not be considered as a substitute
for operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in conformity with
generally accepted accounting principles, or as a measure of profitability or
liquidity. Similar to EBITDA, management views EBITDAR as a financial
indicator of a company's ability to service or incur debt. A majority of
Fountain View's nursing homes are lease, under operating leases, and not
owned. Accordingly, EBITDAR is used since the rent expense approximates the
interest and depreciation expense Fountain View may have
54
<PAGE>
incurred as if the nursing homes were owned as opposed to leased. Management
intends to expand its cost-effective operating model to maximize profitability
and the quality of care provided across the Company's entire facility network.
ATTRACTIVE, MODERN FACILITY NETWORK. Management believes the Company's
facilities are in excellent aesthetic and operational condition as the result
of recent comprehensive construction and renovation initiatives. Summit has
expended more than $180 million over the past five years constructing,
acquiring, expanding and upgrading facilities, and Fountain View has spent
more than $4 million on facility improvements during the past two years.
Approximately 80% of the Company's
facilities were either constructed or renovated within the past three years.
Management believes the Company's attractive and modern facility network will
continue to support high average census and quality mix levels. In addition,
management believes that the Company's recent construction and renovation
initiatives will facilitate improvements in operating efficiency and
reductions in maintenance capital expenditure levels. The Company owns 56% of
its facilities (representing 70% of its beds) and holds options to purchase an
additional 10% of its facilities, providing the Company with an attractive
asset base, enhanced credit quality and increased financial flexibility.
LEADING MARKET POSITION. Management believes the Company will operate as a
leading provider of long-term and specialty medical care in several Southern
California and Texas markets. The Company's Southern California facilities are
strategically located in geographically clustered networks which management
believes are particularly attractive to managed care organizations. Management
believes the Company is well-positioned to benefit from California's rapidly
increasing managed care enrollment levels, which included 35% of Medicare
enrollees during 1996 as compared to a nationwide enrollment level of 14% as
of July 1997. The Company also expects that the increased density of its
Southern California market presence as a result of the Transactions will
result in heightened brand awareness, expanded referral networks, operating
and administrative economies of scale as well as improved purchasing
economies.
In addition to the Company's geographically clustered networks in Southern
California, the Company operates a broad network of facilities in small to
mid-size markets in Texas. Management believes the Company's Texas facilities
are located in several demographically attractive markets and are generally
characterized by leading market positions. In addition to the Company's strong
local market presence in both Southern California and Texas, management
believes the Company will be subject to a relatively low level of direct
competition from any single large competitor due to the considerable
fragmentation which characterizes the Company's markets.
STRONG MANAGEMENT TEAM. Mr. Scott, the Chairman of the Company, and Mr.
Snukal, the Chief Executive Officer of the Company, together have more than 43
years of senior management experience in the long-term care industry in
Southern California and Texas. Mr. Scott has supervised significant expansion
in the number of Summit's facilities and services through strategic
acquisitions and construction. Mr. Snukal has demonstrated expertise in
developing Fountain View's ability to provide specialty medical and sub-acute
care in a cost-effective manner, and achieving strong facility-level operating
and financial performance. Both Mr. Scott and Mr. Snukal will maintain
significant involvement in the daily operations of the Company and have made
significant equity contributions to the Company in connection with the
Transactions. See "Prospectus Summary--The Transactions".
BUSINESS STRATEGY
FURTHER INCREASE PROPORTION OF REVENUES DERIVED FROM SPECIALTY MEDICAL
CARE. The Company intends to leverage its existing specialty medical
infrastructure, further increasing the proportion of total revenues derived
from specialty medical care. On a pro forma basis for the twelve months ended
December 31, 1997, specialty medical revenues represented 55% of total
revenues. Services comprising specialty medical care generally represent the
most profitable types of services
55
<PAGE>
offered by long-term care providers since such services are reimbursed at
higher rates than routine skilled nursing care and basic assisted living
services. As a result of the trend toward shorter hospital stays by patients
who require medically complex treatments and in order to deliver the highest
quality care possible to its residents, the Company has developed significant
expertise and experience caring for high-acuity patients. The Company's
ability to provide high-acuity specialty medical and sub-acute care in its own
facilities generates substantial revenue for the Company and benefits managed
care payors by reducing hospital costs and by eliminating costs incurred by
transferring patients to acute care hospitals to receive specialty medical
care.
BROADEN IMPLEMENTATION OF COST-EFFECTIVE OPERATING MODEL. Management intends
to expand the Company's cost-effective operating model to maximize
profitability and the quality of care provided across the Company's
facilities. Management believes that expanded implementation of a well-
designed and well-monitored operating model will enhance the quality and
consistency of care delivered and improve profitability by simplifying
procedures for administering care.
EXPAND ANCILLARY SERVICES. The Company intends to increase the penetration
of its therapy and pharmacy businesses within both affiliated and unaffiliated
facilities. Ancillary services generally have produced higher revenues and
profitability than routine long-term care services. The Company currently
provides rehabilitative physical, occupational and speech therapy through
Locomotion Therapy. Locomotion Therapy generated $19.7 million of revenues for
the year ended December 31, 1997, providing services to unaffiliated nursing
homes and acute care hospitals under 97 contracts and to eight Fountain View
facilities. Management expects Locomotion Therapy to expand its provision of
services to Summit facilities, which purchased approximately $34 million of
therapy services from nonaffiliates during fiscal 1997. The Company also
intends to pursue increased "bundling" of ancillary services, offering a
unique package of rehabilitative and pharmacy services to unaffiliated
facilities in a cost-efficient manner. In addition to providing ancillary
therapy services, the Company operates three institutional pharmacies (one of
which is a joint venture), a DME company and an outpatient therapy clinic
through its subsidiary, On-Track. Several of Summit's facilities have
existing, unoccupied space allocated to outpatient therapy services which the
Company expects to utilize for the expansion of services provided by On-Track.
PURSUE CONTROLLED EXPANSION THROUGH CONSTRUCTION AND ACQUISITION-RELATED
GROWTH. The Company intends to acquire and construct facilities selectively in
strategic locations which will facilitate operating efficiencies through
economies of scale, will generate marketing synergies through further
expansion of relationships and contracts with hospitals, physicians and
physician groups and will lead to reduced overhead expenditures. The Company
expects to acquire or construct new beds and facilities in a cost-effective
manner, including expansion initiatives which utilize real estate currently
owned by the Company. The Company currently owns properties adjacent to
several facility locations which management believes can support the
construction of approximately 1,400 additional beds at reduced cost levels
relative to the expense associated with acquisition and development of new
real estate.
CAPITALIZE ON BENEFITS DERIVED FROM THE TRANSACTIONS. As a result of the
Transactions, management believes the Company will be able to realize
significant cost savings. As a result of the Company's contiguous geographic
locations in several Southern California markets, management intends to
eliminate specifically identified corporate expenses and leverage
administrative resources across facilities. Management believes the Company
will be able to reduce its cost of food, sanitary and medical supplies as a
result of improved purchasing power and expects the Company to realize
marketing and referral benefits as a result of the increased geographic
density of the Company's clustered facilities. In addition, the Company
expects to expand its provision of services through Locomotion Therapy to
Summit facilities, which purchased approximately $34 million of therapy
services from nonaffiliates during 1997.
56
<PAGE>
SERVICES
BASIC HEALTHCARE SERVICES
Basic healthcare services refer to skilled nursing care and assisted living
services. The Company provides skilled nursing care in each of Fountain View's
eight SNFs and in each of Summit's 36 SNFs (which collectively have 5,933
beds). Skilled nursing care consists of 24-hour care by registered nurses,
licensed practical or vocational nurses and certified aides, as well as room
and board, special nutritional programs, social services, recreational
activities and related medical and other services that may be prescribed by a
physician. Assisted living services include general services provided by
Fountain View in its ALF and by Summit in its five ALFs, all of which are
located in California and which collectively have 641 beds. These services
consist of basic room and board, social activities and assistance with
activities of daily living such as dressing and bathing.
SPECIALTY MEDICAL CARE
The Company provides specialty medical care, including a wide range of sub-
acute services, to patients with medically complex needs who generally require
more intensive treatment and a higher level of skilled nursing care. These
services represent an area of strategic emphasis for the Company and typically
generate higher profit margins than basic healthcare services.
SUB-ACUTE CARE. The Company provides a wide range of sub-acute services
to patients with medically complex needs, including the following:
COMPLEX MEDICAL CARE. The Company provides complex medical care to
those patients who require a combination of medical treatments. Complex
medical needs often include the administration of intravenous
medications for various conditions, such as fluids for hydration,
diuretics for congestive heart failure, antibiotics for the treatment
of infection, anti-coagulants to prevent clotting or pain control for
cancer patients. Patients requiring complex medical care have typically
undergone surgical procedures ranging from common joint replacements to
organ transplants, and require close monitoring.
MULTIPLE INTRAVENOUS MEDICATIONS. A variety of intravenous
medications are administered to patients through several types of
veinous access. The Company's licensed nurses are intravenous therapy
certified and skilled in initiating and handling central and peripheral
lines for intravenous medications.
BLOOD TRANSFUSIONS. The Company provides blood transfusions to post-
surgical patients with severe and unresolved anemia. Blood products for
transfusion are obtained through a contract with the American Red
Cross.
CHEMOTHERAPY. The Company provides chemotherapy to patients in
accordance with instructions by attending hematologists/oncologists for
the treatment of various cancers. Chemotherapy requires strict and
careful handling of highly toxic chemotherapy agents.
DIALYSIS. Peritoneal dialysis is typically provided to younger
patients who can perform their own dialysis treatments, utilizing
specialized solutions which are introduced through a peritoneal cavity
port. Whenever possible, patients are taught to perform the procedure
themselves upon discharge from the Company's facility. In addition, the
Company provides hemodialysis to qualified patients.
WOUND CARE PROGRAMS. Wound care programs address the needs of
patients suffering from post-operative wounds, including stoma and
ostomy care, and the care of amputees. Treatment for surgical wounds
includes the prevention of post-operative infections and the removal of
surgical staples. The Company also treats patients for existing
infections, including the treatment of antibiotic resistant micro-
organisms with multiple intravenous antibiotics.
57
<PAGE>
Physical therapists aid in the debridement of necrotic wounds with jet
lavage or pulsed irrigation and whirlpool treatments. Electrical
stimulation is used to encourage the growth of healthy tissue.
ENTERAL/PARENTERAL NUTRITION. Patients who are unable to eat for
various reasons may receive enteral or parenteral feeding. The
Company's registered dietitians periodically review the nutritional
needs of each patient.
TRACHEOTOMY CARE. The Company provides care to patients who, due to
any number of conditions, cannot maintain a clear or adequate airway
and have undergone a tracheotomy. These patients often require
mechanical ventilator support. All such patients require frequent
suctioning and humidified oxygen and aggressive pulmonary
rehabilitation.
VENTILATOR CARE. Many patients who have undergone a tracheotomy also
require mechanical ventilation. In treating such patients, the Company
utilizes a ventilator which mechanically regulates the breathing
function of the patient by dictating the volume and/or the rates of
inhalation and exhalation. The Company's licensed nurses and
respiratory therapists oversee a ventilator weaning program under the
direction of a pulmonologist.
ALZHEIMER'S CARE. The Company's dedicated Alzheimer's units provide care
for patients with Alzheimer's disease and severe dementia. This type of
care is designed to reduce the stress and agitation associated with
Alzheimer's disease by addressing the problems of short attention spans and
hyperactivity. The physical environment of the Company's units is designed
to address the problems of disorientation and perceptual confusion
experienced by Alzheimer's sufferers.
THERAPY SERVICES. Many of the Company's patients that have undergone
orthopedic surgeries, including joint replacements such as total hip or
knee replacements or fractures, receive physical therapy. The Company's
physical therapists also perform wound care and utilize electric
stimulation to stimulate viable tissue regrowth. Occupational therapy
addresses functional skills of the upper body and all aspects of self-care.
The Company also provides range of motion and strengthening exercises for
contracture prevention and reduction. Speech therapists treat patients with
speech disorders, perceptual problems, cognitive problems, and swallowing
problems. In coordination with the efforts of the Company's nursing staff
and respiratory therapists, speech therapists help tracheotomy and
ventilator patients use speaking valves and breathing methods which allow
them to communicate with others.
During 1997, Locomotion Therapy provided rehabilitative physical,
occupational and speech therapy to unaffiliated nursing home operators and
acute care hospitals under 97 contracts, as well as to eight Fountain View
facilities, using a progressive, personalized treatment approach to promote
the resident's highest level of independence in mobility and strength.
Historically, a majority of Fountain View's therapy services has been
provided by Locomotion Therapy, which employs approximately 150 therapists
licensed in various specialties who are assigned to facilities based on the
types of contract services requested and the specialization of the
therapists. Throughout the duration of the contract, the selected therapist
functions as the resident therapist for a particular facility.
Summit has also provided rehabilitative care in each of its 36 SNFs
through the use of outside contractors. Historically, Summit has monitored
the rehabilitative care provided in each Summit facility through the use of
in-house supervisory therapists and therapy administration.
PHARMACIES. The Company provides pharmaceutical products and services
through two institutional pharmacies in Southern California. The Company
also owns a 50% equity interest in a limited liability company that
operates a pharmacy in Austin, Texas, which services Summit facilities in
Texas as well as several unaffiliated facilities. These pharmacies service
86 unaffiliated
58
<PAGE>
SNFs, ALFs and acute care hospitals located throughout much of Southern
California and in certain Texas markets, as well as all of Summit's and
several of Fountain View's SNFs and ALFs. The Company's pharmacies,
historically operated by Summit, provide prescription drugs, intravenous
products, enteral nutrition therapy services and infusion therapy services,
including nutrition, pain management, antibiotics and hydration.
OUTPATIENT THERAPY CLINICS. The Company's On-Track subsidiary provides
physical therapy services to the outpatient community through a facility in
Fresno, California. The Company intends to open additional facilities in
underserved markets where it has existing relationships with doctors and
currently provides physical therapy services to nursing homes through
Locomotion Therapy. Several of Summit's Texas facilities have excess
capacity intended for outpatient clinics which the Company expects to
utilize for the expansion of services provided by On-Track.
DURABLE MEDICAL EQUIPMENT. The Company provides various types of durable
medical equipment to Fountain View-owned facilities, as well as
unaffiliated facilities, through a subsidiary. The types of equipment and
supplies provided include enteral feeding supplies, poles and pumps (on a
rental basis), catheterization equipment and orthotics.
SOURCES OF REVENUE
The Company's SNFs receive payment for healthcare services from federally
assisted Medicaid programs, Medicare, programs operated by preferred provider
organizations, health maintenance organizations, the Veterans Administration
and directly from patients or their responsible parties or insurers. The
Company's ALFs receive payment exclusively from private individuals, some of
whom depend upon supplemental Social Security payments as a primary source of
income. The sources and amounts of the Company's revenues are and will
continue to be determined by a number of factors, including the licensed bed
capacity of its facilities, occupancy rate, quality mix, the type of services
rendered to the patient and the rates of reimbursement among payor categories
(primarily private, Medicare and Medicaid).
The following table sets forth for Fountain View's SNFs, ALFs and therapy
operations the approximate percentages of net revenues derived from the
various sources of payment for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Managed care and private pay, including Locomotion
Therapy.............................................. 46.6% 47.5% 44.2%
Medicare.............................................. 20.3 19.6 25.6
Medi-Cal Sub-Acute.................................... 0.3 2.6 3.1
----- ----- -----
Subtotal (Quality Mix).............................. 67.2 69.7 72.9
Medi-Cal.............................................. 32.8 30.3 27.1
----- ----- -----
Total............................................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
The following table sets forth for Summit's SNFs, ALFs and pharmacy
operations the approximate percentages of total revenues derived from the
various sources of payment for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
-------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Managed care and private pay............................ 33.8% 31.9% 29.9%
Medicare................................................ 29.5 34.7 39.7
----- ----- -----
Subtotal (Quality Mix)................................ 63.3 66.6 69.6
Medicaid................................................ 36.7 33.4 30.4
----- ----- -----
Total................................................. 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
59
<PAGE>
Changes in the quality mix between Medicaid (known as Medi-Cal in
California), on the one hand, and either Medicare, managed care or private
pay, on the other hand, can significantly affect profitability. Quality mix
represents revenues from Medicare, Medi-Cal sub-acute, managed care, and
private pay patients as a percentage of revenues. Medicare, Medi-Cal sub-
acute, managed care and private pay patients constitute the most profitable
categories of patient mix and Medicaid patients the least profitable.
Management believes the Company has maintained an attractive and improving
high quality mix. In addition, the Company's average reimbursement rate per
patient day for Medicare patients has increased more rapidly than for Medicaid
patients, reflecting the increasing acuity level of the services provided by
the Company. Services provided to Medicare patients generate a higher level of
revenue per patient day at margins that generally exceed the level of
profitability associated with services provided to Medicaid patients. However,
the Company's profitability has not correlated directly with revenue growth,
reflecting the additional costs associated with providing the higher level of
care and other services required by high-acuity Medicare patients.
QUALITY MIX, PATIENT MIX AND OCCUPANCY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------
FOUNTAIN VIEW SUMMIT COMPANY
------------- ------ -------
<S> <C> <C> <C>
QUALITY MIX
Managed care and private pay, including Locomotion
Therapy.......................................... 44.2% 30.5% 33.4%
Medicare.......................................... 25.6 38.5 35.8
Medi-Cal sub-acute................................ 3.1 -- 0.6
----- ----- -----
Total (Quality Mix)............................. 72.9 69.0 69.8
Medicaid.......................................... 27.1 31.0 30.2
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
PATIENT MIX
Managed care and private pay...................... 17.3 36.8 33.4
Medicare.......................................... 9.0 9.1 9.1
Medi-Cal sub-acute................................ 2.2 -- 0.4
----- ----- -----
28.5 45.9 42.9
Medicaid.......................................... 71.5 54.1 57.1
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
OCCUPANCY ........................................ 89.0% 86.0% 89.0%
</TABLE>
The Company's contract therapy services are provided predominantly by
Locomotion Therapy. Contract therapy revenues, after intercompany
eliminations, represented $17.7 million, or 26.1%, of Fountain View's fiscal
1997 revenues and, on a pro forma basis after giving effect to the
Transactions, would have represented 6.2% of the Company's revenues for the
year ended December 31, 1997.
The Company's pharmacy services are derived from the three institutional
pharmacies historically operated by Summit (one of which is a joint venture).
Pharmacy revenues represented $20.4 million, or 10.3%, of Summit's fiscal 1997
revenues and, on a pro forma basis after giving effect to the Transactions,
would have represented 7.1% of the Company's revenues for the year ended
December 31, 1997.
The Company's DME business is provided by a Fountain View subsidiary. DME
revenues represented approximately $3.0 million, or 4.4%, of Fountain View's
fiscal 1997 revenues and, on a pro forma basis after giving effect to the
Transactions, would have represented 1.0% of the Company's revenues for the
year ended December 31, 1997.
60
<PAGE>
COMPLIANCE PROGRAM
Historically, senior management of the Company has supervised the Company's
compliance with applicable laws and regulations. The Company is in the process
of developing and implementing an enhanced compliance program to facilitate
the integration of Fountain View and Summit. In the past several years,
federal and state governments have increased their scrutiny of healthcare
providers with regard to compliance with applicable laws and regulations. The
Accountability Act and the Balanced Budget Act have provided the federal
government with increased funding for this initiative as well as a broader
range of penalties available for violation of applicable laws and regulations.
See "--Government Regulations". Management believes that compliance programs
are advisable, particularly in the current environment of stricter government
enforcement in the healthcare industry. The OIG has released guidelines
applicable to compliance programs for laboratories and hospitals, but has not
yet developed a model compliance program or compliance program guidelines for
the long-term care industry. Given the federal government's current fraud and
abuse initiatives however, including Operation Restore Trust which focuses on
the long-term care and home health industry, management believes that a
compliance program will give the Company an additional layer of protection and
assurance in a heavily regulated and continuously evolving industry.
Management believes that an effective compliance program should maximize the
Company's ability to detect and prevent potential infractions of applicable
law (thus reducing the risk of a qui tam, or "whistleblower", action against
the Company for infractions that were not timely detected and addressed) and
may be used to resolve any infractions that do occur in a consistent and
organized fashion. Further, the existence of an effective compliance program
may be taken into account by the government to reduce any fines or penalties
incurred by the Company for infractions or violations of applicable law or
regulation.
Management intends to develop and implement a compliance program that will
involve the appointment of a compliance officer, who will report directly to
the Company's board of directors and Chief Executive Officer, to assist in the
development, implementation and maintenance of the compliance program. The
Company anticipates that the compliance program will include policies and
procedures applicable to all Fountain View and Summit facilities and will
address all aspects of compliance with government requirements, including,
among others, licensing obligations, quality of care, documentation
requirements, billing and coding requirements, regulations regarding
relationships with physicians and other healthcare providers, and federal and
state reporting obligations. It is anticipated that the Company's compliance
program will establish formal training requirements for all Company employees
in areas applicable to individual job functions, as well as general training
regarding criteria and requirements for participation in federal government
healthcare programs. Management intends to establish a Company-wide hotline
pursuant to which any employee may report activity that does not conform to
current standards. Further, the Company anticipates that the existence of a
compliance program will assist it in integrating all Fountain View and Summit
facilities into a consistent Company-wide infrastructure, thereby facilitating
operational and management economies of scale.
QUALITY ASSURANCE
The Company is committed to providing its patients with the highest possible
standard of quality of care. To this end, both Fountain View and Summit have
in place a Quality Assurance department consisting of registered nurses who
routinely visit the Company's facilities and conduct quality assurance tests
to ensure the consistently high quality of care provided in each facility.
Further, Quality Assurance personnel conduct regular training for the nursing
and other staff of each facility. The Company intends to consolidate the
Quality Assurance departments of Fountain View and Summit in order to continue
their tradition of providing the highest possible quality of care. In
addition, the Company intends to develop and implement a compliance program
that will address, in part, quality of care issues. See "--Compliance
Program".
61
<PAGE>
The Company is in the process of obtaining accreditation by the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO") for each of
its facilities. As of March 1, 1998, twelve of the Company's 44 SNFs are JCAHO
accredited or are awaiting formal declaration of such accreditation, with the
remainder of the facilities slated for JCAHO accreditation review in the next
24 months. Management believes that the Company's JCAHO accreditation will
assist the Company in obtaining and maintaining high occupancy rates at its
facilities and demonstrates its commitment to a high standard of quality of
care.
MARKETING
The Company's sales and marketing efforts are directed toward improving
overall occupancy and quality mix by maximizing the number of private pay,
managed care and Medicare patients on each facility's census. The Company
believes that the selection of a long-term care facility is strongly
influenced by word-of-mouth marketing and referrals from physicians, hospital
discharge planners, community leaders and family members. Therefore, the
Company's marketing strategy is focused at the local level, and the
administrator, admissions coordinator and other personnel at each facility are
responsible for contacting potential referral sources. Case managers at
certain facilities actively market services to managed care organizations.
Regional marketing directors support and coordinate sales and marketing
efforts. The Company maintains a sales and marketing information system to
monitor the results of its strategy.
GOVERNMENT REGULATIONS
LICENSURE. The Company's SNF, ALF, sub-acute and specialty medical service,
therapy, pharmacy and DME supplies businesses are subject to various
regulatory and licensing requirements of state and local authorities in
California, Texas and Arizona. Each SNF is licensed by either the California
Department of Health Services, the Texas Department of Human Services or the
Arizona Department of Health Services, as applicable. Each ALF is licensed by
the California Department of Social Services and the pharmacies are licensed
by the California Board of Pharmacy and the Texas State Board of Pharmacy. All
licenses must be renewed annually, and failure to comply with applicable
rules, laws and regulations could lead to loss of licenses. In granting,
monitoring and renewing licenses, these agencies consider, among other things,
the physical condition of the facility, the qualifications of the
administrative and nursing staffs, the quality of care and compliance with
applicable laws and regulations. Such regulatory and licensing requirements
are subject to change, and there can be no assurance that the Company will
continue to be able to maintain necessary licenses or that it will not incur
substantial costs in doing so. Failure to comply with such requirements could
result in the loss of the right to payment by Medicare or Medicaid as well as
the right to conduct the business of the licensed entity. Further, the
facilities operated by the Company are subject to periodic inspection by
governmental and other regulatory authorities to assure continued compliance
with various standards and to provide for their continued licensing under
state law and certification under the Medicare and Medicaid programs.
From time to time, the Company receives notices from federal and state
regulatory agencies relating to alleged deficiencies for failure to comply
with all components of the regulations. Facilities which are not in
substantial compliance and do not correct deficiencies within a certain time
frame may be terminated from the Medicare and/or Medicaid programs. While the
Company endeavors to comply with all applicable regulatory requirements, from
time to time certain of the Company's nursing facilities have been subject to
various sanctions and penalties as a result of deficiencies alleged by HCFA or
state survey agencies. While in certain instances denial of certification or
licensure revocation actions have been threatened, management believes that
the Company will not suffer any material adverse effect as a result thereof.
There can be no assurance, however, that the Company will not be subject to
sanctions and penalties in the future as a result of such actions.
62
<PAGE>
MEDICARE AND MEDICAID. The Company's SNFs are subject to various
requirements for participation in government-sponsored healthcare funding
programs such as Medicare and Medicaid. To receive Medicare and Medicaid
payments, each facility must also comply with a number of rules regarding
charges and claims procedures, the violation of which can result in denial of
reimbursement. Medicare is a health insurance program operated by the federal
government for the aged and certain chronically disabled individuals. The
Medicare program consists of Parts A and B. Participation in Part B is
voluntary and is funded in part through the payment of premiums. Benefits
under Part A include inpatient hospital services, skilled nursing services
rendered in a SNF and medical services such as physical, occupational and
speech therapy, certain pharmaceuticals and medical supplies. Part B provides
coverage for physician services. Part B also reimburses for medical services
with the exception of pharmaceutical services. Medicare benefits are not
available for intermediate and custodial levels of care including but not
limited to residence in ALFs; however, medical and physician services
furnished to patients requiring such care may be reimbursable under Part B.
Currently, the Medicare program utilizes a cost-based reimbursement system
for free-standing SNFs which, subject to limits fixed for the particular
geographic area on the costs for routine services (excluding capital related
expenses), reimburses SNFs for reasonable direct and indirect allowable costs
incurred in providing services (as defined by the Medicare program). Allowable
costs normally include administrative and general costs, as well as operating
costs and rental, depreciation and interest expenses. Reimbursement is subject
to retrospective audit adjustment. An interim rate based upon estimated costs
is paid by Medicare during the cost reporting period and a cost settlement is
made following an audit of the actual costs as reported in the filed cost
report. Such adjustments may result in additional payments being made to the
Company or in recoupments from the Company. The Company maintains reserves to
cover retroactive audit adjustments. To the extent that the Company's costs
exceed certain limits known as the Medicare Routine Cost Limits, the Company
may submit exception requests seeking reimbursement for such excess costs from
Medicare. To date, Summit has filed three exception requests and has received
approval on all three. Fountain View has not filed any exception requests to
date. There is no assurance the Company will be able to recover such excess
costs on any future requests. If the Company files exception requests on a
regular basis in the future and fails to recover the excess costs covered by
such requests, such failure could adversely affect the Company's financial
position and results of operations. However, exception requests will no longer
be necessary upon implementation of PPS, as discussed more fully below.
Fiscal intermediaries also occasionally undertake a more in-depth audit of a
facility's billing records. In March 1997, one of Summit's facilities was the
subject of a Medicare billing audit by its fiscal intermediary, resulting in a
finding that approximately $1,500,000 of charges for SNF services (after cost
report settlement and subject to downward adjustment) lacked a timely
certification of medical necessity by a physician. Summit is currently
repaying such charges against reimbursement of current claims. Following this
audit, Summit adopted measures to strengthen its documentation relating to
physician certification. While the Company does not believe that it is the
target of any other focused reviews, there can be no assurance that
substantial amounts will not be expended by the Company in connection with any
such audit or to defend allegations arising therefrom. If it were found that a
significant number of the Company's Medicare claims failed to comply with
Medicare billing requirements, the Company could be materially adversely
affected.
The Balanced Budget Act requires the establishment of a prospective payment
system, or PPS, for Medicare SNFs under which facilities will be paid a
federal per diem rate for virtually all covered SNF services in lieu of the
current cost-based reimbursement rate. PPS will be phased in over three cost
reporting periods, starting with cost reporting periods beginning on or after
July 1, 1998. The PPS rates have not yet been determined and there can be no
assurance that the Company's revenues under PPS will be sufficient to cover
its costs to operate its facilities.
63
<PAGE>
In addition, prior to the enactment of the Balanced Budget Act, federal law
required state Medicaid programs to reimburse SNFs for costs incurred by
efficiently and economically operated providers in order to meet quality and
safety standards. The Balanced Budget Act repealed this payment standard,
effective for services provided on or after October 1, 1997, thereby granting
states greater flexibility in establishing payment rates. There can be no
assurance that budget constraints or other factors will not cause states to
reduce Medicaid reimbursement to SNFs or that payments to SNFs will be made on
a timely basis. Any such efforts to reduce Medicaid payment rates or failure
of states to meet their Medicaid obligations on a timely basis would have a
material adverse effect on the Company.
Current Medicare regulations applicable to transactions between related
parties, such as the Company's subsidiaries, are relevant to the amount of
Medicare reimbursement that the Company is entitled to receive for goods and
services which are charged to the Medicare program. The amount charged on
related party transactions is dependent upon whether or not the related party
exception applies. For transactions between each provider and the applicable
related party which do not qualify for the related party exception, the
transaction is recorded at cost and no profit may be earned by the related
party. For transactions which do qualify for the related party exception, the
transaction is recorded at fair market value. In order for transactions to
qualify as an exception to the related party rule, the following conditions
must be met: (i) the related party must be a bona fide organization; (ii) a
substantial part of the services of each such related party must be transacted
with non-affiliated entities, and there must be an open, competitive market
for such services; (iii) the services provided by each such entity commonly
are obtained by a provider from other organizations, and are not a basic
element of patient care provided by such facilities; and (iv) the prices
charged to the provider by such entities are in line with the charges for such
services in the open market, and no more than the prices charged by such
entities under comparable circumstances to non-affiliated entities. The
Company believes that it satisfies the requirements for exception to the
related party rules in transactions between its long-term care facilities and
its therapy, DME and pharmacy subsidiaries. If, however, the Company has
failed or, in the future, fails to satisfy regulations for the related party
exception with respect to inter-corporate transactions, the Medicare
reimbursement that the Company received or will receive could be reduced, and
as a result, the Company's financial condition could be materially and
adversely affected.
The Company's financial condition and results of operations may also be
affected by the revenue reimbursement process, which in the Company's industry
is complex and can involve lengthy delays between the time that revenue is
recognized and the time that reimbursement amounts are settled. Net revenues
realizable under third-party payor agreements are subject to change due to
examination and retroactive adjustment by payors during the settlement
process. Payors may disallow, in whole or in part, requests for reimbursement
based on determinations that certain costs are not reimbursable or because
additional supporting documentation is necessary. The majority of third-party
payor balances are settled within two to three years following provision of
services. The Company's results of operations would be materially and
adversely affected if the amount actually received from third-party payors in
any reporting period differed materially from the amounts accrued in prior
periods. The Company's financial condition and results of operations may also
be affected by the timing of reimbursement payments and rate adjustments from
third-party payors (for example, Medi-Cal has in the past exposed providers to
payment delays, thus affecting reimbursement).
THERAPY REGULATION. The Company furnishes therapy services on a contract
basis to certain affiliated and unaffiliated providers. For Medicare patients,
the providers bill the Medicare program for reimbursement of the amounts paid
to the Company for these services. HCFA has the authority to establish limits
on the amount Medicare reimburses for therapy services. For services other
than inpatient hospital services, these limits are equivalent to the
reasonable amount that would have been paid if provider employees had
furnished the services. HCFA has exercised this authority by publishing
"salary equivalency guidelines" for physical therapy, respiratory therapy,
speech language pathology
64
<PAGE>
and occupational therapy services. On January 30, 1998, HCFA issued a final
regulation, effective April 1, 1998, that will revise the pre-existing salary
equivalency guidelines for physical therapy and respiratory therapy and
establish, for the first time, salary equivalency guidelines for speech
language pathology and occupational therapy services. HCFA estimates that the
regulation will increase the reimbursement rates for physical therapy by 35%
and for respiratory therapy by 10%. In contrast, however, HCFA expects the
salary equivalency rates for occupational therapy and speech language
pathology to reduce current reimbursement rates by 40% and 25%, respectively.
The salary equivalency guidelines will not apply to SNFs that are paid under
PPS, which is being phased-in by Medicare, as discussed above. Management
cannot predict the effect the salary equivalency guidelines will have on the
Company.
PHARMACY REGULATION. The Company's pharmacies are subject to a variety of
state licensing and other laws governing the storage, handling, sale or
dispensing of drugs, and the provision of a duly licensed pharmacist in each
pharmacy, in addition to federal regulation under the Food, Drug and Cosmetic
Act and the Prescription Drug Marketing Act. Moreover, the Company is required
to register its pharmacies with the United States Drug Enforcement
Administration, and to comply with requirements imposed by that agency with
respect to security and reporting of inventories and transactions. Medicare
pays for the costs of prescription drugs furnished in a number of different
settings under limited circumstances. The California and Texas Medicaid
programs reimburse pharmacies for drugs supplied to patients based on the cost
of the drug plus an additional amount which varies depending on the type of
drugs supplied.
OUTPATIENT THERAPY REGULATION. Outpatient therapy services are currently
reimbursed on a per visit basis, subject to cost limits established by HCFA
for the given type of therapy provided to the patient. The Balanced Budget Act
contains provisions affecting outpatient rehabilitation agencies and
providers, including a 10% reduction in operating and capital costs for 1998,
a fee schedule for therapy services beginning in 1999, and the application of
per beneficiary therapy caps currently applicable to independent therapists to
all outpatient rehabilitation services beginning in 1999. These provisions may
affect the reimbursement to the Company in connection with the services
provided by On-Track, the Company's outpatient therapy subsidiary.
DME REGULATION. Medicare generally provides reimbursement for DME on a fee
schedule basis. The amount reimbursed depends on the classification of the DME
and, generally, will be the lesser of (1) the provider's actual charge for the
DME or (2) the fee schedule amount.
REFERRAL RESTRICTIONS AND FRAUD AND ABUSE. The Company is also subject to
federal and state laws which govern financial and other arrangements between
healthcare providers. Federal law, as well as the law in California, Texas and
Arizona and other states, prohibits direct or indirect payments in some cases
or fee-splitting arrangements between healthcare providers that are designed
to induce or encourage the referral of patients to, or the recommendation of,
a particular provider for medical products and services. These laws include
the federal Anti-Kickback Statute which prohibits, among other things, the
offer, payment, solicitation or receipt of any form of remuneration in return
for, or to induce, the referral of Medicare and Medicaid patients. A wide
array of relationships and arrangements, including ownership interests in a
company by persons who refer or are in a position to refer patients, as well
as personal service agreements have, under certain circumstances, been alleged
or been found to violate these provisions. Certain arrangements, such as the
provision of services for less than fair market value compensation, may also
violate such laws. Because of the law's broad reach, the federal government
has published regulations, known commonly as "safe harbors", which set forth
the requirements under which certain relationships will not be considered to
violate the law. One of these safe harbors protects payments for personal
services which are set in advance at a fair market rate and which do not vary
with the value or volume of services referred, provided there is a written
contract which meets certain requirements. A similar safe harbor applies for
65
<PAGE>
certain agreements for management services. A safe harbor for discounts, which
focuses primarily on appropriate disclosure, is also available. A violation of
the federal Anti-Kickback Statute and similar state laws could result in the
loss of eligibility to participate in Medicare or Medicaid, or in criminal
penalties of up to five years imprisonment and/or $25,000 fines.
In addition, the federal government and some states restrict certain
business relationships between physicians and other providers of healthcare
services. Effective January 1, 1995, Stark II prohibits any physician with a
financial relationship (defined as a direct or indirect ownership or
investment interest or compensation arrangement) with an entity from making a
referral for a Medicare directors or prohibit its medical directors from
referring patients to the Company. Violations of Stark II may result in the
imposition of civil monetary penalties of up to $15,000 for each prohibited
service provided as well as restitution of reimbursement for such services.
There are various federal and state laws prohibiting other types of fraud by
healthcare providers, including criminal provisions which prohibit filing
false claims or making false statements to receive payment or certification
under Medicare and Medicaid, or failing to refund overpayments or improper
payments. Violation of these provisions is a felony punishable by up to five
years imprisonment and/or $25,000 fines. Civil provisions prohibit the knowing
filing of a false claim or the knowing use of false statements to obtain
payment. The penalties for such a violation are fines of not less than $5,000
nor more than $10,000, plus treble damages, for each claim filed.
State and federal governments are devoting increasing attention and
resources to anti-fraud initiatives against healthcare providers. The
Accountability Act and the Balanced Budget Act expand the penalties for
healthcare fraud, including broader provisions for the exclusion of providers
from the Medicare and Medicaid programs and the establishment of civil
monetary penalties for violations of the anti-kickback provisions. While the
Company believes that its billing practices are consistent with Medicare and
Medicaid criteria, those criteria are often vague and subject to
interpretation. There can be no assurance that aggressive anti-fraud
enforcement actions will not adversely affect the business of the Company.
Under Operation Restore Trust, a major anti-fraud demonstration project, the
OIG, in cooperation with other federal and state agencies, has focused on the
activities of SNFs, home health agencies, hospices, and DME suppliers in
certain states, including California and Texas, in which the Company currently
operates. Due to the success of Operation Restore Trust, the project has been
expanded to numerous other states and to additional healthcare providers
including providers of ancillary nursing home services. While management does
not believe the Company is the target of any Operation Restore Trust
investigations, there can be no assurance that substantial amounts will not be
expended by the Company to cooperate with any such investigation or to defend
allegations arising therefrom. If it were found that any of the Company's
practices failed to comply with the anti-fraud provisions, the Company could
be materially affected.
CORPORATE PRACTICE OF MEDICINE. Many states, including California, Texas and
Arizona, prohibit business corporations and other persons or entities not
licensed to practice medicine from providing, or holding themselves out as a
provider of, medical care. Possible sanctions for violation of any of these
restrictions or prohibitions include loss of licensure or eligibility to
participate in reimbursement programs and civil and criminal penalties. These
laws, their construction and level of enforcement, vary from state to state
and are enforced by both the courts and regulatory authorities, each with
broad discretion. Some states interpret the 'practice of medicine' broadly to
include activities of corporations such as the Company that have an indirect
impact on the practice of medicine, even where the physician rendering the
medical services is not an employee of the corporation and the corporation
exercises no discretion with respect to the diagnosis or treatment of a
particular patient. The Company believes that its current and intended
operations do not and will not violate applicable state laws regulating the
unlicensed practice of medicine by a business corporation. However, because
the laws
66
<PAGE>
governing the corporate practice of medicine vary from state to state, any
expansion of the operations of the Company to a state with strict corporate
practice of medicine laws may require the Company to modify its operations
with respect to one or more of such practices, which may result in increased
financial risk to the Company. Further, there can be no assurance that the
Company's arrangements will not be successfully challenged as constituting the
unauthorized practice of medicine. See "Risk Factors -- State Laws Regarding
Prohibition of Corporate Practice of Medicine".
PENDING LEGISLATION. Government reimbursement programs are subject to
statutory and regulatory changes, retroactive rate adjustments, administrative
ceilings and government funding restrictions, all of which could materially
decrease the rates paid to the Company for its future services or the services
for which the Company will be able to seek reimbursement. Since 1972, Congress
has consistently attempted to curb federal spending on healthcare programs.
The Company expects that there will continue to be a number of state and
federal proposals to limit Medicare and Medicaid reimbursement for healthcare
services. The Company cannot at this time predict what healthcare reform
legislation will ultimately be enacted and implemented or whether other
changes in the administration or interpretation of the governmental healthcare
programs will occur. There can be no assurance that future healthcare
legislation or other changes in the administration or interpretation of
governmental healthcare programs, if enacted, will not have a material adverse
effect on the results of operations of the Company.
SHIFT TO MANAGED CARE. The growth in healthcare spending has caused the
private sector, Medicare and state Medicaid programs to reshape the financing
of healthcare services for their beneficiaries. Management anticipates that
one of the most significant changes to the financing of healthcare services
will be the shift to managed care, and that the federal Medicare program,
state Medicaid programs and private insurers will place greater reliance on
managed care alternatives in the future. According to HCFA, as of 1996, 35% of
Medicare enrollees in California had enrolled in a managed care program. In
comparison, 8% of Medicare enrollees in Texas are enrolled in managed care
programs, and approximately 14% of Medicare enrollees nationwide are enrolled
in a managed care program. Providers are generally willing to discount charges
for services to managed care patients because managed care plans can direct
(or strongly influence) the flow of patients. Management believes that the
Company is likely to service an increasing proportion of managed care
enrollees in the future, although payment rates for such services may not be
as favorable as those presently in effect. There can be no assurance that
reimbursements for services provided under managed care programs will not
adversely affect the Company's revenues.
ENVIRONMENTAL REGULATION. The Company is also subject to a wide variety of
federal, state and local environmental and occupational health and safety laws
and regulations. Among the types of regulatory requirements faced by
healthcare providers are: air and water quality control requirements; waste
management requirements; specific regulatory requirements applicable to
asbestos, polychlorinated biphenyls, and radioactive substances; requirements
for providing notice to employees and members of the public about hazardous
materials and wastes; and certain other requirements.
In its role as owner and/or operator of properties or centers, the Company
may be subject to liability for investigating and remedying any hazardous
substances that have come to be located on the property, including any such
substances that may have migrated off, or emitted, discharged, leaked, escaped
or been transported from, the property. Ancillary to the Company's operations
are, in various combinations, the handling, use, storage, transportation,
disposal and/or discharge of hazardous, infectious, toxic, radioactive,
flammable and other hazardous materials, wastes, pollutants or contaminants.
Such activities may result in damage to individuals, property or the
environment; may interrupt operations and/or increase their costs; may result
in legal liability, damages, injunctions or fines; may result in
investigations, administrative proceedings, penalties or other governmental
agency actions; and may not be covered by insurance. There can be no assurance
that the Company will not encounter such risks in the future, and such risks
may result in material adverse consequences to the operations or financial
condition of the Company.
67
<PAGE>
COMPETITION
The Company operates in a highly competitive industry. The Company's SNFs
and ALFs are located in communities that also are served by similar facilities
operated by others. Some competing facilities provide services not offered by
the Company and some are operated by entities having greater financial and
other resources than the Company. In addition, some competing facilities are
operated by non-profit organizations or government agencies supported by
endowments, charitable contributions, tax revenues and other resources not
available to the Company. Furthermore, cost containment efforts, which
encourage more efficient utilization of acute care hospital services, have
resulted in decreased hospital occupancy in recent years. As a result, a
significant number of acute care hospitals have converted portions of their
facilities to other purposes, including specialty and sub-acute units. The
competitiveness of the Company's markets is further supported by the fact that
within California, Texas and Arizona, a Certificate of Need is no longer
required in order to build or expand a SNF. However, in Texas, competition is
limited by restrictions on the number of beds that can be enrolled in the
Medicaid program.
The Company also expects to encounter competition during future initiatives
of acquiring or developing new facilities. The Company's pharmacies and DME
business also operate in highly competitive environments and compete with
regional and local pharmacies, medical supply companies and pharmacies
operated by other long-term care chains or by other companies ranging from
small local operators to companies which are national in scope and
distribution capability. The Company also expects to encounter continued
competition in connection with the provision of other ancillary services,
including physical, occupational and speech therapy.
PROPERTIES
As of March 31, 1998, the Company had a total of 44 SNFs with an aggregate
of 5,937 beds and 6 ALFs with an aggregate of 641 beds, as reflected in the
following tables:
<TABLE>
<CAPTION>
SUMMIT FOUNTAIN VIEW
---------------- ---------------- TOTAL TOTAL
STATES FACILITIES BEDS FACILITIES BEDS FACILITIES BEDS
------ ---------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
SNFs
California............. 13 1,515 8 1,061 21 2,576
Texas.................. 22 3,211 -- -- 22 3,211
Arizona................ 1 150 -- -- 1 150
--- ----- --- ----- --- -----
Subtotal............. 36 4,876 8 1,061 44 5,937
ALFs
California............. 5 475 1 166 6 641
--- ----- --- ----- --- -----
Total................ 41 5,351 9 1,227 50 6,578
=== ===== === ===== === =====
</TABLE>
FOUNTAIN VIEW FACILITIES
<TABLE>
<CAPTION>
YEAR YEAR
FACILITY LOCATION # BEDS OWNED/LEASED BUILT RENOVATED
-------- ----------- ------ ------------ ----- ---------
<S> <C> <C> <C> <C> <C>
SKILLED NURSING--CALIFORNIA
Rio Hondo...................... Montebello 200 Leased(a) 1968 1996/1998
Hancock Park................... Los Angeles 141 Leased 1969 1996/1998
Brier Oak Terrace.............. Los Angeles 159 Leased 1966 1997/1998
Alexandria..................... Los Angeles 177 Leased 1969 1997
Montebello..................... Montebello 99 Leased(a) 1969 --
Fountain View.................. Los Angeles 99 Leased(a) 1963 1996/1998
Sycamore Park.................. Los Angeles 90 Leased(a) 1965 1997
Elmcrest....................... El Monte 96 Leased 1958 1997
ASSISTED LIVING--CALIFORNIA
Hancock Park................... Los Angeles 166 Leased 1971 1996/1998
-----
Total.................................... 1,227
=====
</TABLE>
- --------
(a) Facility is owned by the Snukal family and leased to a subsidiary of
Fountain View.
68
<PAGE>
SUMMIT FACILITIES
<TABLE>
<CAPTION>
YEAR
FACILITY LOCATION # BEDS OWNED/LEASED YEAR BUILT RENOVATED
-------- ---------------- ------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
SKILLED NURSING--
CALIFORNIA
Woodland................ Reseda 153 Leased 1972 1996
Royalwood............... Torrance 108 Leased 1952 1998(c)
Valley.................. Fresno 99 Owned 1960 1996
Villa Maria............. Santa Maria 85 Owned 1970 1995
Earlwood................ Torrance 85 Owned 1967 1993
Sharon.................. Los Angeles 85 Leased 1967 1996
Bay Crest............... Torrance 78 Leased 1960/1968(b) 1995
Fountain................ Orange 172 Owned 1963/1966(b) 1994
Carehouse............... Santa Ana 174 Owned 1974/1994(b) 1998(c)
Palm Grove.............. Garden Grove 122 Leased 1958 1994
Anaheim................. Anaheim 97 Leased 1967 1997
Devonshire.............. Hemet 98 Owned 1969 1992
Willow Creek............ Fresno 159 Owned 1996 --
-----
Subtotal.............. 1,515
SKILLED NURSING--TEXAS
Coronado................ Abilene 219 Owned 1969 1996
West Side............... White Settlement 238 Owned 1985 1996
The Woodlands........... Houston 212 Owned 1988 1994
Colonial Tyler.......... Tyler 162 Owned 1968 1997
Colonial Manor.......... New Braunfels 152 Owned 1967 1996
Guadalupe Valley........ Seguin 149 Leased(a) 1990 1996
Town & Country.......... Boerme 124 Owned 1972 1994
Clairmont--Longview..... Longview 174 Owned 1986/1996(b) --
Clairmont--Beaumont..... Beaumont 148 Owned 1987/1996(b) --
Clairmont--Tyler........ Tyler 116 Owned 1989 1998
Southern Manor.......... Hallettsville 114 Owned 1991 1995
Southwood............... Austin 112 Owned 1975 1992
Comanche Trail.......... Big Spring 115 Leased(a) 1991 1995
Lubbock................. Lubbock 114 Owned 1968 1995
Monument Hill........... La Grange 111 Owned 1987 1997
Live Oak................ George West 100 Leased(a) 1993 1995
Oak Crest............... Rockport 92 Owned 1991 1996
Oakland Manor........... Giddings 114 Owned 1992 1995
Oak Manor............... Flatonia 80 Owned 1980 1995
Heritage Oaks........... Lubbock 161 Owned 1995/1996(b) --
Cityview................ Fort Worth 210 Owned 1997 --
Briarcliff.............. McAllen 194 Leased(a) 1993/1996(b) --
-----
Subtotal.............. 3,211
SKILLED NURSING--ARIZONA
Phoenix................. Phoenix 150 Leased 1965/1995(b) 1995
ASSISTED LIVING--
CALIFORNIA
Carson.................. Carson 202 Owned 1972 1994
Spring.................. Torrance 51 Owned 1962 1993
Hemet................... Hemet 84 Owned(d) 1965 1997
Fountain................ Orange 72 Owned 1967 1995
Ashton Court............ Orange 66 Owned 1967 1997
-----
Subtotal.............. 475
-----
Total................. 5,351
</TABLE>
- --------
(a) Option to purchase.
(b) Year of latest addition to facility.
(c) Scheduled.
(d) Building owned by Summit with real property held under a ground lease
extending to 2030.
69
<PAGE>
EMPLOYEES
As of March 31, 1998, Fountain View had approximately 1,200 full-time
equivalent employees, and Summit had approximately 4,700 full-time equivalent
employees. Fountain View has three collective bargaining agreements for a
union covering approximately 400 of Fountain View's employees. Fountain View
considers the relations with its employees to be good and it has not
experienced any strikes or work stoppages. None of Summit's employees are
covered by collective bargaining agreements and Summit considers the relations
with its employees to be good and it has not experienced any strikes or work
stoppages. Both Fountain View and Summit are subject to federal and state
minimum wage and applicable federal and state wage and hour laws and maintain
various employee benefit plans.
INSURANCE
Fountain View maintains general and professional liability coverage,
employee benefits liability, property, inland marine, crime, boiler and
machinery coverage, health, automobile, employment practices liability,
earthquake and flood, workers' compensation and employers' liability that
Fountain View believes is adequate. Summit maintains general and professional,
property, casualty, health, directors and officers, automobile, crime,
employee's and workers' compensation coverage that Summit believes is
adequate. Summit's workers' compensation insurance for its California and
Arizona employees pays for claims up to $250,000 per claim and for the
purchase of reinsurance coverage for amounts in excess of the per claim limit
and for annual aggregate claim amounts in excess of $986,000. Texas employees
are covered by a policy for employer's excess and occupational indemnity for
risks in excess of $150,000 up to $1,000,000 per occurrence and no annual
aggregate stop loss. Summit pays for claims up to $150,000 per occurrence.
Fountain View's and Summit's services subject them to liability risk.
Malpractice claims may be asserted against them if their services are alleged
to have resulted in patient injury or other adverse effects, the risk of which
is greater for higher-acuity patients, such as those treated by specialty and
sub-acute services, than for traditional long-term care patients. Fountain
View and Summit have from time to time been subject to malpractice claims and
other litigation in the ordinary course of their businesses. While the Company
believes that the ultimate resolution of all pending legal proceedings will
not have a material adverse effect on the Company's business or financial
condition, there can be no assurance that future claims will not have such an
effect on the Company. Fountain View's current policy for general and
professional liability coverage is a per occurrence policy and has limits of
$1,000,000 per occurrence and $3,000,000 in the aggregate per year and carries
no deductible except for employee benefits liability coverage, which carries a
$1,000 deductible per claim. In addition, Fountain View has a per occurrence
umbrella policy which provides additional insurance limits of $10,000,000 per
occurrence and $10,000,000 aggregate per year with a self-insured retention of
$10,000 per occurrence over its primary general, professional, automobile and
employers' liability coverage policies. Summit's current policy for general
and professional liability coverages is a claims-made policy and has limits of
$500,000 per occurrence and $1,000,000 in the aggregate per year and carries a
self-insured retention of $100,000 per occurrence and a $700,000 annual
aggregate loss limit. In addition, Summit has a claims-made umbrella policy
which provides additional insurance of $8,500,000 per occurrence and
$8,500,000 aggregate per year over its primary general and professional
policy, its automobile liability policy and its employer liability policy.
Although Fountain View and Summit have not been subject to any judgments or
settlements in excess of their respective insurance limits, there can be no
assurance that claims for damages in excess of such coverage limits will not
arise in the future.
LEGAL PROCEEDINGS
Fountain View and Summit are subject to routine litigation in the ordinary
course of business. Although there can be no assurances, in the opinion of
management, the ultimate resolution of all pending legal proceedings will not
have a material adverse effect on the Company's business, financial condition
or results of operations.
70
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<C> <C> <S>
William C. Scott...................... 60 Director and Chairman
Robert M. Snukal...................... 55 Director, Chief Executive
Officer and President
Director and Executive Vice
Sheila S. Snukal...................... 54 President
Derwin L. Williams.................... 60 Chief Financial Officer
Keith Abrahams........................ 38 President, Locomotion Therapy,
Inc. and On-Track Therapy
Center, Inc.
Michael H. Martel..................... 35 Senior Vice President, Marketing
Michel Reichert....................... 47 Director
Michael F. Gilligan................... 42 Director
Peter Z. Hermann...................... 43 Director
Mark J. Jrolf......................... 33 Director
</TABLE>
William C. Scott became a Director and Chairman upon the closing of the
purchase of Summit Shares in the Tender Offer on March 27, 1998. Mr. Scott
previously served as Chief Executive Officer of Summit since May 1994 and
Chairman of the Board of Summit since December 1995. Mr. Scott served as
President of Summit from December 1985 until January 1996 and held the office
of Chief Operating Officer from December 1985 until May 1994. Mr. Scott served
as Senior Vice President of Summit Health Ltd., Summit's former parent
company, from December 1985 until its acquisition by OrNda Health Corp. in
April 1994 and previously was a partner with Arthur Andersen & Co.
Robert M. Snukal became a Director, Chief Executive Officer and President on
August 1, 1997, upon the formation of Fountain View. For the preceding five
years, Mr. Snukal has served as a Director and President of each of Fountain
View's subsidiaries, which were owned directly by Mr. Snukal and Sheila Snukal
during that period and prior to the formation of Fountain View. Mr. Snukal is
the husband of Sheila Snukal and the father-in-law of Mr. Abrahams.
Sheila S. Snukal became a Director and Executive Vice President on August 1,
1997, upon the formation of Fountain View. For the preceding five years, Mrs.
Snukal has served as a Director and Executive Vice President of each of
Fountain View's subsidiaries, which were owned directly by Mrs. Snukal and
Robert M. Snukal during that period and prior to the formation of Fountain
View. Mrs. Snukal is the wife of Robert M. Snukal and the mother-in-law of Mr.
Abrahams.
Derwin L. Williams assumed the role of Chief Financial Officer on April 16,
1998. Mr. Williams previously served as Vice President--Finance and Chief
Financial Officer of Summit from July 1, 1993, and Treasurer from May 10,
1994. Mr. Williams held the Treasurer position at three other nursing home
companies: Hallmark Health Service, Inc., from November 1989 to February 1992;
Care Enterprises from April 1980 to August 1987; and Flagg Industries, Inc.,
from June 1978 to March 1980. Mr. Williams has also served in various
capacities specializing in Medicare reimbursement for the Company in 1992 and
1993 and for Beverly Enterprises in 1988 and 1989. He is also a certified
public accountant. Mr. Williams has given notice to the Company of his
resignation to be effective no later than September 30, 1998.
71
<PAGE>
Keith Abrahams has been President of Locomotion since 1995. Mr. Abrahams was
previously employed as a Chief Financial Officer of Heftel Broadcasting from
1987 to 1992, a radio broadcasting company. He is also a certified public
accountant. Mr. Abrahams is the son-in-law of Mr. and Mrs. Snukal.
Michael H. Martel assumed the role of Senior Vice President-Marketing on
April 16, 1998. Mr. Martel previously served as Senior Vice President--
Marketing of Summit in March 1995. Prior to joining Summit, Mr. Martel was
Vice President--Marketing for Arbor Health Care Company from August 1992 to
March 1995. Mr. Martel served as Regional Director of Marketing for the acute
care rehabilitation division of National Medical Enterprises from April 1988
to August 1992.
Michel Reichert has been a Director of the Company since August 1, 1997.
Since 1994, Mr. Reichert has been a Managing General Partner of Heritage
Partners, Inc., a Boston-based private investment firm. Prior to 1994, Mr.
Reichert was a Managing Director of BancBoston Capital Inc., a private
investment firm.
Michael F. Gilligan became a Director of the Company immediately prior to
the consummation of the Tender Offer on March 27, 1998. Since December 1993,
Mr. Gilligan has been a General Partner of Heritage Partners, Inc., a Boston-
based private investment firm. Prior to 1994, Mr. Gilligan was a Director of
BancBoston Capital Inc., a private investment firm.
Peter Z. Hermann became a Director of the Company immediately prior to the
consummation of the Tender Offer on March 27, 1998. Since January 1994,
Mr. Hermann has been a General Partner of Heritage Partners, Inc., a Boston-
based private investment firm. Prior to 1994, Mr. Hermann was a Director of
BancBoston Capital Inc., a private investment firm.
Mark J. Jrolf has been a Director of the Company since August 1, 1997. Since
February 1997, Mr. Jrolf has served as Partner and Vice President of Heritage
Partners, Inc. From September 1996 to January 1997, Mr. Jrolf served as a Vice
President of Heritage Partners, Inc. From September 1993 to September 1996,
Mr. Jrolf was a consultant with McKinsey & Co. specializing in healthcare.
Executive officers of the Company are appointed by the Board, subject to the
provisions of such officers' respective employment agreements. See "--
Employment Agreements". The other officers and Directors are elected to serve
until their respective successors have been duly elected and qualified or
until their earlier resignation or removal.
72
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth compensation for
the past three fiscal years for the Company's Chief Executive Officer and the
other four most highly compensated executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------- ------------
SECURITIES
UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- --------------------------- ------ ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert M. Snukal............. 1997 298,340 400,000 -- --
President, Chief Executive 1996 258,750 696,912 -- --
Officer and Director 1995 246,000 967,900 -- --
William C. Scott (2)......... 1997 394,773 -- -- --
Director and Chairman 1996 369,869 150,000 165,000 --
1995 344,869 162,500 50,000 --
Sheila S. Snukal............. 1997 178,125 200,000 -- --
Executive Vice President 1996 144,750 327,570 -- --
and Director 1995 132,000 521,200 -- --
Derwin L. Williams (2)....... 1997 181,423 -- -- --
Chief Financial Officer 1996 171,008 50,000 25,000 --
1995 147,162 40,000 20,000 --
Michael H. Martel (1)(2)..... 1997 152,404 10,000 10,000 --
Senior Vice
President/Marketing 1996 141,308 -- 10,000 --
1995 36,250 10,000 25,000 --
</TABLE>
- --------
(1) Mr. Martel joined Summit Care Corporation in March 1995.
(2) Compensation indicated is for the fiscal year ended June 30.
Options Grants In Last Fiscal Year. The Company did not grant any options to
the Named Executive Officers in the last fiscal year. All options to purchase
shares of Summit Care Corporation outstanding immediately prior to the date of
the Merger were converted into the right to receive $21.00 per share in cash,
less the exercise price of such option.
Fiscal Year-End Option Values. During fiscal 1997, none of the Named
Executive Officers exercised stock options issued by the Company. In addition,
none of the Named Executive Officers held options to purchase stock of the
Company as of the end of the Company's most recent fiscal year. All options to
purchase shares of Summit Care Corporation outstanding immediately prior to
the date of the Merger were converted into the right to receive $21.00 per
share in cash, less the exercise price of such option.
STOCKHOLDERS AGREEMENT
CORPORATE GOVERNANCE. On March 27, 1998, the Company and its stockholders
entered into a Stockholders Agreement (the "Stockholders Agreement")
concurrently with the closing of the Tender Offer. The Stockholders Agreement,
which was amended on May 4, 1998, provides that the Company's board of
directors (the "Board") will consist of directors nominated as follows: (i)
two individuals (but not less than 25% of the total number of directors) will
be designated by Mr. Snukal, as long as he continues to hold any shares of the
Company's common stock; (ii) one individual will be designated by Mr. Scott,
as long as he continues to hold any shares of the Company's common stock;
73
<PAGE>
(iii) one individual will be designated by Baylor, as long as it continues to
hold any shares of the Company's common stock or any securities convertible
into or exercisable for the Company's common stock; and (iv) all other
directors will be designated by the holders of a majority of the shares of
common stock of the Company held by Heritage and certain co-investors (which
designation is expected to be controlled by Heritage). The Board includes a
majority of directors designated by Heritage. Under the Stockholders
Agreement, each stockholder of the Company has granted Heritage an irrevocable
proxy to vote such stockholder's securities of the Company, except with
respect to matters the effect of which on such stockholder differs materially
and adversely from the effect on Heritage. The practical effect of the grant
of the proxy is that Heritage will control the outcome of most matters which
come before the stockholders of the Company, except where such matter will
result in significant harm to the other stockholders of the Company, but not
to Heritage. For example, Heritage would not be able to exercise the proxy to
vote the shares of the other stockholders in favor of an amendment to the
Stockholders Agreement which would provide that, in the event of a sale of the
Company, the other stockholders would receive one-half the consideration per
share that Heritage would receive. The purpose of the limitation on Heritage's
exercise of the proxy is to protect the other stockholders from Heritage
abusing its control position.
Board vacancies will be filled by a designee of the individual or group who
originally designated the vacating director. Each individual or group entitled
to designate a director will also be entitled to direct the removal of such
director and designate a replacement director.
SPECIAL PROVISIONS FOR SERIES B NON-VOTING COMMON STOCK. Mr. and Mrs. Snukal
own an aggregate of 62,599 shares of the Company's Series B Non-Voting Common
Stock and Mr. Scott owns 51,603 shares of the Company's Series B Non-Voting
Common Stock, all of which were issued to them by the Company for nominal
consideration. These shares represent approximately 9.63% of the total number
of outstanding shares of the Company's common stock, on a fully-diluted basis.
The Stockholders Agreement provides that some or all of the Company's Series B
Non-Voting Common Stock will be subject to forfeiture upon a change of control
of the Company, an initial public offering of its shares or other similar
events (each, a "Trigger Event"), with the precise number of shares forfeited
to be determined on a sliding scale based on the value of the Company's common
equity at the date of the Trigger Event in relation to certain value targets
at various dates in the future. Under this arrangement, the higher the value
of the Company at the date of the Trigger Event, the more shares of Series B
Non-Voting Common Stock Mr. and Mrs. Snukal and Mr. Scott will retain.
STOCK TRANSFER RESTRICTIONS AND RIGHTS. The Stockholders Agreement provides
for certain transfer restrictions on securities of the Company. The
stockholders of the Company who are members of management may not transfer
their securities until four years after the consummation of the Tender Offer,
except for certain transfers in connection with estate planning, provided that
Mr. Snukal may transfer his securities earlier if the Company terminates his
employment without cause. See "--Employment Agreements". The Company and
certain stockholders have a right of first refusal on transfers of Company
securities by a stockholder, other than estate planning transfers by
management, transfers by Heritage and certain transfers to affiliates. If
Heritage transfers its securities, other than to its partners, the other
stockholders will have the right to participate on a pro rata basis with
Heritage in such transfers. Heritage will also have the right to require all
other stockholders to transfer a pro rata portion of their shares in a
transaction in which Heritage transfers its shares. For example, on the one
hand, if Heritage decides to sell half of its shares to a third party (other
than one of its partners), each of the other stockholders will have the right
also to sell half of their shares to the same third party; on the other hand,
if a third party wants to buy half of the Company, and Heritage is willing to
sell only half of its shares to this third party, then Heritage can require
each other stockholder to sell half of his shares to the same third party.
OTHER. The Stockholders Agreement also (i) provides stockholders with pre-
emptive rights in the event of certain future issuances of securities by the
Company, (ii) restricts the ability of the Company
74
<PAGE>
to issue shares of capital stock having rights senior or on par with those of
the Series A Preferred Stock and of the Company's subsidiaries to issue shares
of capital stock while any shares of Series A Preferred Stock are outstanding,
unless the Company is in compliance with certain financial tests, (iii) limits
the amounts of dividends or distributions which the Company may pay with
respect to its common stock while the Series A Preferred Stock remains
outstanding, and (iv) includes a mechanism to convert all existing shares of
common stock into a single series of common stock upon an initial public
offering of the Company. The agreement will terminate upon the consummation of
an initial public offering by the Company.
EMPLOYMENT AGREEMENTS
On March 27, 1998, the Company entered into employment agreements with Mr.
Snukal, Mrs. Snukal and Mr. Scott.
Each employment agreement provides a term of employment of five years, which
will automatically renew for up to five additional one-year terms unless
either the Company or the respective employee provides prior written notice of
termination to the other party, and specifies a base salary, a bonus range and
a package of benefits. Mr. Snukal is employed as Chief Executive Officer, Mrs.
Snukal is employed as Executive Vice President and Mr. Scott is employed as
Chairman of the Company. The employment agreements provide base salaries for
the year ending March 1999 as follows: William C. Scott--$450,000; Robert M.
Snukal--$500,000; and Sheila Snukal--$225,000. Such base salaries will be
subject to cost of living adjustments for each subsequent year. The employment
agreements provide for annual bonuses, based upon the achievement of certain
financial targets, of up to the following amounts for the year ending March
1999 and each subsequent year: William C. Scott--$350,000; Robert M. Snukal--
$500,000; and Sheila Snukal--$125,000.
Each employment agreement provides for termination of employment at any time
by the Company with or without cause or in the event of the death or
disability of the employee. Each of the employment agreements also provides
for severance pay upon termination by the Company without cause (other than
for death or disability). The Company must pay the employee his or her base
salary as in effect prior to any such termination for the duration of the
employee's scheduled employment term (plus an additional $25,000 annually in
the case of such termination of both Mr. and Mrs. Snukal and, in the case of
Mr. Scott, less an amount, if any, he is then due under the Summit Special
Severance Plan adopted by Summit in connection with the Merger). If Mr. Snukal
is terminated without cause, Mrs. Snukal may, at her option, deem her
employment to have been terminated without cause and receive the severance
referred to in the preceding sentence. No severance will be payable in the
event of a termination of employment as a result of death, disability or
retirement, or a termination by the employee without good reason or by the
Company with cause.
Under the employment agreements, each of Mr. and Mrs. Snukal and Mr. Scott
agree not to compete with the Company for the greater of five years after the
date of such agreements or three years after termination of employment,
subject to certain exceptions. In addition, each of Mr. and Mrs. Snukal and
Mr. Scott agree that, for the greater of five years after the date of the
employment agreement or two years after termination, he or she will not
solicit (i) any person who is, or was within the one-year period immediately
prior to termination of the employee's employment with the Company, employed
by, a consultant to or associated with the Company or (ii) a recent (within
two years) client, customer or supplier to the Company.
MANAGEMENT EQUITY INCENTIVE PLANS
The Company intends to adopt one or more management equity incentive plans
to attract, retain and incentivize its management and employees. These plans
may include a stock option plan to make stock options available to employees
(other than Mr. Scott and Mr. Snukal), directors and consultants.
75
<PAGE>
Stock options granted may be qualified or non-qualified. The Company expects
that vesting of stock options may be subject to certain conditions, including
achievement of Company and individual performance objectives. In addition,
these plans may include a restricted stock plan providing for the grant of
restricted stock that would be subject to vesting based on the achievement of
operating and financial goals.
DIRECTOR COMPENSATION
Directors of the Company do not currently receive compensation from the
Company for their service in such capacity.
76
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
the voting common stock of the Company by (i) each person who beneficially
owns more than 5% of the outstanding shares of the Company's voting common
stock, (ii) each director of the Company, (iii) each of the executive officers
of the Company and (iv) each of the directors and executive officers of the
Company as a group. Each of the following stockholders has sole voting and
investment power with respect to shares beneficially owned by such
stockholder, except to the extent that authority is shared with spouses under
applicable law or as otherwise noted.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF SHARES(1) OF CLASS
---- ------------ --------
<S> <C> <C>
Heritage Fund II, L.P.(2)............................. 537,486 50.2%
Michel Reichert(2).................................... 537,486 50.2
Michael F. Gilligan(2)................................ 537,486 50.2
Peter Z. Hermann(2)................................... 537,486 50.2
Mark J. Jrolf(2) ..................................... 537,486 50.2
Robert M. Snukal(3)................................... 149,484 14.0
Sheila S. Snukal(3)................................... 149,484 14.0
Goldman, Sachs & Co.(4)............................... 79,032 7.4
GS Private Equity Partners, L.P.(4)................... 79,032 7.4
GS Private Equity Partners Offshore, L.P.(4).......... 79,032 7.4
PMI Mezzanine Fund, L.P.(5)........................... 59,275 5.5
Baylor Health Care System(6) ......................... 54,999 5.1
William C. Scott(7)................................... 31,357 2.9
Keith Abrahams(8)..................................... 16,588 1.6
All directors and executive officers as a group (10
persons)............................................. 734,915 68.6
</TABLE>
- --------
(1) Number of shares represents the number of shares of Series A Common Stock
and Series C Common Stock, which comprise all of the Company's voting
stock. It does not include the Series A Preferred Stock and Series B Non-
Voting Common Stock. For purposes of this table, a person or group of
persons is deemed to have "beneficial ownership" of any shares as of a
given date which such person has the right to acquire within 60 days after
such date.
(2) The address of such stockholder is c/o Heritage Partners, Inc.,
30 Rowes Wharf, Boston, MA 02110. The shares shown as beneficially owned
by Mr. Reichert, Mr. Gilligan, Mr. Hermann and Mr. Jrolf represent 525,633
shares and warrants to purchase 11,853 shares owned of record by Heritage.
Each of such persons, through one or more intermediaries may be deemed to
control the voting and disposition of the securities owned by Heritage,
and accordingly may be deemed to have shared voting and investment power
with respect to all shares held by Heritage. However, each of such persons
disclaims beneficial ownership of the securities held by Heritage.
Heritage has a proxy to vote an additional 474,367 shares held by other
stockholders, representing 44.2% of the Company's voting stock, except
with respect to matters the effect of which on such other stockholders
differs materially and adversely from the effect on Heritage. Heritage,
Mr. Reichert, Mr. Gilligan, Mr. Hermann and Mr. Jrolf disclaim beneficial
ownership of such shares.
(3) The address of such stockholder is c/o Fountain View, Inc., 11900 Olympic
Boulevard, Suite 680, Los Angeles, CA 90064. The shares shown as
beneficially owned by Mr. Snukal and by Mrs. Snukal represent an aggregate
of 149,484 shares owned jointly by them, and as to which they have shared
voting and investment power. Mr. and Mrs. Snukal also own an aggregate of
62,599 shares of the Company's Series B Non-Voting Common Stock.
(4) The address of such stockholder is c/o Goldman, Sachs & Co., 85 Broad
Street, New York, NY 10004. Shares shown as beneficially owned by Goldman,
Sachs & Co., GS Private Equity Partners, L.P. and GS Private Equity
Partners Offshore, L.P. represent 53,393 shares owned of record by GS
Private Equity Partners, L.P. and 25,639 shares owned of record by GS
Private Equity Partners Offshore, L.P. Each of GS Private Equity Partners,
L.P. and GS Private Equity Partners Offshore, L.P. is an affiliate of
Goldman, Sachs & Co. and each of such entities disclaims beneficial
ownership of the other entity's securities. Goldman, Sachs & Co. disclaims
beneficial ownership of the securities owned by such entities.
(5) The address of such stockholder is c/o Pacific Mezzanine Group, 610
Newport Center Dr., Suite 1100, Newport Beach, CA 92660.
(6) The address of such stockholder is 3500 Gaston Avenue, Suite 150, Dallas,
TX 75246.
(7) Mr. Scott also owns an aggregate of 51,603 shares of the Company's Series
B Non-Voting Common Stock.
(8) The address of such stockholder is c/o Fountain View, Inc., 11900 Olympic
Blvd., Suite 680, Los Angeles, CA 90064. Shares shown as beneficially
owned by Mr. Abrahams include 8,294 shares owned by Stacy Abrahams, his
wife.
77
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INVESTMENT AGREEMENT
The Company and Robert Snukal, Sheila Snukal, William Scott, Heritage Fund
II, L.P., Heritage Investors II, L.L.C., Heritage Fund II Investment
Corporation, HFV Holdings, LLC, Nassau Capital Partners II L.P., NAS Partners
I LLC, Paribas North America, Inc., Phoenix Home Life Mutual Insurance
Company, PMI Mezzanine Fund, L.P., GS Private Equity Partners, L.P., GS
Private Equity Partners Offshore, L.P. and Sutro Investment Partners V, LLC
(collectively, the "Investors") entered into an Investment Agreement dated
March 27, 1998, providing for the issuance by the Company to such stockholders
of an aggregate of 15,000 shares of Series A Preferred Stock, 668,065 shares
of Series A Common Stock, 114,202 shares of Series B Common Stock and a
warrant to purchase 71,119 shares of Series C Common Stock. These securities
were issued immediately prior to the consummation of the Tender Offer (other
than the Series A Preferred Stock, the warrant and certain shares issued to
Mr. Scott, which were issued promptly after the Merger). The Investment
Agreement specifies the consideration paid by the Investors for the issuance
of such Company securities, which includes (i) a new cash investment in an
aggregate amount of approximately $82 million, (ii) in the case of Heritage,
Mr. Snukal and Mrs. Snukal, the exchange of previously-held stock of Fountain
View, and (iii) in the case of Mr. Scott, the issuance by him to the Company
of a limited recourse promissory note in the amount of $2,530,600, with an
interest rate of 5.7%, due and payable on the earlier to occur of (A) April
15, 2007, or (B) the sale by Mr. Scott of the 20,000 shares of the Company's
common stock pledged as security for the note; the Company has recourse for
the payment of up to $1,012,240 of the principal amount of the note. Pursuant
to the terms of the Investment Agreement, Heritage made an additional cash
investment of $2.6 million for the purchase of the shares of Series A
Preferred Stock and the warrants for shares of Series C Common Stock. On May
4, 1998, Baylor and Buckner purchased certain shares of the Company's Series A
Preferred Stock and a portion of the warrants to purchase Series C Preferred
Stock from Heritage and signed a supplemental signature page agreeing to
become parties to the Investment Agreement. See "Prospectus Summary--The
Financings" and "--Recent Developments".
THE CERTIFICATE OF INCORPORATION
In connection with the Transactions, on March 27, 1998 and May 6, 1998, the
Company amended its certificate of incorporation to provide that its
authorized capital stock consists of (a) 3,000,000 shares of Common Stock
designated as follows: (i) 1,500,000 shares of Series A Common Stock, (ii)
200,000 shares of Series B Non-Voting Common Stock, (iii) 1,300,000 shares of
Series C Common Stock and (b) 1,000,000 shares of Preferred Stock, 200,000 of
which are designated Series A Preferred Stock. The shares of Series A
Preferred Stock are subject to mandatory redemption upon an underwritten
initial public offering of the Company's common stock or after May 1, 2010.
The certificate of incorporation further provides that, on liquidation of the
Company, the holders of Series A Preferred Stock are entitled to receive a
liquidation payment. After such payment, the assets of the Company will be
divided ratably among the holders of (i) the Series A Common Stock and the
Series B Non-Voting Common Stock, on the one hand, and (ii) the holders of the
Series C Common Stock, on the other, based on the relative number of shares of
Common Stock outstanding and held by such holders, provided that the aggregate
number of outstanding shares of Series A Common Stock and Series B Non-Voting
Common Stock shall be deemed to be 1,114,202, or, if different, shall be
deemed to be the number of shares of Series A Common Stock and Series B Non-
Voting Common Stock then outstanding plus any shares of Series B Non-Voting
Common Stock previously outstanding but forfeited pursuant to the Stockholders
Agreement. All amounts distributable among the Series A Common Stock and the
Series B Non-Voting Common Stock will be divided as follows, to the extent of
available proceeds: (A) first, each share of Series A Common Stock will
receive $126.53 plus a 22% internal rate of return thereon calculated from
March 27, 1998 (the "Series A Common Stock Preference"); (B) second, each
share of Series B Non-Voting Common Stock will receive an amount
78
<PAGE>
equal to the Series A Common Stock Preference; and (C) third, the remaining
assets will be distributed ratably among the Series A Common Stock and the
Series B Non-Voting Common Stock.
The March 27 amendment to the Company's certificate of incorporation also
provides that all shares of Company stock outstanding prior to the amendment
were reclassified into an aggregate of 331,935 shares of Series A Common
Stock.
REGISTRATION RIGHTS AGREEMENT
The Company and its stockholders entered into a Registration Rights
Agreement (the "Investor Registration Rights Agreement") on March 27, 1998
concurrently with the consummation of the Tender Offer. The Investor
Registration Rights Agreement provides that Heritage has the right to require
the Company on two occasions to effect the registration of the Company's
common stock held by it under the Securities Act and Mr. and Mrs. Snukal have
the right to cause the Company to effect one demand registration, each at the
Company's expense and subject to certain conditions. Mr. Scott has the right
to request inclusion of the Company common stock held by him in any such
registrations. In addition, all holders of Registrable Securities (as defined
in the Investor Registration Rights Agreement) are entitled to request the
inclusion of any shares of common stock of the Company in any registration
statement at the Company's expense whenever the Company proposes to register
any of its common stock under the Securities Act. However, the underwriter
managing any such offering or any offering effected pursuant to a demand
registration may reduce the number of shares included therein.
PAYMENTS TO CERTAIN STOCKHOLDERS
SUMMIT EXECUTIVE INCENTIVE PLAN FOR MR. SCOTT. Mr. Scott was the beneficiary
of an Executive Incentive Plan maintained by Summit. Under the terms of this
plan, which was amended by Summit prior to the signing of the Merger
Agreement, Mr. Scott received a cash payment from Summit at the effective time
of the Merger of approximately $1,275,000.
REDEMPTION OF MR. SCOTT'S SUMMIT STOCK OPTIONS. Under the Summit Stock
Option Plan, which terminated at the effective time of the Merger, Mr. Scott
received in cash from Summit the net value of his options to purchase Summit
Shares, which equalled $749,125. Mr. Scott held options to acquire 300,000
Summit Shares.
BONUS TO MR. SCOTT FROM THE COMPANY. At the effective time of the Merger,
the Company paid Mr. Scott a bonus equal to $550,000 to partially cover the
tax cost he will incur upon redemption of his stock options described in the
preceding paragraph. The amount of the bonus was calculated not to exceed the
tax benefit which Summit realized as a result of the payments of those
amounts.
BONUS TO MR. SCOTT FROM SUMMIT. At the effective time of the Merger, Summit
paid Mr. Scott a $100,000 bonus.
REINVESTMENT BY MR. SCOTT. The entire net after-tax proceeds of the
foregoing payments to Mr. Scott were invested by Mr. Scott in securities of
the Company under the terms of the Investment Agreement.
PAYMENT TO HERITAGE PARTNERS MANAGEMENT COMPANY, INC. At the effective time
of the Merger, the Company paid Heritage Partners Management Company, Inc., a
fee of $3 million in connection with the Transactions.
PRE-TRANSACTION ARRANGEMENTS
FOUNTAIN VIEW EQUITY TRANSACTIONS
Prior to August 1, 1997, each of the corporations which is now a subsidiary
of Fountain View (other than Summit and its subsidiaries) was owned directly
by Mr. and Mrs. Snukal. On July 24, 1997,
79
<PAGE>
each of those corporations entered into a Stock Purchase and Contribution
Agreement (the "1997 Agreement") with Mr. and Mrs. Snukal, Heritage and
Fountain View providing for the recapitalization of Fountain View, the
issuance of stock of Fountain View to Heritage and the restructuring of the
ownership of the various corporations so that all of them became wholly-owned
subsidiaries of Fountain View. In addition, under the terms of the 1997
Agreement, Mr. and Mrs. Snukal received cash payments from the investments by
Heritage and loans from a senior lender in the aggregate amount of $43.7
million.
The 1997 Agreement contained certain representations, warranties and
covenants, and provided for Mr. and Mrs. Snukal to indemnify Heritage and
Fountain View for varying amounts.
The transactions contemplated by the 1997 Agreement were consummated on
August 1, 1997. From August 1, 1997, until the closing of the purchase of
Summit Shares in the Tender Offer, Fountain View's Board of Directors has
consisted and will consist of three nominees of Mr. and Mrs. Snukal and two
nominees of Heritage. For additional information with respect to the Fountain
View Equity Transactions, see Note 3 to the audited financial statements of
Fountain View included elsewhere in this Prospectus.
RELATED PARTY LEASES
Fountain View leases four SNFs from Mr. and Mrs. Snukal under leases entered
into on August 1, 1997 pursuant to the 1997 Agreement. These facilities are
Fountainview Convalescent Hospital in Los Angeles, California, Montebello
Convalescent Hospital in Montebello, California, Rio Hondo Nursing Center in
Montebello, California and Sycamore Park Convalescent Hospital in Los Angeles,
California. Each lease is for a term of 20 years. The annual rent for the year
ending July 31, 1998 for each of these facilities is as follows: Fountainview
Convalescent Hospital--$360,000; Montebello Convalescent Hospital--$360,000;
Rio Hondo Nursing Center--$720,000; and Sycamore Park Convalescent Hospital--
$324,000. The leases contain rent escalation clauses based on increases in the
consumer price index. Fountain View believes the terms of these leases to be
at fair market value.
TWIN MED
Mrs. Snukal owns approximately 33% of the outstanding equity of Twin Med,
Inc. ("Twin Med"), a supplier of disposable products to long-term care
facilities. Twin Med is one of Fountain View's and Summit's suppliers. Average
monthly payments by Fountain View and Summit to Twin Med are approximately
$50,000 to $70,000 in the aggregate.
80
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
GENERAL. The Company entered into a credit facility with Bank of Montreal
("BMO") that provides Fountain View with financing in the aggregate amount of
up to $115 million. The following summary of the material provisions of the
New Credit Facility does not purport to be complete, and is subject to, and
qualified in its entirety by reference to, (i) the Credit Agreement dated as
of April 16, 1998 among Fountain View, the Banks party thereto and BMO, as
Agent and (ii) the Loan Documents referenced therein .
While BMO committed to fund the entire amount of the credit facilities
described in the Summary of Terms, subject to the conditions described
therein, BMO has formed a syndicate to participate in the New Credit Facility,
and in the future may add financial institutions and other investors
(collectively with BMO, the "Lenders") to such syndicate, who shall be
reasonably acceptable to Fountain View, to join with BMO in providing the
financing. BMO will act as agent for the Lenders (the "Agent"). The New Credit
Facility commitments of the Lenders, which, after syndication, will be several
and not joint, were allocated among (i) a $30 million revolving credit
facility (the "Revolving Credit Facility"), with a $4 million sublimit for
letters of credit (with BMO as the issuing bank), and (ii) one or more term
loan facilities in an aggregate amount of up to $85.0 million (collectively,
the "Term Loan Facility"). The proceeds of the New Credit Facility were used
to refinance certain indebtedness incurred by Fountain View in connection with
the Tender Offer and the Merger, to refinance certain indebtedness of Summit,
to pay fees and expenses incurred in connection with the Transactions (not to
exceed $28 million) and to fund working capital and capital expenditure needs
of the Company and its subsidiaries and for other general corporate purposes.
MATURITY AND PREPAYMENT. The Revolving Credit Facility will mature on April
16, 2004. The Term Loan Facility will be payable in installments with a final
maturity on March 31, 2004. The Term Loan amortization schedule is as follows:
year 1--$0; year 2--$5,000,000; year 3--$10,000,000; year 4--$20,000,000; year
5--$22,500,000; and year 6--$27,500,000. The New Credit Facility is also
subject to mandatory prepayment out of the net cash proceeds of certain asset
sales, issuances of equity, subordinated debt (excluding the Notes offered
hereby) or senior debt securities, as well as out of 85% of excess cash flow
if a specified leverage ratio is exceeded. Prepayments will be applied to
reduce the Term Loan Facility.
REPRESENTATIONS AND WARRANTIES. The credit documents relating to the New
Credit Facility contain customary representations and warranties, including
with respect to corporate status; corporate power, authority and
enforceability; no violation of law, contracts or organizational documents; no
material litigation; correctness of specified financial statements and no
material adverse change; no required governmental or third party approvals;
use of proceeds and compliance with margin regulations; status under the
Investment Company Act of 1940; the Employment Retirement Income Security Act
of 1974, as amended ("ERISA"); environmental matters; perfected liens and
security interests; and payment of taxes.
COVENANTS. The credit documents contain usual and customary covenants,
including covenants with respect to delivery of financial statements and other
reports; compliance with laws; payment of taxes; maintenance of insurance;
limitations on liens; limitations on future mergers, consolidations, joint
ventures and partnerships; prohibitions on sale of all or a substantial part
of the Company's assets; limitations on the incurrence of debt; limitations on
dividends, stock redemptions and the redemption and/or prepayment of other
debt; limitations on investments and acquisitions; limitations on capital
expenditures; compliance with ERISA; limitations on transactions with
affiliates; and a negative pledge, with certain exceptions, for equipment
financing. The credit documents also contain certain financial covenants,
including a minimum fixed charge coverage ratio, a maximum leverage ratio and
a minimum net worth test.
INTEREST AND FEES. Pursuant to the terms of New Credit Facility, Fountain
View may elect to have the interest rate on loans outstanding under the
Revolving Credit Facility and loans outstanding
81
<PAGE>
under the Term Loan Facility bear interest at the LIBOR or the applicable
alternate base rate (defined as the higher of the federal funds rate plus
0.50% or BMO's base rate), in each case plus an applicable margin which will
vary between 1.75% and 2.75% for LIBOR loans and between 0.75% and 1.75% for
alternate base rate loans, depending upon the ratio of the sum of Fountain
View's total funded debt plus a multiple of its operating rents to EBITDAR.
During the continuance of an event of default, a default interest rate equal
to 2.00% above the rate otherwise in effect shall apply. The Company will pay
a commitment fee of 0.50% on the unused portion of the Revolving Credit
Facility. The Company will also pay BMO, as Agent, a customary annual
administration fee.
EVENTS OF DEFAULT; REMEDIES. The New Credit Facility contains customary
events of default, including with respect to nonpayment of principal,
interest, fees or other amounts; violation of covenants; inaccuracy of
representations and warranties; cross-default to other material agreements and
indebtedness; bankruptcy; material judgments; ERISA; and actual or asserted
invalidity of any loan documents or security interest.
INDEMNIFICATION. Under the New Credit Facility, the Company will indemnify
the Lenders from and against all losses, liabilities, claims, damages or
expenses relating to their loans and the Company's use of loan proceeds or the
commitments, including but not limited to, reasonable attorneys' fees and
settlement costs.
SECURITY AND GUARANTEES. The New Credit Facility contains a perfected first
lien on all of the Company's assets, both tangible and intangible, including
without limitation, cash, cash equivalents, inventory, accounts receivable,
property, plant and equipment, intangibles, bank accounts, instruments,
securities, contract rights and other agreements, and the stock of or other
equity interests in all currently owned or to be acquired subsidiaries of the
Company (other than the capital stock of Alexandria Convalescent Hospital,
Inc.). The New Credit Facility is fully guaranteed by all existing and future
subsidiaries of the Company. The guarantees are secured by a perfected first
lien on all assets of the subsidiaries of the Company.
BMO is an affiliate of Nesbitt Burns Securities Inc., one of the Initial
Purchasers of the Notes. One of the other Lenders is Banque Paribas, an
affiliate of Paribas Corporation, one of the Initial Purchasers of the Notes,
and another affiliate of Paribas Corporation is a Fountain View stockholder.
CAPITAL LEASES
In addition to the indebtedness described above, Summit is also party to
seven capital leases for certain of its facilities. All of these capital
leases contain purchase options and certain of these leases contain various
renewal options and extend up to the year 2030. For the year ended June 30,
1997, property and equipment of Summit includes the following amounts for
leases which have been capitalized (assuming the purchase options contained in
these leases will be exercised):
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Land and land improvements.......................... $ 1,400
Buildings and leasehold improvements................ 21,481
Furniture and equipment............................. 2,405
-------
25,286
Less accumulated amortization....................... 2,070
-------
$23,216
=======
</TABLE>
The minimum rental payments for the next five years under noncancellable
capital leases (including purchase options when expected to be exercised) that
have initial or remaining lease terms in excess of one year as of the year
ended June 30, 1997 are $3,321,000, $4,634,000, $4,297,000, $350,000 and
$350,000 for 1998, 1999, 2000, 2001 and 2002, respectively.
82
<PAGE>
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $120.0 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Outstanding Notes properly tendered on or prior to the Expiration
Date and not withdrawn as permitted pursuant to the procedures described
below. The Exchange Offer is being made with respect to all of the Outstanding
Notes; the total aggregate principal amount of Outstanding Notes and Exchange
Notes will in no event exceed $120.0 million.
The summary herein of material provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which will be available upon request of the Company.
PURPOSE OF THE EXCHANGE OFFER
On April 16, 1998, the Company issued $120.0 million aggregate principal
amount of Outstanding Notes. The issuance of the Outstanding Notes was not
registered under the Securities Act in reliance upon exemptions provided in
Rule 144A and Regulation S under the Securities Act.
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on the Closing Date. Pursuant to the
Registration Rights Agreement, the Company and the Guarantors agreed to use
commercially reasonable efforts to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the Exchange Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors will offer the Exchange
Notes (which will have terms substantially identical in all material respects
to the Outstanding Notes), including the Existing Guarantees (the "Exchange
Notes") (except that the Exchange Notes will not contain terms with respect to
transfer restrictions). If (i) the Company and the Guarantors are not required
to consummate the Exchange Offer because the Exchange Offer is not permitted
by applicable law or Commission policy or (ii) any Holder of Transfer
Restricted Securities notifies the Company within 20 days after the Exchange
Offer has been consummated (A) that it is prohibited by applicable law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder, or (C) that such Holder is a broker-dealer and holds
Notes acquired directly from the Company or one of its affiliates, then the
Company and the Guarantors will use commercially reasonable efforts to file a
shelf registration statement pursuant to Rule 415 under the Securities Act,
which may be an amendment to the Existing Offer Registration Statement (in
either event, the "Shelf Registration Statement") on or prior to the earliest
to occur of (1) the 60th day after the date on which the Company determines
that it is not required to file the Exchange Offer Registration Statement or
(2) the 60th day after the date on which the Company receives notice from a
Holder of Transfer Restricted Securities as contemplated by clause (ii) above
(such earliest date being the "Shelf Filing Deadline"), which Shelf
Registration Statement shall provide for resales of all Transfer Restricted
Securities the Holders of which shall provide certain information to the
Company. The Company and the Guarantors will use commercially reasonable
efforts to cause such Shelf Registration Statement to be declared effective by
the Commission on or before the 135th day after the obligation to file the
Shelf Registration Statement arises. For purposes of the foregoing, "Transfer
Restricted Securities" means each Note until the earliest of (i) the date on
which such Note is exchanged in the Exchange Offer and the Note for which it
is exchanged is entitled to be resold to the public by the Holder thereof
without complying
83
<PAGE>
with the prospectus delivery requirements of the Securities Act, (ii) the date
on which such Note has been disposed of in accordance with a Shelf
Registration Statement, or (iii) the date on which such Note is permitted to
be distributed to the public pursuant to Rule 144 under the Securities Act or
by a broker-dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of a copy of this
prospectus).
The Registration Rights Agreement provided that unless the Exchange Offer
were not permissible under applicable law or Commission policy (i) the Company
and the Guarantors would cause to be filed an Exchange Offer Registration
Statement with the Commission as soon as practicable after the Closing Date,
but in no event later than 90 days after the Closing Date, (ii) the Company
and the Guarantors would use commercially reasonable efforts to cause the
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 150 days after the Closing Date,
(iii) in connection with the foregoing, file (A) all pre-effective amendments
to such Registration Statement as may be necessary in order to cause such
Registration Statement to become effective, (B) if applicable, a post-
effective amendment to such Registration Statement pursuant to Rule 430A under
the Securities Act and (C) cause all necessary filings in connection with the
registration and qualification of the Exchange Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit the Exchange Offer
to be consummated, and (iv) upon the effectiveness of such Registration
Statement, commence the Exchange Offer. The Company is entitled to suspend the
effectiveness of any Shelf Registration Statement for certain limited periods
under certain prescribed circumstances. If (a) any of the Registration
Statements required by the Registration Rights Agreement is not filed with the
Commission on or prior to the date specified for such filing; (b) any of such
Registration Statements has not been declared effective by the Commission on
or prior to the date specified for such effectiveness; (c) an Exchange Offer
Registration Statement becomes effective but the Company and the Guarantors
fail to consummate the Exchange Offer within 30 business days thereafter with
respect to the Exchange Offer Registration Statement; or (d) subject to
certain exceptions, the Shelf Registration Statement or the Exchange Offer
Registration Statement is filed and is declared effective but thereafter
ceases to be effective or fails to be usable for its intended purpose prior to
the expiration of the time period specified in the Registration Rights
Agreement without being succeeded immediately by a post-effective amendment to
such Registration Statement that cures such failure and that is itself
declared effective immediately (each such event referred to in clauses (a)
through (d) above, a "Registration Default", and each period during which a
Registration Default has occurred and is Continuing, a "Registration Default
Period"), the Company and Guarantors jointly and severally agree that the
liquidated damages ("Liquidated Damages"), in addition to the base interest
that would otherwise accrue on the Transfer Restricted Securities, shall
accrue at a per annum rate of 0.25% of the aggregate principal amount of such
Transfer Restricted Securities for the first 90 days of the Registration
Default Period, increasing by 0.25% per annum every 90 days up to a maximum of
1.0% per annum until such Registration Default has been cured. All accrued
Liquidated Damages will be paid by the Company to the Record Holders by wire
transfer of immediately available funds or by federal funds check on each
interest payment date at the office or agency of the Company maintained for
such purpose in the Borough of Manhattan, The City of New York. Following the
cure of all Registration Defaults relating to any particular Transfer
Restricted Securities, the accrual of Liquidated Damages with respect to such
Transfer Restricted Securities will cease immediately.
Holders of such Notes will be required to make certain representations to
the Company and the Guarantors (as described in the Registration Rights
Agreement) in order to participate in the Exchange Offer and will be required
to deliver information to be used in connection with the Shelf Registration
Statement within the time periods set forth in the Registration Rights
Agreement in order to have their Notes included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set
forth above.
84
<PAGE>
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 P.M., New York City time, on
, 1998, unless the Company, in its sole discretion, has extended the
period of time (as described below) for which the Exchange Offer is open (such
date, as it may be extended, is referred to herein as the "Expiration Date").
The Expiration Date will be at least 20 business days after the commencement
of the Exchange Offer (or longer if required by applicable law). The Company
expressly reserves the right, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any Outstanding Notes by giving oral notice
(confirmed in writing) or written notice to the Exchange Agent (as defined
herein) and by giving written notice of such extension to the holders thereof
or by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by making a release through the Dow Jones News
Service, in each case, no later than 9:00 A.M. New York City time, on the next
business day after the previously scheduled Expiration Date. Such announcement
may state that the Company is extending the Exchange Offer for a specified
period of time. During any such extension, all Outstanding Notes previously
tendered will remain subject to the Exchange Offer.
In addition, the Company expressly reserves the right to terminate or amend
the Exchange Offer and not to accept for exchange any Outstanding Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "-- Certain Conditions to the Exchange Offer". If any
such termination or amendment occurs, the Company will notify the Exchange
Agent and will either issue a press release or give oral or written notice to
the holders of the Outstanding Notes as promptly as practicable.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender to the Company of Outstanding Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal.
A holder of Outstanding Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references
in this Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Outstanding Notes being tendered, if any, and
any required signature guarantees, to the Exchange Agent at its address set
forth below on or prior to 5:00 p.m., New York City time, on the Expiration
Date (or complying with the procedure for book-entry transfer described below)
or (ii) complying with the guaranteed delivery procedures described below. THE
METHOD OF DELIVERY OF OUTSTANDING NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, OR AN OVERNIGHT OR HAND DELIVERY SERVICE, BE
USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY
DELIVERY. NO OUTSTANDING NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE
COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Outstanding Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Outstanding Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution (as defined herein). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantee must be by a
participant in a recognized signature guaranty medallion program (each an
85
<PAGE>
"Eligible Institution"). If Outstanding Notes are registered in the name of a
person other than a signer of the Letter of Transmittal, the Outstanding Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Outstanding Notes at the
book-entry transfer facility, The Depository Trust Company, for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of Outstanding Notes by causing
such book-entry transfer facility to transfer such Outstanding Notes into the
Exchange Agent's account with respect to the Outstanding Notes in accordance
with the book-entry transfer facility's procedures for such transfer. Although
delivery of Outstanding Notes may be effected through book-entry transfer in
the Exchange Agent's account at the book-entry transfer facility, an
appropriate Letter of Transmittal with any required signature guarantee and
other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Outstanding Notes to reach the Exchange Agent before
the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if the Exchange Agent
has received at its address or facsimile number set forth below on or prior to
the Expiration Date a letter, telegram or facsimile from an Eligible
Institution setting forth the name and address of the tendering holder, the
name in which the Outstanding Notes are registered and, if possible the
certificate number or numbers of the certificate or certificates representing
the Outstanding Notes to be tendered, and stating that the tender is being
made thereby and guaranteeing that within three business days after the
Expiration Date the Outstanding Notes in proper form for transfer (or a
confirmation of book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at the book-entry transfer facility), will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
Outstanding Notes being tendered by the above-described method are deposited
with the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Company may, at its option, reject the tender. Copies of a
Notice of Guaranteed Delivery which may be used by an Eligible Institution for
the purposes described in this paragraph are available from the Exchange
Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Outstanding Notes (or a confirmation of book-entry transfer
of such Outstanding Notes into the Exchange Agent's account at the book-entry
transfer facility) is received by the Exchange Agent, or (ii) a Notice of
Guaranteed Delivery or letter, telegram or facsimile to similar effect (as
provided above) from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Outstanding Notes tendered
pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile
to similar effect (as provided above) by an Eligible Institution will be made
only against deposit of the Letter of Transmittal (and any other required
documents) and the tendered Outstanding Notes. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance of
Outstanding Notes tendered for exchange will be determined by the Company in
its sole discretion, which determination will be final and binding on all
parties. The Company reserves the right to reject any and all tenders of any
particular Outstanding Notes not properly tendered or reject any particular
shares of Outstanding Notes the acceptance of which might, in the judgment of
the Company or its counsel, be unlawful. The
86
<PAGE>
Company also reserves the absolute right to waive any defects or
irregularities or condition of the Exchange Offer as to any particular
Outstanding Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Outstanding
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Outstanding Notes for exchange must be cured within such time as
the Company shall determine. Neither the Company nor any other person shall be
under any duty to give notification of defects or irregularities with respect
to tenders of Outstanding Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal or any Outstanding Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
By tendering, each holder that is not a broker-dealer or is a broker-dealer
but is not receiving Exchange Notes for its own account will represent to the
Company that the Exchange Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of such holder's business, that such
holder has no arrangement or understanding with any person to participate in
the distribution of such Exchange Notes and that such holder is not an
"affiliate" of the Company as defined in Rule 405 under the Securities Act or,
if it is an affiliate, such holder will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Each broker-dealer that is receiving Exchange Notes for its own
account in exchange for Outstanding Notes that were acquired as a result of
market-making or other trading activities will represent to the Company that
it will deliver a prospectus in connection with any resale of such Outstanding
Notes. In addition, the Letter of Transmittal requires each holder to
represent and warrant that (a) the holder accepts the terms and conditions of
the Exchange Offer, (b) the holder has a net long position within the meaning
of Rule 14e-4 under the Exchange Act ("Rule 14e-4") equal to or greater than
the principal amount of Outstanding Notes being tendered, (c) the tender of
such Outstanding Notes complies with Rule 14e-4 (to the extent that Rule 14e-4
is applicable to such exchange), (d) the holder has full power and authority
to tender, exchange, assign and transfer the Outstanding Notes being tendered,
and (e) when the same are accepted for exchange by the Company, the Company
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim or
right.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "--Certain
Conditions to the Exchange Offer", to terminate the Exchange Offer and (b) to
the extent permitted by applicable law, purchase Outstanding Notes in the open
market, in privately negotiated transactions or otherwise. The terms of any
such purchases or offers may differ from the terms of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of Outstanding Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
letter, telegram or facsimile must be received by the Exchange Agent at any
time prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date at its address or facsimile number set forth below. Any such
notice of withdrawal must (i) specify the name of the person having tendered
the Outstanding Notes to be withdrawn (the "Depositor"), (ii) identify the
87
<PAGE>
Outstanding Notes to be withdrawn (including the certificate number of numbers
of the certificate or certificates representing such Outstanding Notes and the
aggregate principal amount of such Outstanding Notes), (iii) be signed by the
holder in the same manner as the original signature on the Letter of
Transmittal by which such Outstanding Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Transfer Agent with respect to the Outstanding Notes
to register the transfer of such Outstanding Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Outstanding
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such withdrawal notices will be determined by the Company in its sole
discretion, which determination will be final and binding on all parties. Any
Outstanding Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be
issued with respect thereto unless the Outstanding Notes so withdrawn are
validly retendered. Any Outstanding Notes which have been tendered but which
are withdrawn will be returned to the holder thereof without cost to such
holder as soon as practicable after such withdrawal. Properly withdrawn
Outstanding Notes may be retendered by following one of the procedures
described above under "-- Procedures for Tendering Outstanding Notes" at any
time prior to the Expiration Date.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Outstanding
Notes properly tendered and will issue the Exchange Notes promptly after
acceptance of the Exchange Offer. See "-- Certain Conditions to the Exchange
Offer" below. For purposes of the Exchange Offer, the Company will be deemed
to have accepted properly tendered Outstanding Notes for exchange when the
Company has given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of the Exchange Notes in exchange for Outstanding
Notes pursuant to the Exchange Offer will be made only after timely receipt by
the Company of such Outstanding Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered
Outstanding Notes are not accepted for exchange for any reason set forth in
the terms and conditions of the Exchange Offer, such unaccepted Outstanding
Notes will be returned without expense to the tendering holder thereof as
promptly as practicable after the rejection of such tender or the expiration
or termination of the Exchange Offer.
UNTENDERED OUTSTANDING NOTES
Holders of Outstanding Notes whose Outstanding Notes are not tendered or are
tendered but not accepted in the Exchange Offer will continue to hold such
Outstanding Notes and will be entitled to all the rights and preferences and
subject to the limitations applicable thereto. Following consummation of the
Exchange Offer, the holders of Outstanding Notes will continue to be subject
to the existing restrictions upon transfer thereof and, except as provided
herein, the Company will have no further obligation to such holders to provide
for the registration under the Securities Act of the Outstanding Notes held by
them. To the extent that Outstanding Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Outstanding Notes could be adversely affected.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or issue Exchange Notes in exchange for,
any Outstanding Notes, and may terminate or amend the Exchange Offer, if at
any time before the acceptance of such Outstanding Notes for exchange, any of
the following events shall occur:
(A) an injunction, order or decree shall have been issued by any court or
governmental agency that would prohibit, prevent or otherwise materially
impair the ability of the Company to proceed with the Exchange Offer; or
88
<PAGE>
(B) there shall occur a change in the current interpretation of the staff
of the Commission which current interpretation permits the Exchange Notes
issued pursuant to the Exchange Offer in exchange for the Outstanding Notes
to be offered for resale, resold and otherwise transferred by holders
thereof (other than (i) a broker-dealer who purchases such Exchange Notes
directly from the Company to resell pursuant to Rule 144A, Regulation S or
any other available exemption under the Securities Act or (ii) a person
that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to
participate in the distribution of Exchange Notes.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the Expiration Date, subject to the rights of such holders of tendered
shares of Outstanding Notes to withdraw their tendered Outstanding Notes, or
(iii) waive such termination event with respect to the Exchange Offer and
accept all properly tendered Outstanding Notes that have not been withdrawn.
If such waiver constitutes a material change in the Exchange Offer, the
Company will disclose such change by means of a supplement to this Prospectus
that will be distributed to each registered holder of Outstanding Notes, and
the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders of the Outstanding Notes, if the Exchange
Offer would otherwise expire during such period.
In addition, the Company will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at any time any stop order shall be threatened by the
Commission or in effect with respect to the Registration Statement.
The Exchange Offer is not conditioned on any minimum principal amount of
Outstanding Notes being tendered for exchange.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions regarding Exchange Offer procedures and requests
for additional copies of this Prospectus or the Letter of Transmittal should
be directed to the Exchange Agent addressed as follows:
By Mail:
By Hand:
or Overnight Delivery:
State Street Bank and Trust Company of California, N.A.
c/o State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Attention: Kellie Mullen
Re: Fountain View, Inc.
89
<PAGE>
By Facsimile:
617-664-5290
Confirm by Telephone:
617-664-5587
State Street Bank and Trust Company of California, N.A. is also the Transfer
Agent for the Outstanding Notes and Exchange Notes.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptance of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services and
will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The cash expenses to be incurred by the Company in
connection with the Exchange Offer will be paid by the Company.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the respective dates as
of which information is given herein. The Exchange Offer is not being made to
(nor will tenders be accepted from or on behalf of) holders of Outstanding
Notes in any jurisdiction in which the making of the Exchange Offer or the
acceptance thereof would not be in compliance with the laws of such
jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Outstanding Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Outstanding Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Outstanding Notes
tendered, or if tendered Outstanding Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Exchange
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holders.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. Expenses incurred in connection
with the issuance of the Exchange Notes will be amortized by the Company over
the term of the Exchange Notes under generally accepted accounting principles.
90
<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations of the staff of the Division of Corporation Finance
of the Commission set forth in no-action letters issued to third parties, the
Company believes that, except as described below, Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the respective holders thereof without further compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that (i) such Exchange Notes are acquired in the ordinary course of
such holder's business and (ii) such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
of the Exchange Notes. A holder of Outstanding Notes that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act or that is
a broker-dealer that purchased Outstanding Notes from the Company to resell
pursuant to an exemption from registration under the Securities Act (a) cannot
rely on such interpretations by the staff of the Division of Corporation
Finance of the Commission, (b) will not be permitted or entitled to tender
such Outstanding Notes in the Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Outstanding Notes unless
such sale or transfer is made pursuant to an exemption from such requirements.
In addition, any holder who tenders Outstanding Notes in the Exchange Offer
with the intention or for the purpose of participating in a distribution of
the Exchange Notes cannot rely on such interpretations by the staff of the
Division of Corporation Finance of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with the secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing selling security
holders information required by Item 507 of Regulation S-K under the
Securities Act. To date, the staff of the Division of Corporation Finance of
the Commission has taken the position that a broker-dealer that has acquired
securities in exchange for securities that were acquired by such broker-dealer
as a result of market-making activities or other trading activities may
fulfill the prospectus delivery requirements with the prospectus contained in
an exchange offer registration statement.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make
certain representations to the Company set forth in "The Exchange Offer--
Purpose of the Exchange Offer".
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such Exchange Notes. This Prospectus may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired as a result of market-making
activities or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company has agreed that, for a
period of up to 180 days after the effective date of the Registration
Statement, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Risk Factors--Absence of Public
Market for the Notes" and "The Exchange Offer--Procedures for Tendering
Outstanding Notes".
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer
91
<PAGE>
and any broker or dealer that participates in a distribution of such Exchange
Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit from any such resale of Exchange Notes and any
commissions or concessions received by any such person may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Subject to certain provisions set forth in the Registration Rights
Agreement, for a period of 180 days after the effective date of the
Registration Statement, the Company will promptly send additional copies of
this Prospectus and any amendment or supplement to this Prospectus to any
participating broker-dealer that requests such documents in the Letter of
Transmittal. The Company has agreed to pay the expenses incident to the
Exchange Offer, other than any discounts or commissions incurred upon the sale
of the Exchange Notes. The Company will indemnify each participating broker-
dealer selling Exchange Notes against certain liabilities, including
liabilities under the Securities Act.
92
<PAGE>
DESCRIPTION OF NOTES
GENERAL
Except as otherwise indicated, the following description relates both to the
Outstanding Notes issued in the Note Offering and the Exchange Notes, together
with the Exchange Guarantees, to be issued in exchange for the Outstanding
Notes in the Exchange Offer. The form and terms of the Exchange Notes are the
same as the form and terms of the Outstanding Notes, except that the Exchange
Notes have been registered under the Securities Act and therefore will not
bear legends restricting the transfer thereof. The Exchange Notes will be
obligations of the Company evidencing the same indebtedness as the Outstanding
Notes. The Outstanding Notes were issued, and the Exchange Notes offered
hereby will be issued, pursuant to an Indenture (the "Indenture") between the
Company, the Guarantors and State Street Bank and Trust Company of California,
N.A., as trustee (the "Trustee"), in a private transaction that is not subject
to the registration requirements of the Securities Act. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the material provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
proposed form of Indenture and Registration Rights Agreement are available as
set forth below under "--Additional Information". The definitions of certain
terms used in the following summary are set forth below under "--Certain
Definitions". For purposes of this summary, the term "Company" refers only to
Fountain View, Inc. and not to any of its Subsidiaries.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all current and future Senior Debt. As of
March 31, 1998, on a pro forma basis giving effect to the Transactions the
Company would have had Senior Debt of approximately $124.9 million, $15.0
million of mandatory redeemable preferred stock and, through its Subsidiaries,
would have had additional liabilities (including trade payables) aggregating
approximately $71.1 million. The Indenture permits the incurrence of
additional Senior Debt in the future.
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. The Notes are
effectively subordinated to all Indebtedness and other liabilities and
commitments (including trade payables) of the Company's Subsidiaries. Any
right of the Company to receive assets of any of its Subsidiaries upon the
latter's liquidation or reorganization (and the consequent right of the
Holders of the Notes to participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors, except to the
extent that the Company is itself recognized as a creditor of such Subsidiary,
in which case the claims of the Company would still be subordinate to any
security in the assets of such Subsidiary and any indebtedness of such
Subsidiary senior to that held by the Company. As of March 31, 1998, the
Company's Subsidiaries would have had approximately $24.9 million of
Indebtedness, $46.2 million of trade payables and other liabilities
outstanding and $15.0 million of mandatory redeemable preferred stock after
giving pro forma effect to the Transactions. See "Risk Factors--Ability of
Company to Obtain Funds from Subsidiaries".
As of the date of the Indenture, all of the Company's Subsidiaries are
Restricted Subsidiaries. However, under certain circumstances, the Company
will be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $120.0 million and
will mature on April 15, 2008. Interest on the Notes accrues at the rate of 11
1/4% per annum and will be payable semi-annually
93
<PAGE>
in arrears on April 15 and October 15, commencing on October 15, 1998, to
Holders of record on the immediately preceding April 1 and October 1. Interest
on the Notes accrues from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of original issuance. Interest
is computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest and Liquidated Damages on the Notes
is payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register
of Holders of Notes; provided that all payments of principal, premium,
interest and Liquidated Damages with respect to Notes the Holders of which
have given wire transfer instructions to the Company will be required to be
made by wire transfer of immediately available funds to the respective
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Notes will be issued in denominations
of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed by the Guarantors. The Guarantee of each Guarantor are unsecured
and subordinated to the prior payment in full of all Senior Debt of such
Guarantor, which as of May 31, 1998 included approximately $126.0 million of
Senior Debt and the amounts for which the Guarantors are liable under the
guarantees issued from time to time with respect to Senior Debt, including
guarantees of all Obligations under the New Credit Facility. The Subsidiary
Guarantees provide that the Obligations of each Guarantor thereunder are
limited so as not to constitute a fraudulent conveyance under applicable law.
See, however, "Risk Factors--Effect of Fraudulent Transfer Statutes on
Validity of Notes and Guarantees".
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor under the
Registration Rights Agreement and, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the Trustee, under the Notes and
the Indenture; (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; and (iii) except in the case of a merger
of a Guarantor with or into another Guarantor or a merger of a Guarantor with
or into the Company, the Company would be permitted by virtue of the Company's
pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the covenant described below
under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock".
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor (other than to the Company or another
Guarantor), by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the Capital Stock of any Guarantor (other than to the
Company or another Guarantor), then such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the entity acquiring the property
(in the event of a sale or other disposition of all of the assets of such
Guarantor) will be released and relieved of any obligations under its
Subsidiary Guarantee and any such acquiring entity will not be required to
assume any obligations of such Guarantor under the applicable Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition
are applied in accordance with the applicable provisions of the Indenture. See
"Repurchase at Option of Holders--Asset Sales".
94
<PAGE>
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes is
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter incurred.
Upon any distribution to creditors of the Company or any Guarantor in a
liquidation or dissolution of the Company or any Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or any Guarantor or its property, an assignment for the benefit of
creditors or any marshalling of the Company's or any Guarantor's assets and
liabilities, the holders of Senior Debt will be entitled to receive payment in
full of all Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt) before the Holders of Notes will be entitled to
receive any payment with respect to the Notes, and until all Obligations with
respect to Senior Debt are paid in full, any distribution to which the Holders
of Notes would be entitled shall be made to the holders of Senior Debt (except
that Holders of Notes may receive and retain Permitted Junior Securities and
payments made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
The Company and the Guarantors also may not make any payment upon or in
respect of the Notes or the Guarantees (except in Permitted Junior Securities
or from the trust described under "--Legal Defeasance and Covenant
Defeasance") if (i) a default in the payment of the principal of, premium, if
any, or interest on Senior Debt occurs and is continuing beyond any applicable
period of grace or (ii) any other default occurs and is continuing with
respect to Designated Senior Debt that permits holders of the Designated
Senior Debt as to which such default relates to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the Company or the holders of any Designated Senior Debt. Payments on the
Notes may and shall be resumed (a) in the case of a payment default, upon the
date on which such default is cured or waived and (b) in case of a nonpayment
default, the earlier of the date on which such nonpayment default is cured or
waived or 179 days after the date on which the applicable Payment Blockage
Notice is received by the Trustee, unless the maturity of any Designated
Senior Debt has been accelerated. No new period of payment blockage under
clause (ii) above may be commenced unless and until (i) 360 days have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice and
(ii) all scheduled payments of principal, premium, if any, and interest on the
Notes that have come due have been paid in full in cash. No nonpayment default
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been waived for a period of not
less than 180 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company and the Guarantors who are holders of Senior Debt.
The principal amount of Senior Debt outstanding at May 31, 1998 was
approximately $126.0 million. The Indenture limits, subject to certain
financial tests, the amount of additional Indebtedness, including Senior Debt,
that the Company and its Subsidiaries can incur. See "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock".
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to April 15,
2003. Thereafter, the Notes will be subject to redemption at any time or from
time to time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices
95
<PAGE>
(expressed as percentages of principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on April
15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................... 105.625%
2004........................................................... 103.750
2005........................................................... 101.875
2006 and thereafter............................................ 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to April 15, 2001, the
Company may redeem up to 35% of the aggregate principal amount of Notes
originally issued under the Indenture at a redemption price of 111.25% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings by the Company; provided that at least
$78.0 million in aggregate principal amount of Notes remain outstanding
immediately after the occurrence of such redemption (excluding Notes held by
the Company and its Subsidiaries); and provided, further, that such redemption
shall occur within 60 days of the date of the closing of such Public Equity
Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. Notices of redemption may not be conditional. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
purchase (the "Change of Control Payment"). Within fifteen Business Days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase Notes on the date specified in such notice,
which date shall be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"), pursuant to
the procedures required by the Indenture and described in such notice. The
Company will
96
<PAGE>
comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture will
provide that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility currently prohibits the Company from purchasing any
Notes and also provides that certain change of control events, including,
without limitation, a Change of Control, with respect to the Company would
constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing Notes. In such case, the
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which would, in turn, constitute a default under
the New Credit Facility. In such circumstances, the subordination provisions
in the Indenture would likely restrict payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all", there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
97
<PAGE>
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary
is in the form of cash; provided that the amount of (x) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet), of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes
or the Subsidiary Guarantees thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability and (y) in the
case of any Asset Sale constituting the transfer (by merger or otherwise) of
all of the Capital Stock of a Restricted Subsidiary, any liabilities (as shown
on such Restricted Subsidiary's most recent balance sheet) of such Restricted
Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Notes or the Subsidiary Guarantees) that will
remain outstanding after such transfer and will not be a liability of the
Company or any other Restricted Subsidiary of the Company following such
transfer and (z) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay Senior
Debt, or (b) to the acquisition of a majority of the assets of, or a majority
of the Voting Stock of, a Healthcare Related Business, the making of a capital
expenditure or the acquisition of other long-term assets for use in a
Healthcare Related Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company will be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that any Excess Proceeds remain after consummation of
an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount
of Notes tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to
be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct
or indirect holders of the Company's or
98
<PAGE>
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or to the Company or a Restricted
Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or
retire for value (including, without limitation, in connection with any merger
or consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company; (iii) make any payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness that is subordinated to the Notes except a payment
of interest or principal at Stated Maturity, or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described above under caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (vi) and (vii) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company since the date of the Indenture as a contribution to its
common equity capital or from the issue or sale of Equity Interests of the
Company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company), plus (iii) to the extent that any Restricted Investment that
was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness that is subordinated to the Notes or Equity
Interests of the Company in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a Restricted Subsidiary of
the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance
or other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition
of Indebtedness that is subordinated to the Notes with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of
any dividend (in cash or otherwise) by a Restricted Subsidiary of the Company
to the holders of its common Equity Interests on a pro rata basis; and (v) the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company
held by any member of the Company's (or any of its Restricted Subsidiaries')
management pursuant to any management equity
99
<PAGE>
subscription agreement, stock option agreement or employment agreement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $2.0 million in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; (vi) the repurchase,
redemption or other acquisition or retirement for value of any Equity
Interests of the Company or any Subsidiary of the Company held by any member
of the Company's (or any of its Subsidiaries') management pursuant to any
management equity subscription agreement, stock option agreement or employment
agreement, provided that the purchase price is paid with the proceeds to the
Company of key man life insurance or disability insurance policies purchased
by the Company specifically to finance any such repurchase, redemption or
other acquisition; or (vii) the payment of the Transaction Related Payments.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant or Permitted
Investments, as applicable. All such outstanding investments will be deemed to
constitute Restricted Investments in an amount equal to the greatest of (x)
the net book value of such Investments at the time of such designation, (y)
the fair market value of such Investments at the time of such designation and
(z) the original fair market value of such Investments at the time they were
made. Such designation will only be permitted if such Restricted Payment would
be permitted at such time and if such Restricted Subsidiary otherwise meets
the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by
this covenant shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the Trustee, such determination to
be based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if such fair market value exceeds
$10.0 million. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which
the calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred
stock, provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and the Company's
Subsidiaries may incur Indebtedness or issue preferred stock if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters (excluding any fiscal quarters ending prior to July 1, 1997) for
which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock or preferred stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or
the Disqualified Stock or preferred stock had been issued, as the case may be,
at the beginning of such four-quarter period.
100
<PAGE>
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters of credit
(with letters of credit being deemed to have a principal amount equal to
the stated amount thereof) and other obligations under Credit Facilities in
an aggregate principal amount that does not exceed at any one time $115.0
million less the aggregate amount of all Net Proceeds of Asset Sales
applied by the Company or any of its Subsidiaries to repay Indebtedness
under such Credit Facilities pursuant to the covenant described above under
the caption "--Asset Sales" (other than temporary paydowns pending final
application of such Net Proceeds);
(ii) the incurrence by the Company and the Guarantors of the Existing
Indebtedness and the issuance of the Existing Disqualified Stock;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes in an aggregate principal amount not to exceed $120.0 million;
(iv) the incurrence by the Company or any of the Guarantors of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (iv), that does not
exceed at any one time the amount of such Capital Lease Obligations,
mortgage financings or purchase money obligations outstanding as of the
date of the Indenture, plus $5.0 million;
(v) the incurrence by the Company or any of the Guarantors of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred under the
first paragraph hereof or clauses (ii) or (iv) of this paragraph;
(vi) the incurrence by the Company or any of the Guarantors of
intercompany Indebtedness between or among the Company and any Guarantor;
provided, however, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Guarantor thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Guarantor
thereof shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Guarantor, as the case may be, that was
not permitted by this clause (vi);
(vii) the incurrence by the Company or any of the Guarantors of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is permitted
by the terms of this Indenture to be outstanding; and
(viii) the guarantee by the Company or any of its Subsidiaries or any of
the Guarantors of Indebtedness of the Company or another Guarantor that was
permitted to be incurred by another provision of this covenant;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (ix), and
the issuance of preferred stock by Unrestricted Subsidiaries; and
101
<PAGE>
(x) the incurrence by the Company or any of the Guarantors of additional
Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (x), not to exceed $5.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (i) through (x) above or is entitled to
be incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and
the payment of dividends on Disqualified Stock in the form of additional
shares of the same class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock for purposes
of this covenant; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued (to the extent not already
included in Fixed Charges).
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien of any kind on any asset now owned or hereafter
acquired, securing Indebtedness or trade payables, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1)
on its Capital Stock or (2) with respect to any other interest or
participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii)
transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries. However, the foregoing restrictions will not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are not materially more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the agreements governing such Existing Indebtedness as in effect
on the date of the Indenture, (b) the New Credit Facility as in effect as of
the date of the Indenture, or other Credit Facilities entered into subsequent
to the date of the Indenture, and in either case any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such other Credit
Facilities or amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are not materially more
restrictive, taken as a whole, with respect to such dividend and other payment
restrictions than those contained in the New Credit Facility as in effect on
the date of the Indenture, (c) the Indenture and the Notes, (d) applicable
law, (e) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or
102
<PAGE>
the property or assets of the Person, so acquired, provided that, in the case
of Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred, (f) customary non-assignment provisions in leases and other
contracts and other contracts entered into in the ordinary course of business
and consistent with past practices, (g) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions
of the nature described in clause (iii) above on the property so acquired, (h)
any agreement for the sale of a Subsidiary or a substantial proportion of such
Subsidiary's assets that restricts distributions by that Subsidiary pending
its sale, (i) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced,
(j) secured Indebtedness otherwise permitted to be incurred pursuant to the
provisions of the covenant described above under the caption "--Liens" that
limits the right of the debtor to dispose of the assets securing such
Indebtedness, (k) provisions with respect to the disposition or distribution
of assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business and (l) restrictions on cash
or other deposits or net worth imposed by customers under contracts entered
into in the ordinary course of business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made is
a corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) except in the case of a merger
or consolidation of the Company with or into a Wholly Owned Restricted
Subsidiary of the Company, the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company) or the entity or
Person to which such sale, assignment, transfer, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Registration Rights Agreement, the Notes and the Indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction and (B) will,
immediately after such transaction after giving pro forma effect thereto and
any related financing transaction as if the same had occurred at the beginning
of the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock". The Indenture
will provide that the Company shall not lease its properties and assets
substantially as an entirety to any Person.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is
103
<PAGE>
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of
the Board of Directors and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing. Notwithstanding the
foregoing, the following items shall not be deemed to be Affiliate
Transactions: (i) any employment agreement entered into by the Company or any
of its Subsidiaries in the ordinary course of business and consistent with the
past practice of the Company or such Subsidiary, (ii) transactions between or
among the Company and/or its Restricted Subsidiaries, (iii) payment of
reasonable directors fees to Persons who are not otherwise Affiliates of the
Company, (iv) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company, (v) Restricted Payments that are permitted
by the provisions of the Indenture described above under the caption "--
Restricted Payments", and (vi) Existing Affiliate Transactions.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if
(i) the Company could have incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Additional
Indebtedness and Issuance of Preferred Stock", (ii) the gross cash proceeds of
such sale and leaseback transaction are at least equal to the fair market
value (as determined in good faith by the Board of Directors and set forth in
an Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, the covenant
described above under the caption "--Asset Sales".
Senior Subordinated Debt
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
expressly subordinate or junior in right of payment to any Senior Debt and
senior in any respect in right of payment to the Notes, and (ii) no Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is expressly subordinate or junior in right of payment
to the Senior Guarantees and senior in any respect in right of payment to the
Guarantees.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder of any Notes for
or as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or is paid to all Holders of the Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
104
<PAGE>
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Subsidiary after the date of the
Indenture, then such newly acquired or created Subsidiary shall become a
Guarantor and execute a Supplemental Indenture and deliver an Opinion of
Counsel, in accordance with the terms of the Indenture; provided, that all
Subsidiaries that have properly been designated as Unrestricted Subsidiaries
in accordance with the Indenture (i) shall not be subject to the requirements
of this covenant and (ii) shall be released from all Obligations under any
Guarantee, in each case for so long as they continue to constitute
Unrestricted Subsidiaries.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the Exchange
Offer, whether or not required by the rules and regulations of the Commission,
the Company will file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such
a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company and the
Guarantors have agreed that, for so long as any Notes remain outstanding, they
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act. Any materials required
to be furnished to Holders of Notes by this covenant shall discuss, in
reasonable detail, either on the face of the financial statements included
therein or in the footnotes thereto and in any Management's Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations
of the Unrestricted Subsidiaries of the Company.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (ii) default in payment when
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (iii) failure by
the Company or any of its Subsidiaries for 30 days after notice to comply with
the provisions described under the captions "--Change of Control", "--Asset
Sales", "--Restricted Payments" or "--Incurrence of Indebtedness and Issuance
of Preferred Stock"; (iv) failure by the Company or any of its Subsidiaries
for 60 days after notice to comply with any of its other agreements in the
Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, which default
results in the acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness the maturity of which
has been so accelerated, aggregates $5.0 million or more;
105
<PAGE>
(vi) failure by the Company or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries; and (viii) except as permitted by the Indenture, any Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid in any
material respect or shall cease for any reason to be in full force and effect
or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny
or disaffirm its obligations under its Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute
a Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
April 15, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to April 15, 2003, then the
premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest, Liquidated Damages or premium on, or the principal of,
the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or the Registration Rights Agreement or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below,
106
<PAGE>
(ii) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the Stated Maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred; (iv) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute
a default under any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound, including, without
limitation, the New Credit Facility; (vi) the Company must have delivered to
the Trustee an opinion of counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and
107
<PAGE>
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company is not
required to transfer or exchange any Note selected for redemption. Also, the
Company is not required to transfer or exchange any Note for a period of
15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the redemption of
the Notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders"); (iii) reduce the
rate of or change the time for payment of interest on any Note; (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
Liquidated Damages, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration); (v) make any Note payable in money other
than that stated in the Notes; (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of or premium, if any, or interest on
the Notes; (vii) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"); or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, any amendment to
the provisions of Article 10 of the Indenture (which relate to subordination)
will require the consent of the Holders of at least 75% in aggregate principal
amount of the Notes then outstanding if such amendment would adversely affect
the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
108
<PAGE>
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Fountain View,
Inc., 11900 W. Olympic Blvd., Suite 680, Los Angeles, California 90064,
Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The Outstanding Notes were offered and sold to qualified institutional
buyers in reliance on Rule 144A ("Rule 144A Notes"). The Outstanding Notes
were also offered and sold in offshore transactions in reliance on Regulation
S ("Regulation S Notes"). Except as set forth below, the Outstanding Notes are
issued in registered, global form in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof. Notes were issued at the
Closing only against payment in immediately available funds.
Rule 144A Notes are represented by one or more Notes in registered, global
form without interest coupons (collectively, the "Rule 144A Global Notes").
Regulation S Notes are represented by one or more Notes in registered, global
form without interest coupons (collectively, the "Regulation S Global Notes"
and, together with the Rule 144A Global Notes, the "Outstanding Global
Notes"). The Outstanding Global Notes were deposited upon issuance with the
Trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below. Through and including the 40th day after the later of the commencement
of the Note Offering and the Closing (such period through and including such
40th day, the "Restricted Period"), beneficial interests in the Regulation S
Global Notes could be held only through the Euroclear System ("Euroclear") and
Cedel, S.A. ("Cedel") (as indirect participants in DTC), unless transferred to
a person that took delivery through a Rule 144A Global Note in accordance with
the certification requirements described below. Beneficial interests in the
Rule 144A Global Notes may not be exchanged for beneficial interests in the
Regulation S Global Notes at any time except in the limited circumstances
described below. See "--Exchanges between Regulation S Notes and Rule 144A
Notes".
Except as set forth below, the Outstanding Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee. Beneficial interests in the Outstanding Global Notes may
not be exchanged for Outstanding Notes in certificated form except in the
limited circumstances described below. See "--Exchange of Book-Entry Notes for
Certificated Notes". Except in the limited circumstances described below,
owners of beneficial interests in the Outstanding Global Notes are not
entitled to receive physical delivery of Certificated Notes (as defined
below).
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Notes) are subject to certain restrictions on transfer and bear a restrictive
legend. Regulation S Notes also bear a restrictive legend. In addition,
transfers of beneficial interests in the Outstanding Global Notes are subject
to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and Cedel), which
may change from time to time.
The Trustee acts as Paying Agent and Registrar. The Outstanding Notes may be
presented for registration of transfer and exchange at the offices of the
Registrar.
109
<PAGE>
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may
beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Outstanding Global Notes, DTC credited the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Outstanding Global Notes and (ii) ownership of
such interests in the Outstanding Global Notes is shown on, and the transfer
of ownership thereof will be effected only through, records maintained by DTC
(with respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interest in the
Outstanding Global Notes).
Investors in the Rule 144A Global Notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations (including Euroclear and Cedel) which are Participants
in such system. Investors in the Regulation S Global Notes must initially hold
their interests therein through Euroclear or Cedel, if they are participants
in such systems, or indirectly through organizations that are participants in
such systems. After the expiration of the Restricted Period (but not earlier),
investors may also hold interests in the Regulation S Global Notes through
Participants in the DTC system other than Euroclear and Cedel. Euroclear and
Cedel will hold interests in the Regulation S Global Notes on behalf of their
participants through customers' securities accounts in their respective names
on the books of their respective depositories, which are Morgan Guaranty Trust
Company of New York, Brussels office, as operator of Euroclear, and Citibank,
N.A., as operator of Cedel. All interests in a Global Note, including those
held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Cedel may also
be subject to the procedures and requirements of such systems. The laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act
on behalf of Indirect Participants and certain banks, the ability of a person
having beneficial interests in a Outstanding Global Note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE OUTSTANDING GLOBAL
NOTES DO NOT HAVE OUTSTANDING NOTES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE PHYSICAL DELIVERY OF OUTSTANDING NOTES IN CERTIFICATED FORM AND WILL
NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS" THEREOF UNDER THE
INDENTURE FOR ANY PURPOSE.
110
<PAGE>
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on an Outstanding Global Note registered in the
name of DTC or its nominee will be payable to DTC in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the persons in whose names the Outstanding
Notes, including the Outstanding Global Notes, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, neither the Company, the Trustee nor any
agent of the Company or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Outstanding Global Notes, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Outstanding Global Notes or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Company that its current practice, upon receipt of any payment in
respect of securities such as the Outstanding Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in the principal amount of beneficial interest in the relevant
security as shown on the records of DTC unless DTC has reason to believe it
will not receive payment on such payment date. Payments by the Participants
and the Indirect Participants to the beneficial owners of the Outstanding
Notes will be governed by standing instructions and customary practices and
will be the responsibility of the Participants or the Indirect Participants
and will not be the responsibility of DTC, the Trustee or the Company. Neither
the Company nor the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Outstanding Notes,
and the Company and the Trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest
in the Outstanding Global Notes are eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests
will, therefore, settle in immediately available funds, subject in all cases
to the rules and procedures of DTC and its Participants. See "--Same Day
Settlement and Payment".
Subject to any applicable transfer restrictions, transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same day funds, and transfers between participants in
Euroclear and Cedel will be effected in the ordinary way in accordance with
their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Outstanding Notes described herein, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear or Cedel participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or Cedel, as the case may be, by its respective
depositary; however, such cross-market transactions will require delivery of
instructions to Euroclear or Cedel, as the case may be, by the counterparty in
such system in accordance with the rules and procedures and within the
established deadlines (Brussels time) of such system. Euroclear or Cedel, as
the case may be, will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action to effect
final settlement on its behalf by delivering or receiving interests in the
relevant Outstanding Global Note in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Euroclear participants and Cedel participants may not deliver
instructions directly to the depositories for Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of the Outstanding Notes only at the direction of one or
more Participants to whose account DTC has credited the interests in the
Outstanding Global Notes and only in respect of such portion of the aggregate
principal amount of the Outstanding Notes as to which such Participant or
Participants has
111
<PAGE>
or have given such direction. However, if there is an Event of Default under
the Outstanding Notes, DTC reserves the right to exchange the Outstanding
Global Notes for legended Outstanding Notes in certificated form, and to
distribute such Outstanding Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Regulation S Global Notes and in the
Rule 144A Global Notes among Participants in DTC, Euroclear and Cedel, they
are under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company nor
the Trustee nor any of their respective agents will have any responsibility
for the performance by DTC, Euroclear or Cedel or their respective
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
An Outstanding Global Note is exchangeable for definitive Outstanding Notes
in registered certificated form ("Certificated Notes") if (i) DTC (x) notifies
the Company that it is unwilling or unable to continue as depositary for the
Outstanding Global Notes and the Company thereupon fails to appoint a
successor depositary or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Company, at its option, notifies the Trustee
in writing that it elects to cause the issuance of the Certificated Notes or
(iii) there shall have occurred and be continuing a Default or Event of
Default with respect to the Outstanding Notes. In addition, beneficial
interests in an Outstanding Global Note may be exchanged for Certificated
Notes upon request upon compliance with the procedures set forth in the
Indenture. In all cases, Certificated Notes delivered in exchange for any
Outstanding Global Note or beneficial interests therein will be registered in
the names, and issued in any approved denominations, requested by or on behalf
of the depositary (in accordance with its customary procedures) and will bear
the applicable restrictive legend, unless the Company determines otherwise in
compliance with applicable law.
Exchange of Certificated Notes for Book-Entry Notes
Outstanding Notes issued in certificated form may not be exchanged for
beneficial interests in any Outstanding Global Note unless the transferor
first delivers to the Trustee a written certificate (in the form provided in
the Indenture) to the effect that such transfer will comply with any
appropriate transfer restrictions applicable to such Outstanding Notes.
Exchanges Between Regulation S Notes and Rule 144A Notes
Prior to the expiration of the Restricted Period, beneficial interests in
the Regulation S Global Note may be exchanged for beneficial interests in the
Rule 144A Global Note only if such exchange occurs in connection with a
transfer of the Outstanding Notes pursuant to Rule 144A and the transferor
first delivers to the Trustee a written certificate (in the form provided in
the Indenture) to the effect that the Outstanding Notes are being transferred
to a person who the transferor reasonably believes to be a qualified
institutional buyer within the meaning of Rule 144A, purchasing for its own
account or the account of a qualified institutional buyer in a transaction
meeting the requirements of Rule 144A and in accordance with all applicable
securities laws of the states of the United States and other jurisdictions.
Beneficial interest in a Rule 144A Global Note may be transferred to a
person who takes delivery in the form of an interest in the Regulation S
Global Note, whether before or after the expiration of the Restricted Period,
only if the transferor first delivers to the Trustee a written certificate (in
the form provided in the Indenture) to the effect that such transfer is being
made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if
available) and that, if such transfer occurs prior to the expiration of the
Restricted Period, the interest transferred will be held immediately
thereafter through Euroclear or Cedel.
112
<PAGE>
Transfers involving an exchange of a beneficial interest in the Regulation S
Global Note for a beneficial interest in a Rule 144A Global Note or vice versa
will be effected in DTC by means of an instruction originated by the Trustee
through the DTC Deposit/Withdraw at Custodian system. Accordingly, in
connection with any such transfer, appropriate adjustments will be made to
reflect a decrease in the principal amount of the Regulation S Global Note and
a corresponding increase in the principal amount of the Rule 144A Global Note
or vice versa, as applicable. Any beneficial interest in one of the
Outstanding Global Notes that is transferred to a person who takes delivery in
the form of an interest in the other Outstanding Global Note will, upon
transfer, cease to be an interest in such Outstanding Global Note and will
become an interest in the other Outstanding Global Note and, accordingly, will
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interest in such other Outstanding Global Note for so
long as it remains such an interest. The policies and practices of DTC may
prohibit transfers of beneficial interests in the Regulation S Global Note
prior to the expiration of the Restricted Period.
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Outstanding Notes
represented by the Outstanding Global Notes (including principal, premium, if
any, interest and Liquidated Damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the Outstanding
Global Note Holder. With respect to Outstanding Notes in certificated form,
the Company will make all payments of principal, premium, if any, interest and
Liquidated Damages, if any, by wire transfer of immediately available funds to
the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holder's registered address. The
Outstanding Notes represented by the Outstanding Global Notes are expected to
be eligible to trade in the PORTAL market and to trade in the Depositary's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such Outstanding Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in any certificated Outstanding Notes will also be
settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in an Outstanding Global Note from a
Participant in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear or Cedel participant, during the securities
settlement processing day (which must be a business day for Euroclear and
Cedel) immediately following the settlement date of DTC. DTC has advised the
Company that cash received in Euroclear or Cedel as a result of sales of
interests in an Outstanding Global Note by or through a Euroclear or Cedel
participant to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or
Cedel cash account only as of the business day for Euroclear or Cedel
following DTC's settlement date.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of
113
<PAGE>
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; provided that beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption "--Change of
Control" and/or the provisions described above under the caption "--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be
deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary,
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Restricted Payments", and (iv) an exchange of facilities
by the Company or a Restricted Subsidiary to the extent that such facilities
are exchanged for one or more nursing centers, long-term care facilities,
assisted living facilities, outpatient clinics or any other facilities or
businesses that are used or useful in the provision of healthcare related
services, in each case the aggregate fair market value of which is equal to or
greater than the fair market value of the facilities so exchanged, as
determined in good faith by the Board of Directors.
"Attributable Debt" in respect of a sale and leaseback transaction or an
operating lease in respect of a healthcare facility means, at the time of
determination, the present value (discounted at the rate of interest implicit
in such transaction, determined in accordance with GAAP) of the obligation of
the lessee of the property subject to such sale and leaseback transaction or
operating lease in respect of a healthcare facility for net rental payments
during the remaining term of the lease included in such transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with
114
<PAGE>
any lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution
meeting the qualifications specified in clause (iii) above, (v) commercial
paper having the highest rating obtainable from Moody's Investors Service,
Inc. or Standard & Poor's Corporation and in each case maturing within six
months after the date of acquisition and (vi) money market funds at least 95%
of the assets of which constitute Cash Equivalents of the kinds described in
clauses (i)-(v) of this definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than one or more Principals and their
Related Parties, (ii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than one or more Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall
be deemed to have "beneficial ownership" of all securities that such person
has the right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly or
indirectly, of more than 50% of the Voting Stock of the Company (measured by
voting power rather than number of shares), (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than one or
more Principals and their Related Parties, becomes the "beneficial owner" (as
defined above), directly or indirectly, of more than 35% of the Voting Stock
of the Company (measured by voting power rather than number of shares) and the
Principals and their Related Parties in the aggregate "beneficially own" (as
defined above) less than 35% of the Voting Stock of the Company (measured by
voting power rather than number of shares) or, in the event the Company has
consummated a Public Equity Offering, less than 20% of the Voting Stock of the
Company (measured by voting power rather than number of shares), or (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent
that such provision for taxes was included in computing such Consolidated Net
Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, plus (v) any non-recurring expenses
related to Fountain View's reorganization transactions during August 1997,
plus (vi) non-recurring financing, advisory and other expenses incurred in
connection with the Transactions, minus (vii) non-cash items increasing
115
<PAGE>
such Consolidated Net Income for such period (other than items that were
accrued in the ordinary course of business), in each case, on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing,
the provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Subsidiary of the Company shall
be added to Consolidated Net Income to compute Consolidated Cash Flow of the
Company only to the extent that a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable
to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iv) the cumulative effect of
a change in accounting principles shall be excluded, (v) the Net Income of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries and (vi) the Net Income of any Restricted
Subsidiary shall be calculated after deducting preferred stock dividends
payable by such Restricted Subsidiary to Persons other than the Company and
its other Restricted Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments).
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture, (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election, or (iii) was elected to such Board of Directors
pursuant to a designation made pursuant to the Stockholder Agreement, provided
that at such time the Principals and their Related Parties own more than 35%
of the Voting Stock of the Company.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the New Credit Facility) or commercial paper facilities with banks
or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Facilities outstanding on
116
<PAGE>
the date on which Notes are first issued and authenticated under the Indenture
shall be deemed to have been incurred on such date in reliance on the
exception provided by clause (i) of the definition of Permitted Indebtedness.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) so long as the New Credit Facility is
outstanding, any Indebtedness outstanding under the New Credit Facility, and
(ii) at any time thereafter any other Senior Debt permitted under the
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt".
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments".
"Employment Agreement" means any of the employment agreements between the
Company and William C. Scott, Robert M. Snukal or Sheila S. Snukal in effect
as of the date of the Indenture.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Affiliate Transactions" means any transaction contemplated by any
of (i) the Stockholder Agreement, (ii) the Employment Agreements, (iii) the
Agreement and Plan of Merger, dated as of February 6, 1998, among the Company,
Summit Care Corporation, Heritage Fund II, L.P. and FV-SCC Acquisition Corp.,
(iv) the Investment Agreement, dated as of March 27, 1998, among the Company,
Heritage Fund II, L.P., Heritage Investors II, L.L.C. and certain other
Persons named therein, (v) the leases of the Company's Rio Hondo, Fountain
View, Montebello and Sycamore Park skilled nursing facilities, between Robert
M. Snukal, Sheila S. Snukal or their affiliates and the Company, and (vi) the
purchase and supply agreements between the Company or its Subsidiaries and
Twin Med, Inc. consistent with past practice in the ordinary course of
business.
"Existing Disqualified Stock" means the Series A Preferred Stock of the
Company.
"Existing Indebtedness" means up to $165 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs (other
than any such costs incurred in connection with the Transactions) and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
117
<PAGE>
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or any of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or any of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded,
and (iii) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of
the referent Person or any of its Restricted Subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each of Summit Care Corporation, a California
corporation, Summit Care-California, Inc., a California corporation, Summit
Care Pharmacy, Inc., a California corporation, Skilled Care Network, a
California corporation, Summit Care Texas Equity, Inc., a California
corporation, Summit Care-Texas No. 2, Inc., a Texas corporation, Summit Care-
Texas No. 3, Inc., a Texas corporation, Summit Care Management Texas, Inc., a
Texas corporation, Summit Care Texas, L.P., a Texas limited partnership,
Fountain View Holdings, Inc., a Delaware corporation, AIB Corp., a California
corporation, Alexandria Convalescent Hospital, Inc., a California corporation,
BIA Hotel Corp., a California corporation, Brier Oak Convalescent, Inc., a
California corporation, Elmcrest
118
<PAGE>
Convalescent Hospital, a California corporation, Fountainview Convalescent
Hospital, a California corporation, Fountain View Management, Inc., a
California corporation, Rio Hondo Nursing Center, a California corporation,
Locomotion Holdings, Inc., a Delaware corporation, Locomotion Therapy, Inc., a
Delaware corporation, On-Track Therapy Center, Inc., a California corporation,
I.'N O., Inc., a California corporation, and Sycamore Park Convalescent
Hospital, a California corporation, and (ii) any other subsidiary that
executes a Guarantee in accordance with the provisions of this Indenture, and
their respective successors and assigns.
"Healthcare Related Business" means a business, at least a majority of whose
revenues result from healthcare, long-term care or assisted living related
businesses or facilities.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any Indebtedness of any other
Person. The amount of any Indebtedness outstanding as of any date shall be (i)
the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments".
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
119
<PAGE>
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied
to the repayment of Indebtedness (other than Indebtedness under the New Credit
Facility) secured by a lien on the asset or assets that were the subject of
such Asset Sale, and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, by and among the
Company and Bank of Montreal, as agent, providing for up to $30 million of
revolving credit borrowings and $85 million of term loan borrowings, including
any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other
than the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment
in Cash Equivalents; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Restricted Subsidiary of the Company and a Guarantor or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Restricted Subsidiary of the Company that is a
Guarantor; (d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales"; (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (f) Hedging Obligations; (g) any Investment in Permitted Joint
Ventures; (h) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when
120
<PAGE>
taken together with all other Investments made pursuant to this clause
(h) that are at the time outstanding, not to exceed $2.5 million; and (i)
Investments provided for in the Investment Agreement as of the date of the
Indenture.
"Permitted Joint Venture" means (i) any Restricted Subsidiary which owns,
operates or services a Healthcare Related Business, and (ii) Summit Care
Pharmacy, L.L.C., which owns and operates a pharmacy in Texas.
"Permitted Junior Securities" means Equity Interests in the Company or any
Guarantor or debt securities that are unsecured and subordinated to all Senior
Debt (and any debt securities issued in exchange for Senior Debt) to at least
the same extent as, or to a greater extent than, the Notes are subordinated to
Senior Debt pursuant to Article 10 of the Indenture.
"Permitted Liens" means (i) Liens on assets of the Company, and of its
Restricted Subsidiaries or any of the Guarantors securing Senior Debt that was
permitted by the terms of the Indenture to be incurred; (ii) Liens in favor of
the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof or
the acquisition of a Person owning such property or assets by the Company or
any Restricted Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
date of the Indenture; (viii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall
be required in conformity with GAAP shall have been made therefor; (ix)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen and other Liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent or being contested
in good faith, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made in respect thereof; (x)
easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (xi) Liens on assets of Guarantors to secure Senior
Debt of such Guarantors that was permitted by the Indenture to be incurred;
(xii) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred
in connection with the borrowing of money or the obtaining of advances or
credit (other than trade credit in the ordinary course of business) and (b) do
not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company
or such Restricted Subsidiary; and (xiii) Liens on assets of Unrestricted
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable
121
<PAGE>
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Principals" means Heritage Partners Management Company, Inc. and Heritage
Fund II, L.P.
"Public Equity Offerings" means a public offering of common stock of the
Company pursuant to a registration statement filed with the Securities and
Exchange Commission in accordance with the Securities Act.
"Related Party" with respect to any Principal means (A) any controlling
holder of Equity Interests, 80% (or more) owned Subsidiary, or spouse or ex-
spouse or immediate family member (in the case of an individual) of such
Principal or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding
an 80% or more controlling interest of which consist of such Principal and/or
such other Persons referred to in the immediately preceding clause (A) or (C)
any investment fund, whether a limited partnership, limited liability company
or corporation or other entity managed or controlled by Heritage Partners
Management Company, Inc.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means (i) all Indebtedness outstanding under Credit Facilities
and all Hedging Obligations with respect thereto, (ii) any other Indebtedness
permitted to be incurred by the Company under the terms of the Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to
the Notes and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Debt will
not include (w) any liability for federal, state, local or other taxes owed or
owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without
122
<PAGE>
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
"Transaction Related Payments" means (i) certain bonus and other payments
not to exceed $1,925,000 from Summit or the Company to William Scott, payable
at the effective time of the Merger, (ii) payments not to exceed $2,535,000 in
the aggregate to effect the cash-out of Summit stock options, as described in
the Merger Agreement, (iii) the payment of a transaction fee of up to $3
million by the Company to Heritage, payable at the effective time of the
Merger, and (iv) payments to Mr. and Mrs. Snukal and William Scott, not to
exceed $150,000 in the aggregate, upon the forfeiture of Series B Common Stock
pursuant to the Stockholders Agreement.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (x) to subscribe for additional Equity Interests
or (y) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results; (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has
at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments".
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock", the Company
shall be in default of such covenant). The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only
be permitted if (i) such Indebtedness is permitted under the covenant
described under the caption "Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock", calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference
period, and (ii) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal,
123
<PAGE>
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
124
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the anticipated material United States
federal income tax consequences of an exchange of the Outstanding Notes for
the Exchange Notes and of the purchase at original issue, ownership and
disposition of the Exchange Notes is based upon the provisions of the Internal
Revenue Code of 1986, as amended, (the "Code"), the final, temporary and
proposed regulations promulgated thereunder, and administrative rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. This summary does not
purport to deal with all aspects of federal income taxation that may be
relevant to a particular investor, nor any tax consequences arising under the
laws of any state, locality, or foreign jurisdiction, and it is not intended
to be applicable to all categories of investors, some of which may be subject
to special rules. The tax treatment of holders of the Notes may vary depending
upon their particular situations. Certain holders (including insurance
companies, tax-exempt organizations, financial institutions, subsequent
purchasers of Notes and broker-dealers) may be subject to special rules not
discussed below. In general, this discussion assumes that a holder acquires a
Note at original issuance and holds such Note as a capital asset and not as
part of a "hedge", "straddle", "conversion transaction", "synthetic security"
or other integrated investment.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
UNITED STATES FEDERAL TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF
NOTES, AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY
FOREIGN, STATE, LOCAL OR OTHER TAXING JURISDICTION.
TAXATION OF HOLDERS ON EXCHANGE
Subject to the limitation set forth above, an exchange of Outstanding Notes
for Exchange Notes should not be a taxable event to holders of Outstanding
Notes, and holders should not recognize any taxable gain or loss as a result
of such an exchange. Accordingly, a holder would have the same adjusted basis
and holding period in the Exchange Notes as it had in the Outstanding Notes
immediately before the exchange. Further, the tax consequences of ownership
and disposition of any Exchange Notes should be the same as the tax
consequences of ownership and disposition of Outstanding Notes.
As used herein, the term "United States Holder" means a beneficial owner of
a Note that is, for United States federal income tax purposes, a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in the United States or under the law of the United
States or of any political subdivision thereof, an estate whose income is
includible in gross income for United States federal income tax purposes
regardless of its source or a trust, if a United States court is able to
exercise primary supervision over the administration of the trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust.
UNITED STATES HOLDERS
STATED INTEREST. Stated interest on a Note will be taxable to a United
States Holder as ordinary interest income at the time that such interest
accrues or is received, in accordance with the United States Holder's regular
method of accounting for federal income tax purposes. The Company expects that
the Notes will not be considered to be issued with original issue discount for
federal income tax purposes.
LIQUIDATED DAMAGES. The Company intends to take the position that the
Liquidated Damages described above under "The Exchange Offer--Purpose of the
Exchange Offer" will be taxable to a United States Holder as ordinary income
in accordance with such United States Holder's method of
125
<PAGE>
accounting for tax purposes. The Internal Revenue Service ("IRS"), however,
may take a different position, which could affect the timing of both a United
States Holder's income and the timing of the Company's deduction with respect
to such Liquidated Damages.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. Upon the sale, exchange,
redemption, retirement at maturity or other disposition of a Note, a United
States Holder will generally recognize taxable gain or loss equal to the
difference between the sum of cash plus the fair market value of all other
property received on such disposition (except to the extent such cash or
property is attributable to accrued interest which will be taxable as ordinary
income) and such holder's adjusted tax basis in the Note. Gain or loss
recognized on the disposition of a Note generally will be capital gain or
loss. Pursuant to the recently enacted Taxpayer Relief Act of 1997, long-term
capital gains tax rates will apply to dispositions by individuals of capital
assets (such as the Notes) held for more than 18 months. The maximum long-term
capital gains tax rate applicable to individuals is currently 20% (10% for
individuals in the 15% tax bracket). Mid-term capital gains tax rates will
apply to dispositions by individuals of capital assets held for more than one
year but not more than 18 months. The maximum mid-term capital gains tax rate
applicable to individuals is currently 28% (15% for individuals in the 15% tax
bracket). Corporate taxpayers continue to be subject to a maximum regular tax
rate of 35% on all capital gains and ordinary income.
The exchange of a Note by a United States Holder for an Exchange Note should
not constitute a taxable exchange of the Note. As a result, a United States
Holder should not recognize taxable gain or loss upon receipt of an Exchange
Note, a United States Holder's holding period for an Exchange Note should
generally include the holding period for the Note so exchanged and such
holder's adjusted tax basis in an Exchange Note should generally be the same
as such holder's adjusted tax basis in the Note so exchanged.
BACKUP WITHHOLDING AND INFORMATION REPORTING. In general, a United States
Holder of a Note will be subject to backup withholding at the rate of 31% with
respect to interest, premium and possibly principal, if any, paid on a Note,
unless the holder (a) is an entity (including corporations, tax-exempt
organizations and certain qualified nominees) that is exempt from withholding
and, when required, demonstrates this fact, or (b) provides the Company with
its Taxpayer Identification Number ("TIN") (which, for an individual, would be
the holder's Social Security number), certifies that the TIN provided to the
Company is correct and that the holder has not been notified by the IRS that
it is subject to backup withholding due to underreporting of interest or
dividends, and otherwise complies with applicable requirements of the backup
withholding rules. In addition, such payments of interest, premium and
possibly principal to United States Holders that are not corporations, tax-
exempt organizations or qualified nominees will generally be subject to
information reporting requirements.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such holder's federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the IRS.
NON-UNITED STATES HOLDERS
STATED INTEREST. Interest paid by the Company to any beneficial owner of a
Note that is not a United States Holder (a "Non-United States Holder") will
not be subject to United States federal income or withholding tax if such
interest is not effectively connected with the conduct of a trade or business
within the United States by such Non-United States Holder and (a) such Non-
United States Holder (i) does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of the Company;
(ii) is not a controlled foreign corporation with respect to which the Company
is a "related person" within the meaning of the Code and (iii) satisfies
certain certification requirements or (b) such Non-United States Holder is
entitled to the benefits of an income tax treaty under which the interest is
exempt from United States withholding tax, and such Non-United States
126
<PAGE>
Holder provides a properly executed IRS Form 1001 claiming the exemption (or,
after December 31, 1998, IRS Form W-8, which may require obtaining a TIN and
making certain certifications). However, to the extent that any payment of
Liquidated Damages is not treated as a payment of interest on the Notes, such
payment may be subject to U.S. withholding taxes. See "--United States
Holders".
SALE, EXCHANGE OR RETIREMENT OF THE NOTES. A Non-United States Holder will
generally not be subject to United States federal income tax on gain
recognized on a sale, exchange, redemption, retirement at maturity or other
disposition of a Note unless (i) the gain is effectively connected with the
conduct of a trade or business within the United States by the Non-United
States Holder or (ii) in the case of a Non-United States Holder who is a
nonresident alien individual and holds the Note as a capital asset, such
holder is present in the United States for 183 or more days in the taxable
year and certain other requirements are met.
FEDERAL ESTATE TAXES. If interest on the Notes is exempt from withholding of
United States federal income tax under clause (a) of the rules described under
"--Stated Interest", the Notes will not be included in the estate of a
deceased Non-United States Holder for United States federal estate tax
purposes.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The Company will, where
required, report to the holders of Notes and the IRS the amount of any
interest paid on the Notes in each calendar year and the amounts of tax
withheld, if any, with respect to such payments.
In the case of payments of interest to Non-United States Holders, Treasury
Regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payment with respect to which
either the requisite certification has been received or an exemption has
otherwise been established; provided that neither the Company nor its payment
agent has actual knowledge that the holder is a United States person or that
the conditions of any other exemption are not in fact satisfied. Under the
Treasury Regulations, these information reporting and backup withholding
requirements will apply, however, to the gross proceeds paid to a Non-United
States Holder on the disposition of the Notes by or through a United States
office of a United States or foreign broker, unless certain certification
requirements are met or the holder otherwise establishes an exemption.
Information reporting requirements, but not backup withholding, will also
apply to a payment of the proceeds of a disposition of the Notes by or through
a foreign office of a United States broker or foreign brokers with certain
types of relationships to the United States unless the holder is an exempt
recipient (as demonstrated through appropriate certification) or such broker
has documentary evidence in its file that the holder of the Notes is not a
United States person and has no actual knowledge to the contrary and certain
other conditions are met. Neither information reporting nor backup withholding
generally will apply to a payment of the proceeds of a disposition of the
Notes by or through a foreign office of a foreign broker not subject to the
preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the IRS.
Recently, the Treasury Department has promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements but unify current
certification procedures and forms and clarify reliance standards. Under the
final regulations, special rules apply which permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The final regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules.
Non-United States Holders are urged to consult their tax advisors with respect
to the application of these final regulations.
127
<PAGE>
VALIDITY OF THE NOTES
Certain legal matters with respect to U.S. federal and Delaware law in
connection with the Exchange Notes offered hereby will be passed upon for the
Company by Choate, Hall & Stewart (a partnership including professional
corporations), Boston, Massachusetts. Stephen M. L. Cohen, a partner of
Choate, Hall & Stewart, is a limited partner in Heritage Fund II, L.P.
AVAILABLE INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Notes remain outstanding, the Company
will furnish to the holders of the Notes and file with the Commission (unless
the Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company was required to file such
forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods set forth in the Commission's rules and
regulations.
In addition, following the consummation of the Exchange Offer, whether or
not required by the rules and regulations of the Commission, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request.
Once the Registration Statement has been declared effective by the
Commission, the Company will become subject to the informational requirements
of the Exchange Act and in accordance therewith will be required to file
reports and other information with the Commission. When filed, the
Registration Statement and the exhibits thereto, as well as such reports and
other information to be filed by the Company with the Commission, may be
inspected, without charge, at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
as well as the regional offices of the Commission at the Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
documents can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed
rates. In addition, the Company will be required to file electronic versions
of these documents with the Commission through the Commission's Electronic
Data Gathering, Analysis, and Retrieval (EDGAR) system. The Commission
maintains a World Wide Web site, located at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
EXPERTS
The consolidated financial statements and schedule of Fountain View, Inc. as
of December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as
stated in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Summit Care Corporation at June 30,
1997 and 1996, and for each of the three years in the period ended June 30,
1997, appearing in this Prospectus and
128
<PAGE>
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements that may be considered "forward-
looking". Such forward-looking statements include, among other things,
synergies resulting from the Transactions, the success of the Company's
business strategy, the Company's ability to develop and expand its business in
its regional markets, the Company's ability to increase the level of sub-acute
and specialty medical care it provides, the effects of government regulation
and healthcare reform, litigation, the Company's anticipated future revenues
and additional revenue opportunities, capital spending and financial
resources, the liquidity demands of the Company, the Company's ability to meet
its liquidity needs, the resolution of Year 2000 issues, and other statements
contained in this Prospectus regarding matters that are not historical facts.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or
achievements of the Company to be materially different from any future
results, performance or achievements of the Company expressed or implied by
such forward-looking statements. Prospective investors in the Notes offered
hereby are cautioned that although management believes that the assumptions on
which the forward-looking statements contained herein are based are
reasonable, any of those assumptions could prove to be inaccurate and, as a
result, the forward-looking statements based on those assumptions also could
be materially incorrect. The uncertainties in this regard include, but are not
limited to, those identified in the section of this Prospectus entitled "Risk
Factors". In light of these and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
the Company that the Company's plans and objectives will be achieved and
prospective investors in the Notes should not place undue reliance on such
forward-looking statements.
129
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FOUNTAIN VIEW, INC.
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1996 and 1997................. F-3
Consolidated Statements of Income for the Years Ended December 31, 1995,
1996 and 1997............................................................ F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the Three
Years Ended December 31, 1997............................................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1996
and 1997................................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
Consolidated Statements of Income (Unaudited) for the Three Months Ended
March 31, 1997 and 1998.................................................. F-14
Consolidated Balance Sheet (Unaudited) at March 31, 1998.................. F-15
Consolidated Statements of Cash Flows (Unaudited) for the Three Months
Ended March 31, 1997 and 1998............................................ F-17
Notes to Unaudited Consolidated Financial Statements...................... F-18
SUMMIT CARE CORPORATION
Report of Independent Auditors............................................ F-22
Consolidated Balance Sheets at June 30, 1996 and 1997..................... F-23
Consolidated Statements of Income for the Years Ended June 30, 1995, 1996
and 1997................................................................. F-24
Consolidated Statements of Shareholders' Equity for the Three Years Ended
June 30, 1997............................................................ F-25
Consolidated Statements of Cash Flows for the Years Ended June 30, 1995,
1996 and 1997............................................................ F-26
Notes to Consolidated Financial Statements................................ F-27
Consolidated Balance Sheet (Unaudited) at December 31, 1997............... F-38
Consolidated Statements of Income (Unaudited) for the Period from July 1,
1997 to
December 31, 1997........................................................ F-39
Consolidated Statements of Cash Flows (Unaudited) for the Period from July
1, 1997 to
December 31, 1997........................................................ F-40
Notes to Unaudited Consolidated Financial Statements...................... F-41
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Fountain View, Inc.
We have audited the accompanying consolidated balance sheets of Fountain
View, Inc. as of December 31, 1996 and 1997 and the related consolidated
statements of income, shareholders' equity (deficit), and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Fountain View, Inc. at December 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Los Angeles, California
March 11, 1998
F-2
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 1,161 $ 2,551
Accounts receivable, less allowance for uncollectible
accounts
of $779 and $1,152, respectively ......................... 18,717 15,809
Deferred income taxes...................................... -- 927
Other current assets....................................... 713 576
------- -------
Total current assets..................................... 20,591 19,863
------- -------
Leasehold improvements and equipment, at cost:
Leasehold improvements..................................... 2,329 4,659
Furniture and equipment.................................... 1,914 2,096
------- -------
4,243 6,755
Less accumulated depreciation and amortization............. (1,680) (2,481)
------- -------
2,563 4,274
Other assets................................................. 968 1,804
------- -------
Total assets................................................. $24,122 $25,941
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Payable to banks........................................... $ 2,975 $ --
Accounts payable and accrued liabilities................... 1,457 4,179
Employee compensation and benefits......................... 2,423 2,479
Income taxes payable....................................... -- 1,443
Current maturities of long-term debt....................... 170 1,741
------- -------
Total current liabilities................................ 7,025 9,842
------- -------
Long-term debt, less current maturities...................... 496 28,335
------- -------
Total liabilities............................................ 7,521 38,177
Commitments and contingencies -- --
Shareholders' equity (deficit):
Preferred stock, $0.01 par value:
7,000 shares authorized, issued and outstanding
(liquidation preference $7,000).......................... $ -- $ --
Common Stock Series A-1, $0.01 par value:
53,850 shares authorized, issued and outstanding......... -- 1
Common Stock Series A-2, $0.01 par value:
99,950 shares authorized, issued and outstanding......... -- 1
Common Stock Series A-3, non-voting, $0.01 par value:
46,200 shares authorized, issued and outstanding......... -- --
Additional paid-in capital................................. 8,000 21,957
Treasury Stock............................................. (120) --
Retained earnings (accumulated deficit).................... 8,721 (34,195)
------- -------
Total shareholders' equity (deficit)......................... 16,601 (12,236)
------- -------
Total liabilities and shareholders' equity (deficit)......... $24,122 $25,941
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES:
Net revenue............................................ $55,836 $59,432 $67,905
EXPENSES:
Salaries and benefits................................ 35,048 36,166 38,215
Supplies............................................. 5,642 5,483 8,293
Purchased services................................... 3,964 4,658 4,256
Provision for doubtful accounts...................... 427 430 395
Other expenses....................................... 3,421 4,043 5,046
Rent................................................. 1,890 2,120 2,004
Rent to related parties.............................. 2,056 1,776 1,771
Depreciation and amortization........................ 416 600 1,198
Interest (net of interest income--$65, $29 and $4 for
1995, 1996 and 1997, respectively).................. 332 278 1,164
------- ------- -------
Total expenses..................................... 53,196 55,554 62,342
------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES............... 2,640 3,878 5,563
Provision for income taxes............................. 54 78 361
------- ------- -------
NET INCOME............................................. $ 2,586 $ 3,800 $ 5,202
======= ======= =======
Pro forma net income:
Net income as reported............................... $ 2,586 $ 3,800 $ 5,202
Charge in lieu of income taxes....................... 1,025 1,493 1,590
------- ------- -------
Net income............................................. $ 1,561 $ 2,307 $ 3,612
======= ======= =======
Earnings per share:
Basic and diluted--Historical........................ $ 12.93 $ 19.0 $ 26.01
======= ======= =======
Pro forma............................ $ 7.81 $ 11.53 $ 18.06
======= ======= =======
Weighted average shares outstanding:
Basic and diluted.................................... 200 200 200
======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
THREE YEARS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A
PREFERRED SERIES A-1 SERIES A-2 SERIES A-3 RETAINED
STOCK COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL EARNINGS
------------- ------------- ------------- ------------- PAID-IN TREASURY (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK DEFICIT) TOTAL
------ ------ ------ ------ ------ ------ ------ ------ ---------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January
1, 1995............ -- $ -- -- $ -- -- $ -- -- $ -- $ 916 $(120) $ 8,998 $ 9,794
Net income........ -- -- -- -- -- -- -- -- -- -- 2,586 2,586
Issuance of
common stock...... -- -- -- -- -- -- -- -- 300 -- -- 300
Distributions to
shareholders...... -- -- -- -- -- -- -- -- -- -- (2,724) (2,724)
----- ----- ------ ----- ------ ----- ------ ----- ------- ----- -------- --------
Balance at December
31, 1995........... -- -- -- -- -- -- -- -- 1,216 (120) 8,860 9,956
Contributions
from
shareholders...... -- -- -- -- -- -- -- -- 6,784 -- -- 6,784
Net income........ -- -- -- -- -- -- -- -- -- -- 3,800 3,800
Distributions to
shareholders...... -- -- -- -- -- -- -- -- -- -- (3,939) (3,939)
----- ----- ------ ----- ------ ----- ------ ----- ------- ----- -------- --------
Balance at December
31, 1996........... -- -- -- -- -- -- -- -- 8,000 (120) 8,721 16,601
Net income........ -- -- -- -- -- -- -- -- -- -- 5,202 5,202
Contributions
before
reorganization.... -- -- -- -- -- -- -- -- 1,277 -- -- 1,277
Cancellation of
treasury stock.... -- -- -- -- -- -- -- -- -- 120 -- 120
Distributions to
shareholders
before
reorganization.... -- -- -- -- -- -- -- -- -- -- (4,418) (4,418)
Reorganization:
Issuance of
preferred stock. 7,000 -- -- -- -- -- -- -- 7,000 -- -- 7,000
Issuance of
common stock.... -- -- 53,850 1 99,950 1 46,200 -- 6,998 -- -- 7,000
Transactional
costs........... -- -- -- -- -- -- -- -- (1,318) -- -- (1,318)
Distributions to
shareholders.... -- -- -- -- -- -- -- -- -- -- (43,700) (43,700)
----- ----- ------ ----- ------ ----- ------ ----- ------- ----- -------- --------
Balance at December
31, 1997........... 7,000 $ -- 53,850 $ 1 99,950 $ 1 46,200 $ -- $21,957 $ -- $(34,195) $(12,236)
===== ===== ====== ===== ====== ===== ====== ===== ======= ===== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income....................................... $ 2,586 $ 3,800 $ 5,202
------- ------- --------
Adjustments to reconcile net income to net cash
provided
by operating activities:
Depreciation and amortization.................. 416 600 1,198
Changes in operating assets and liabilities:
Accounts receivable............................ 1,176 (3,757) 2,908
Other current assets........................... 165 (92) 137
Accounts payable and accrued liabilities....... 317 421 2,722
Employee compensation and benefits............. 1,152 116 56
Income taxes payable........................... 20 (29) 1,443
Deferred income taxes.......................... -- -- (927)
------- ------- --------
Total adjustments............................ 3,246 (2,741) 7,537
------- ------- --------
Net cash provided by operating activities.... 5,832 1,059 12,739
------- ------- --------
INVESTING ACTIVITIES:
Additions to leasehold improvements and
equipment....................................... (665) (1,816) (2,570)
Additions to other assets........................ (282) -- (1,175)
------- ------- --------
Net cash used in investing activities........ (947) (1,816) (3,745)
------- ------- --------
FINANCING ACTIVITIES:
Decrease in payable to bank...................... (250) (925) (2,975)
Principal payments on long-term debt............. (910) (472) (3,090)
Proceeds from long-term debt..................... 725 249 32,500
Proceeds from issuances of stock................. -- -- 12,682
Contributions from shareholders.................. -- 4,649 1,277
Cancellation of treasury stock................... -- -- 120
Distributions to shareholders.................... (2,724) (3,939) (48,118)
------- ------- --------
Net cash used in financing activities........ (3,159) (438) (7,604)
------- ------- --------
Increase (decrease) in cash and cash equivalents... 1,726 (1,195) 1,390
Cash and cash equivalents at beginning of year..... 630 2,356 1,161
------- ------- --------
Cash and cash equivalents at end of year........... $ 2,356 $ 1,161 $ 2,551
======= ======= ========
NONCASH ACTIVITY:
Additional paid-in-capital relating to debt
forgiveness..................................... $ -- $ 2,135 $ --
Additional paid-in-capital relating to stock
acquisition..................................... 300 -- --
</TABLE>
See accompanying notes.
F-6
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. DESCRIPTION OF BUSINESS
Fountain View, Inc. (the "Company") provides a variety of healthcare
services primarily to the elderly through the operation of eight skilled
nursing care centers and a retirement hotel in California. These services
include nursing care, lodging, food and certain specialty medical services,
including rehabilitation care, infusion therapy and other ancillary services.
The Company also provides therapy services to other long-term care providers.
In July 1997, the Company's predecessor, which was comprised of all of the
Company's operating units owned individually by the controlling shareholders,
was merged with and into several companies formed by Fountain View, Inc., a
holding company, formed for the express purpose of effectuating the
reorganization of the Company. These transactions are described further in
Note 3 to the consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
have been eliminated.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
EARNINGS PER SHARE
Basic and diluted earnings per share have been computed reflecting the
Fountain View Equity Transactions as if such transactions had occurred as of
January 1, 1995, and all common stock, series A-1, A-2 and A-3, was
outstanding from that date.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with an original
or remaining maturity of three months or less when purchased. The Company
places its temporary cash investments with high credit quality financial
institutions.
LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Depreciation and amortization (straight-line method) is based on the
estimated useful lives of the individual assets as follows:
<TABLE>
<C> <S>
Leasehold improvements...... Shorter of lease term or estimated useful
life, generally 5-10 years.
Furniture and equipment..... 3-10 years.
</TABLE>
NET PATIENT SERVICES REVENUE
Approximately 53 percent, 52 percent and 56 percent of the Company's
revenues in the years ended December 31, 1995, 1996 and 1997, respectively,
were derived from funds under federal and state medical assistance programs,
the continuation of which are dependent upon governmental policies. These
revenues are based, in certain cases, upon cost reimbursement principles and
are subject to audit. Revenues are recorded on an accrual basis as services
are performed at their estimated net realizable value. Differences between
final settlement and estimated net realizable value accrued in prior years are
reported as adjustments to the current year's net revenues. A significant
F-7
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
portion of the Company's skilled nursing care center revenues is derived from
government-sponsored healthcare programs such as Medicare and Medicaid. These
programs are highly regulated and are subject to budgetary and other
constraints. While the Company's cash flow could be adversely affected by
periodic government program funding delays or shortfalls, management does not
believe there are any significant credit risks associated with these
government programs.
REGULATORY MATTERS
Laws and regulations governing the Medicare program are complex and subject
to interpretation. The Company believes that it is in compliance with all
applicable laws and regulations and is not aware of any pending or threatened
investigations involving allegations of potential wrongdoing. Compliance with
such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties, and exclusion from the Medicare and Medicaid programs.
INSURANCE COVERAGE
The Company insures for workers' compensation and general and professional
liability coverage under an occurrence based policy, with no deductible. Prior
to October 1997, the Company was self-insured for claims arising from
employees relating to employment matters.
ACCOUNTING FOR THE IMPAIRMENT AND DISPOSAL OF LONG LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS 121), requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. SFAS 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company believes,
based on current circumstances, that there are no indicators of impairment to
its long-lived assets, and the Company presently has no expectations for
disposing of any long-lived assets.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130), which is effective for fiscal years beginning after December 15,
1997. This statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence
as other financial statements. Items recognized as components of comprehensive
income which are not included in the income statement include unrealized gains
and losses in marketable securities, foreign currency translation adjustments,
tax benefits related to nonqualified stock options, and others. The Company is
presently evaluating the new standard to determine how it will present
comprehensive income.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Settlements of an
Enterprise and Related Information" (SFAS 131), which is effective for fiscal
years ending after December 15, 1997. SFAS 131 establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements. It also requires that those enterprises report
selected information about
F-8
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
operating segments in interim financial reports issued to shareholders. Under
existing accounting standards, the Company has reported its operations as one
line of business because substantially all of its revenues have been derived
from its skilled nursing care centers and assisted living centers and closely
related ancillary services. The Company is presently evaluating the new
standard in order to determine its effect, if any, on the way the Company
might report its operations in the future.
3. FOUNTAIN VIEW EQUITY TRANSACTIONS
On or about August 1, 1997, the controlling shareholders of the Company
consummated a reorganization transaction (the "Fountain View Equity
Transactions"). Prior to the Fountain View Equity Transactions, the
controlling shareholders were the sole owners of a number of healthcare
companies, which they managed as one business enterprise. The separately owned
companies consisted of eight skilled nursing facilities, an assisted living
facility and a therapy company which provides therapy services primarily to
third-party owned facilities as well as Company-owned facilities.
Additionally, the controlling shareholders owned the real estate which is
operated by four of the nursing homes. The remaining real estate is leased
from unrelated third parties.
The controlling shareholders along with Heritage formed a new holding
company known as Fountain View, Inc. ("New Fountain View") along with several
acquisition subsidiaries to consolidate the healthcare companies owned by the
controlling shareholders into one company. At the same time, New Fountain View
entered into market rate leases for the four real estate facilities owned by
the controlling shareholders.
Under the terms of the Fountain View Equity Transactions, Heritage invested
$14.0 million in cash in New Fountain View in exchange for all of the
Company's preferred stock with a liquidation value of $7.0 million, and 99,950
shares of the Company's Common Stock Series A-2. The controlling shareholders
at the same time contributed all of their healthcare assets, except for owned
real estate, to New Fountain View in exchange for 53,850 shares of the
Company's Common Stock Series A-1 and 46,200 shares of the Company's common
Stock Series A-3. Concurrent with the exchange of shares, the New Fountain
View obtained bank financing totaling $32.5 million, the proceeds of which
along with the $14.0 million invested by Heritage was used to fund a
distribution of $43.7 million of cash to the controlling shareholders and pay
$1,318,000 in transaction costs. The Common Stock Series A-1 shares have three
votes for each share, whereas Series A-2 has one vote per share, and Series A-
3 is non-voting. By virtue of the voting features, the controlling
shareholders maintained a controlling financial interest in New Fountain View.
Also, a shareholders agreement between the controlling shareholders and
Heritage provides that the Controlling Shareholders hold a majority of the
seats on the Board of Directors.
The preferred shareholders are entitled to receive dividends, at the Board
of Director's discretion, at an annual rate of 10 percent of the preferred
stock base amount, as defined. The initial base amount is $7,000,000. The
preferred stock is non-voting and the holders are entitled to be paid in cash,
in respect of each share of preferred stock held, upon any liquidation or
dissolution of the Company before any distribution is made to the common
shareholders.
Since the controlling shareholders maintained a controlling financial
interest in New Fountain View, a change in control was not deemed to have
occurred upon the consummation of the Fountain View Equity Transactions.
Therefore, the Fountain View Equity Transactions were treated as a
reorganization/merger of companies under common control, with no step-up in
basis of the assets of New Fountain View.
F-9
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair market value disclosures.
CASH AND CASH EQUIVALENTS
The carrying amount reported in the balance sheet for cash and cash
equivalents approximates its fair value.
LONG-TERM DEBT (INCLUDING CURRENT PORTION)
The carrying value of $30,076,000 of long-term approximates the fair market
value of such debt since the interest rate approximates the Company's
incremental borrowing rate.
5. MATERIAL TRANSACTIONS WITH RELATED ENTITIES
Robert and Sheila Snukal own the real estate for four of the Company's
facilities. Such real estate has not been included in the financial statements
for any of the years presented herein since such real estate was excluded from
the Fountain View Equity Transactions discussed in Note 3. Lease payments to
the shareholders under operating leases for these facilities totaled
$2,056,000, $1,776,000 and $1,771,000 for the years ended December 31, 1995,
1996 and 1997, respectively.
6. OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER
31,
-----------
1996 1997
---- ------
<S> <C> <C>
Deposits........................................................ $ 56 $ 56
Goodwill, net................................................... 530 500
Lease acquisition costs, net.................................... 382 337
Deferred loan fees.............................................. -- 911
---- ------
$968 $1,804
==== ======
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1997
---- -------
<S> <C> <C>
Union Bank of California, $15 million Term Loan A due in 2002
and $15 million Term Loan B due in 2004, payable in quarterly
installments ranging from $37 to $1,781, including interest
based on the LIBOR rate. The Company's accounts receivable and
equipment collateralize the Term Loans........................ $-- $29,925
Note payable to shareholders................................... 337 --
Other.......................................................... 329 151
---- -------
666 30,076
Less current maturities........................................ 170 1,741
---- -------
$496 $28,335
==== =======
</TABLE>
F-10
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LONG-TERM DEBT (CONTINUED)
Future maturities of long-term debt are as follows: years ending December
31, 1998--$1,741,000; 1999--$3,710,000; 2000--$4,150,000; 2001--$4,150,000;
2002--$5,638,000; and thereafter $10,687,000.
Interest payments were $397,000, $307,000 and $1,105,000, in 1995, 1996 and
1997, respectively.
8. LINE OF CREDIT
The Company has a line of credit with a financial institution amounting to
$4,500,000 in 1996 and $15,000,000 in 1997. Total draws on the line amounted
to $0 and $2,975,000 as of December 31, 1996 and 1997, respectively. The line
of credit terminates on August 1, 2002 and bears interest at the LIBOR rate.
The Company's accounts receivable and equipment collateralize the line of
credit.
9. INCOME TAXES
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996 1997
------ ------ ----
<S> <C> <C> <C>
Federal:
Current................................................. $ -- $ -- $1,004
Deferred................................................ -- -- (722)
State:
Current................................................. 54 78 282
Deferred................................................ -- -- (203)
------ ------ ------
54 78 361
Charge in lieu of income taxes............................ 1,025 1,493 1,590
------ ------ ------
$1,079 $1,571 $1,951
====== ====== ======
</TABLE>
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Temporary differences are primarily
attributable to reporting for income tax purposes the excess of tax over book
depreciation, allowance for uncollectible accounts, accrued expenses and
accrued vacation benefits. Significant components of the Company's deferred
tax liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1997
--------------- ---------------
NON- NON-
CURRENT CURRENT CURRENT CURRENT
------- ------- ------- -------
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Tax over book depreciation................... $ -- $ -- $-- $ 1
Total deferred tax liabilities................. -- -- -- 1
Deferred tax assets:
Vacation, accrued expenses and allowance for
uncollectible accounts -- -- 770 --
State tax...................................... -- -- 157 --
----- ----- ---- ----
Total deferred tax assets...................... -- -- 927 --
----- ----- ---- ----
Net deferred tax assets........................ $ -- $ -- $927 $ 1
===== ===== ==== ====
</TABLE>
F-11
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. INCOME TAXES (CONTINUED)
A reconciliation of the provision for income taxes with the amount computed
using the federal statutory rate is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Federal rate (34%).................................... $ 898 $1,324 $1,902
State taxes, net of federal tax benefit............... 158 234 336
Goodwill.............................................. -- -- 84
Other, net............................................ 23 13 (4)
Establishment of deferred taxes due to conversion from
S-Corporation to C-Corporation....................... -- -- (367)
------ ------ ------
$1,079 $1,571 $1,951
====== ====== ======
</TABLE>
Total income tax payments during 1995, 1996 and 1997 were $17,000, $30,000
and $8,000, respectively.
CHARGE IN LIEU OF INCOME TAXES AND S-CORPORATION STATUS
Prior to the Fountain View Equity Transactions, most of the individually
owned corporations had elected to be taxed as cash basis S-Corporations.
Included herein are pro forma charges in lieu of income taxes to indicate what
the tax provision would have been had the Company been taxed as a C-
Corporation for all years with a federal and state effective tax rate of 41%.
In connection with the Fountain View Equity Transactions, the controlling
shareholders elected to make a Section 338(h)(10) election (the "Election").
Since the corporations which comprised the predecessor organization were owned
individually by the controlling shareholders, and some of such corporations
had previously elected to be taxed as cash basis S-Corporations, upon the
Election, the cash basis S-Corporations incurred taxable income to the extent
of any receivables and payables not previously recognized in the S-Corporation
tax returns. The controlling shareholders, and not the Company, are
responsible for the taxes due as a result of the Election.
10. LEASES
The Company leases certain of its centers and equipment under noncancelable
operating leases. The leases generally provide for payment of property taxes,
insurance and repairs, and have rent escalation clauses based upon the
consumer price index or annual per bed adjustments.
The future minimum rental payments under noncancelable operating leases that
have initial or remaining lease terms in excess of one year as of December 31,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
------- ------- -------
<S> <C> <C> <C>
1998................................................. $ 1,764 $ 1,954 $ 3,718
1999................................................. 1,764 2,003 3,767
2000................................................. 1,764 1,938 3,702
2001................................................. 1,764 1,995 3,759
2002................................................. 1,764 2,023 3,787
Thereafter........................................... 25,726 7,008 32,734
------- ------- -------
$34,546 $16,921 $51,467
======= ======= =======
</TABLE>
F-12
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. CONTINGENCIES
The Company is subject to malpractice claims and other litigation arising in
the ordinary course of business. In the opinion of management, any liability
beyond amounts covered by insurance and the ultimate resolution of all pending
legal proceedings will not have a material adverse effect on the Company's
financial position or results of operations.
YEAR 2000 (UNAUDITED)
Some of the Company's information systems and biomedical equipment have
time-sensitive software that will not properly recognize the year 2000. This
could result in a system failure or miscalculations causing disruption of the
Company's operations. The Company is currently completing an assessment and
developing a plan to modify or replace portions of its software so that its
computer systems will function properly with respect to dates in the year 2000
and thereafter.
12. SHAREHOLDERS' EQUITY
SHAREHOLDERS AGREEMENT
In connection with the Fountain View Equity Transactions, the controlling
shareholders and Heritage which owns all of the preferred stock, and all of
the Series A-2 common stock consummated a shareholders agreement (the
Agreement). Under the Agreement, each of the parties has certain rights and
obligations. The controlling shareholders retain 3 of the 5 board of directors
seats unless certain events occur including non-payment of any debt of $1
million or more, and the failure to meet certain earnings targets. In
addition, at any time on or after July 1, 2001, at the option of Heritage,
Heritage will have the right to put its common stock holdings to the Company
at appraised value. At any time on or after July 1, 2003, if Heritage has not
elected to put its stock to the Company, at the option of a majority of the
controlling shareholders, the controlling shareholders will have the right to
put the stock to the Company at appraised value. Heritage has also retained
certain protective rights with respect to its investment in the Company.
In addition to the above rights and obligations, should certain Company
terminal value targets not be met, then the Common Stock Series A-3 will be
returned to the Company and cancelled, without remuneration to the controlling
shareholders. The number of shares returned is based on a formula included in
the Agreement. The Agreement terminates upon the occurrence of an IPO.
PURCHASE AND CONTRIBUTION AGREEMENT
In connection with the Fountain View Equity Transactions, the controlling
shareholders agreed to reimburse the Company for any adverse change in cost
report settlements for periods prior to the investment of funds by Heritage.
The controlling shareholders also agreed to indemnify the Company from any
future liability arising from a certain lawsuit.
13. SUBSEQUENT EVENT
In February 1998, the Company entered into a purchase agreement with Summit
Care Corporation ("Summit") to acquire all of the outstanding common stock of
Summit for cash of $21 per share. The total purchase price approximates $145
million.
F-13
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1997 1998
------- -------
<S> <C> <C>
Net revenues.................................................. $16,409 $20,078
Expenses:
Salaries and benefits....................................... 9,435 10,686
Supplies.................................................... 1,648 2,218
Purchased services.......................................... 846 1,828
Provision for doubtful accounts............................. 60 142
Other expenses.............................................. 1,002 1,396
Rent........................................................ 497 542
Rent to related parties..................................... 444 441
Depreciation and amortization............................... 142 524
Interest expense............................................ 20 851
------- -------
14,094 18,628
------- -------
Income before provision for income taxes and extraordinary
item......................................................... 2,315 1,450
Provision for income taxes.................................... 33 580
------- -------
Income before extraordinary item.............................. 2,282 870
Extraordinary item:
Loss on early extinguishment of debt, net of taxes.......... -- 517
------- -------
Net income.................................................... $ 2,282 $ 353
======= =======
Pro forma net income:
Net income as reported...................................... $ 2,282 $ 353
Charge in lieu of income taxes for S-Corporation............ 893 --
------- -------
Net income.................................................... $ 1,389 $ 353
======= =======
Basic and diluted earnings per share:
Income before extraordinary item............................ $ 11.41 $ 3.47
Extraordinary item, net of taxes............................ -- (2.06)
------- -------
Net income.................................................. $ 11.41 $ 1.41
======= =======
Basic and diluted earnings per share--pro forma $ 6.95
=======
Weighted average shares outstanding:
Basic and diluted........................................... 200 251
======= =======
</TABLE>
See accompanying notes.
F-14
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEC.
31, MARCH 31,
1997 1998
------- -----------
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 2,551 $ 3,640
Accounts receivable, less allowance for doubtful
accounts: March 1998--$7,245; December 1997--$1,152.... 15,809 55,267
Supplies inventory, at cost............................. -- 2,993
Other current assets.................................... 1,503 19,209
------- --------
Total current assets.................................. 19,863 81,109
Property and equipment, at cost:
Land and land improvements.............................. -- 24,951
Buildings and leasehold improvements.................... 4,659 201,093
Furniture and equipment................................. 2,096 25,826
Construction in progress................................ -- 7,271
------- --------
6,755 259,141
Less accumulated depreciation and amortization.......... (2,481) (2,892)
------- --------
4,274 256,249
Notes receivable, less allowance for doubtful accounts:
March 1998--$384;........................................ -- 6,596
Goodwill and other intangible assets...................... -- 44,199
Deferred financing costs.................................. -- 1,421
Other assets.............................................. 1,804 6,542
------- --------
$25,941 $396,116
======= ========
</TABLE>
NOTE: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes.
F-15
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 31, MARCH 31,
1997 1998
-------- -----------
(NOTE) (UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to banks....................................... $ -- $ 4,192
Accounts payable and accrued liabilities............... 4,179 53,917
Employee compensation and benefits..................... 2,479 9,223
Income taxes payable................................... 1,443 428
Current portion of long-term debt...................... 1,741 4,840
-------- --------
Total current liabilities............................ 9,842 72,600
Long-term debt, less current portion..................... 28,335 222,538
Deferred income taxes.................................... -- 30,859
-------- --------
Commitments and contingencies
Shareholders' equity (deficit):
Preferred Stock Series A, $0.01 par value:
1,000,000 shares authorized; none issued.............. -- --
Common Stock Series A, $0.01 par value:
1,500,000 shares authorized; 200,000 and 1,000,000
shares issued and outstanding at 1997 and 1998........ 2 10
Common Stock Series B, $0.01 par value:
200,000 shares authorized; 114,202 shares issued and
outstanding at 1998................................... -- 1
Common Stock Series C, $0.01 par value:
1,300,000 shares authorized; none issued.............. -- --
Paid in capital........................................ 21,957 103,948
Accumulated deficit.................................... (34,195) (33,840)
-------- --------
Total shareholders' equity (deficit)................. (12,236) 70,119
-------- --------
$ 25,941 $396,116
======== ========
</TABLE>
NOTE: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See accompanying notes.
F-16
<PAGE>
FOUNTAIN VIEW, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
------------------
1997 1998
------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 2,282 $ 353
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 142 524
(Increase) decrease in accounts receivable, net........ 2,640 (2,988)
(Increase) decrease in other current assets............ 153 (249)
(Decrease) increase in accounts payable and accrued
liabilities........................................... 1,244 (2,498)
Increase in employee compensation and benefits......... 160 1,527
(Decrease) increase in income taxes payable............ 30 (1,015)
------- ---------
Total adjustments.................................... 4,369 (4,699)
------- ---------
Net cash (used in) provided by operating activities.. 6,651 (4,346)
------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment...................... (837) (655)
Decrease in deferred financing costs..................... -- 861
Acquisition of Summit Care, net of cash acquired......... -- (143,795)
------- ---------
Net cash (used in) investing activities.............. (837) (143,589)
------- ---------
FINANCING ACTIVITIES:
Distributions to shareholders............................ (2,465) --
(Decrease) in payable to banks........................... (2,975) (27,677)
(Decrease) in capital lease obligations.................. (20) (29)
Proceeds from long-term debt............................. -- 94,730
Proceeds from stock issuance............................. -- 82,000
------- ---------
Net cash provided by (used in) financing activities.. (5,460) 149,024
------- ---------
Increase in cash and cash equivalents...................... 354 1,089
Cash and cash equivalents at beginning of period........... 1,161 2,551
------- ---------
Cash and cash equivalents at end of period................. $ 1,515 $ 3,640
======= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................... $ 20 $ 703
Income taxes........................................... -- 1,250
Detail of purchase business combination:
Fair value of assets acquired............................ -- 367,944
Less: Liabilities assumed................................ -- 222,785
------- ---------
Cash paid for acquisition................................ -- 145,159
Less: Cash acquired from Summit.......................... -- (1,364)
------- ---------
Net cash paid for acquisition........................ $ -- $ 143,795
======= =========
</TABLE>
F-17
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Fountain View, Inc. ("Fountain View" or "Company") is a leading provider of
long-term care with a full continuum of post-acute care services, with a
strategic emphasis on sub-acute specialty medical care. With the acquisition
of Summit Care Corporation ("Summit") on March 27, 1998, Fountain View now
operates a network of facilities in California, Texas, and Arizona, including
44 skilled nursing facilities ("SNFs") that offer sub-acute, rehabilitative
and specialty medical skilled nursing care, as well as six assisted living
facilities ("ALFs") that provide room and board and social services in a
secure environment. In addition to long-term care, Fountain View provides a
variety of high-quality ancillary services such as physical, occupational and
speech therapy in Fountain View-operated facilities, unaffiliated facilities
and acute care hospitals. Fountain View also operates three institutional
pharmacies (one of which is a joint venture), which service acute care
hospitals as well as SNFs and ALFs, both affiliated and unaffiliated with
Fountain View, an outpatient therapy clinic and a durable medical equipment
("DME") company.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. The unaudited financial information contained herein includes
the results of operations of Fountain View for the full periods reported and
the results of operations of Summit for the five day period March 27, 1998
through March 31, 1998. In the opinion of management, the unaudited financial
information reflects all adjustments (all of which are of a normal recurring
nature), which are considered necessary to fairly state the Company's
financial position, its cash flows and the results of operations. These
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements and
should be read in conjunction with the Company's audited financial statements
for the year ended December 31, 1997. The interim financial information herein
is not necessarily representative of that to be expected for a full year.
3. FOUNTAIN VIEW EQUITY TRANSACTIONS
On or about August 1, 1997, the controlling shareholders of the Company
consummated a reorganization transaction (the "Fountain View Equity
Transactions"). Prior to the Fountain View Equity Transactions, the
controlling shareholders were the sole owners of a number of healthcare
companies, which they managed as one business enterprise. The separately owned
companies consisted of eight skilled nursing facilities, an assisted living
facility and a therapy company which provides therapy services primarily to
third-party owned facilities as well as Company-owned facilities.
Additionally, the controlling shareholders owned the real estate which is
operated by four of the nursing homes. The remaining real estate is leased
from unrelated third parties.
The controlling shareholders along with Heritage Fund II, L.P. ("Heritage")
formed a new holding company known as Fountain View, Inc. along with several
acquisition subsidiaries to consolidate the healthcare companies owned by the
controlling shareholders into one company. At the same time, Fountain View
entered into market rate leases for the four real estate facilities owned by
the controlling shareholders.
Under the terms of the Fountain View Equity Transactions, Heritage invested
$14.0 million in cash in Fountain View in exchange for all of the Company's
preferred stock with a liquidation value of $7.0
F-18
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
million, and 99,950 shares of the Company's Common Stock Series A-2. The
controlling shareholders at the same time contributed all of their healthcare
assets, except for owned real estate, to Fountain View in exchange for 53,850
shares of the Company's Common Stock Series A-1 and 46,200 shares of the
Company's Common Stock Series A-3. Concurrent with the exchange of shares,
Fountain View obtained bank financing totaling $32.5 million, the proceeds of
which, along with the $14.0 million invested by Heritage, was used to fund a
distribution of $43.7 million to the controlling shareholders and pay $1.3
million in transaction costs.
Since the controlling shareholders maintained a controlling financial
interest in Fountain View, a change in control was not deemed to have occurred
upon the consummation of the Fountain View Equity Transactions. Therefore, the
Fountain View Equity Transactions were treated as a reorganization/merger of
companies under common control, with no step-up in basis of the assets of
Fountain View.
4. ACQUISITION OF SUMMIT CARE CORPORATION
On February 6, 1998, Fountain View, Summit, Heritage and FV-SCC Acquisition
Corp. ("Acquisition"), a wholly-owned subsidiary of Fountain View entered into
an Agreement and Plan of Merger providing for the acquisition of Summit by
Fountain View at a price of $21.00 per share. On February 13, 1998,
Acquisition initiated a Tender Offer for the outstanding shares of Summit. The
Tender Offer expired on March 25, 1998 and Acquisition purchased approximately
99% of the shares of Summit for approximately $141.8 million, at the closing
of the Tender Offer on March 27, 1998. Pursuant to the short form merger
provisions of California law the Merger became effective 20 days later on
April 16, 1998 and Acquisition was merged into Summit, a wholly owned
subsidiary of Fountain View.
In order to consummate the purchase of the Summit shares in the Tender Offer
and to refinance Fountain View's existing debt, Fountain View entered into a
term-loan borrowing of $32.0 million and a credit facility of approximately
$62.7 million. These borrowings and Summit's existing debt of $132.5 million,
including capital lease and mortgage obligations of $24.7 million were
outstanding as of March 31, 1998. In addition, Fountain View raised
approximately $82.0 million of new equity investments in the amounts of $75.6
million from Heritage and certain other co-investors through the issuance of
597,190 shares of Common Stock Series A, $5.0 million from Mr. Robert Snukal,
Fountain View's Chief Executive Officer, and Mrs. Sheila Snukal, Fountain
View's Executive Vice President through the issuance of 39,516 shares of
Common Stock Series A and 62,599 shares of Common Stock Series B and $1.4
million from Mr. William Scott, Summit's Chairman and Chief Executive Officer
through the issuance of 11,357 shares of Common Stock Series A and 51,603
shares of Common Stock Series B. The Company also secured a commitment for an
additional equity investment of $15.0 million as of March 31, 1998.
5. SUBSEQUENT EVENTS
On April 16, 1998 concurrent with the Merger becoming effective, Fountain
View entered into a new $30.0 million revolving credit facility, an $85.0
million term loan facility, and successfully completed a Senior Subordinated
Note Offering providing for borrowings of $120.0 million. These funds, as well
as the remaining equity commitment of $15.0 million, were used to consummate
the purchase of Summit's remaining shares, refinance all then existing
Fountain View and Summit indebtedness (except for capital lease and mortgage
obligations), redeem all outstanding options for Summit shares, and pay
certain fees, expenses, and other costs arising in connection with such
F-19
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
transactions. In exchange for the $15.0 million in new cash investment 15,000
shares of Preferred Stock Series A and warrants to purchase 71,119 shares of
Common Stock Series C were issued to Heritage, which were subsequently issued
to the Baylor Group.
On May 4, 1998, Fountain View signed an investment agreement with the Baylor
Health Foundation System ("Baylor"), a vertically integrated healthcare system
operating in Texas, and Buckner, a non-profit foundation, (collectively, the
"Baylor Group"). In addition, Fountain View signed an operating agreement with
Baylor. Pursuant to these agreements, Heritage exchanged Series A Preferred
Stock of Fountain View with the Baylor Group for $12.5 million that entitles
them to a dividend at the time of a liquidity event calculated to achieve a
12% annual rate of return, as well as warrants to purchase shares of Fountain
View's Series C Common Stock. As part of its investment, the Baylor Group is
entitled to have one of its nominees serve on Fountain View's board of
directors. Fountain View and Baylor have signed an agreement to develop and
operate certain facilities on a joint or cooperative basis.
6. OTHER CURRENT ASSETS
Other current assets (in thousands) consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Deferred tax assets................................ $ 926 $ 9,468
Notes receivable................................... -- 1,253
Prepaid expenses................................... 551 2,758
Income tax receivable.............................. -- 3,741
Other receivables.................................. 26 1,989
------ -------
$1,503 $19,209
====== =======
</TABLE>
7. RECENT ACCOUNTING PRONOUNCEMENTS
Reporting Comprehensive Income
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130") which establishes standards for the reporting of comprehensive
income and its components in a full set of general-purpose financial
statements. The standard is effective for fiscal years beginning after
December 15, 1997. An enterprise is required to report a total for
comprehensive income in condensed financial statements of interim periods
issued for external reporting purposes. Comprehensive income is defined as the
change in equity (net assets) of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. SFAS
130 uses the term comprehensive income to describe the total of all components
of comprehensive income, that is, net income plus other comprehensive income.
Other comprehensive income items currently include: unrealized gains and
losses on available-for-sale securities; foreign currency translation
adjustments; changes in the market value of certain futures contracts; and
changes in certain minimum pension liabilities. Fountain View has no items of
other comprehensive income in the periods reported, and therefore, this
statement does not apply.
Disclosures about Segments of an Enterprise
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS
F-20
<PAGE>
FOUNTAIN VIEW, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
131"), which is effective for fiscal years beginning after December 15, 1997.
This Statement is not required to be applied to interim financial statements
in the initial year of its application. SFAS 131 establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements. It also requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. Under existing accounting standards, the Company has
reported its operations as one line of business because substantially all of
its revenues have been derived from its skilled nursing care centers and
assisted living centers and closely related ancillary services. The Company is
presently evaluating the new standard in order to determine its effect, if
any, on the way the Company might report its operations in the future.
F-21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Summit Care Corporation
We have audited the accompanying consolidated balance sheets of Summit Care
Corporation and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended June 30,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Summit Care Corporation at June 30, 1997 and 1996, and the consolidated
results of its operations and cash flows for each of the three years in the
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Los Angeles, California
August 22, 1997
F-22
<PAGE>
SUMMIT CARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 2,658 $ 3,994
Accounts receivable, less allowance for doubtful accounts:
1996--$2,084; 1997--$2,028................................ 27,930 33,749
Supplies inventory, at cost................................ 2,058 2,690
Other current assets....................................... 13,032 12,356
-------- --------
Total current assets..................................... 45,678 52,789
Property and equipment, at cost:
Land and land improvements................................. 16,018 19,513
Buildings and leasehold improvements....................... 136,907 161,080
Furniture and equipment.................................... 18,668 23,978
Construction in progress................................... 15,043 5,947
-------- --------
186,636 210,518
Less accumulated depreciation and amortization............. 21,713 28,605
-------- --------
164,923 181,913
Notes receivable, less allowance for doubtful accounts:
1996--$268; 1997--$322..................................... 4,845 6,859
Other assets................................................. 7,606 8,955
-------- --------
$223,052 $250,516
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank............................................ $ 4,165 $ 4,678
Accounts payable........................................... 19,895 29,586
Employee compensation and benefits......................... 3,738 5,877
Income taxes payable....................................... 989 --
Long-term debt due within one year......................... 2,985 --
-------- --------
Total current liabilities................................ 31,772 40,141
Long-term debt............................................... 107,389 121,452
Deferred income taxes........................................ 2,605 7,511
-------- --------
Total liabilities........................................ 141,766 169,104
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value, 2,000,000 authorized shares,
none issued............................................... -- --
Common stock, no par value, 100,000,000 authorized shares;
6,776,000 and 6,772,800 issued and outstanding,
respectively.............................................. 51,486 51,543
Retained earnings............................................ 29,800 29,869
-------- --------
Total shareholders' equity............................... 81,286 81,412
-------- --------
$223,052 $250,516
======== ========
</TABLE>
See accompanying notes.
F-23
<PAGE>
SUMMIT CARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Net revenues........................................ $137,026 $176,062 $197,927
EXPENSES:
Salaries and benefits............................. 63,171 78,233 89,577
Supplies.......................................... 15,374 18,071 20,160
Purchased services................................ 22,234 37,963 51,520
Provision for doubtful accounts................... 1,330 2,241 2,530
Other expenses.................................... 10,268 12,421 15,722
Rental............................................ 1,691 2,656 2,864
Rental to related parties......................... 450 -- --
Depreciation and amortization..................... 5,249 6,142 7,393
Interest (net of interest income: $513, $522 and
$645, respectively).............................. 4,761 6,574 7,973
-------- -------- --------
124,528 164,301 197,739
-------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES............ 12,498 11,761 188
Provision for income taxes.......................... 4,987 4,452 119
-------- -------- --------
NET INCOME.......................................... $ 7,511 $ 7,309 $ 69
======== ======== ========
</TABLE>
See accompanying notes.
F-24
<PAGE>
SUMMIT CARE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
----------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
--------- ------- -------- -------
<S> <C> <C> <C> <C>
Balances at June 30, 1994.................. 6,743,600 $51,381 $14,980 $66,361
Net income............................... -- -- 7,511 7,511
Exercise of stock options................ 15,700 192 -- 192
Expenses on sale of common stock......... -- (251) -- (251)
--------- ------- ------- -------
Balances at June 30, 1995.................. 6,759,300 51,322 22,491 73,813
Net income............................... -- -- 7,309 7,309
Exercise of stock options................ 13,500 164 -- 164
--------- ------- ------- -------
Balances at June 30, 1996.................. 6,772,800 51,486 29,800 81,286
Net income............................... -- -- 69 69
Exercise of stock options................ 3,200 57 -- 57
--------- ------- ------- -------
Balances at June 30, 1997.................. 6,776,000 $51,543 $29,869 $81,412
========= ======= ======= =======
</TABLE>
See accompanying notes.
F-25
<PAGE>
SUMMIT CARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................... $ 7,511 $ 7,309 $ 69
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 5,249 6,142 7,393
(Increase) in accounts receivable............ (6,907) (7,594) (5,819)
(Increase) decrease in supplies inventory.... (623) 118 (632)
Decrease (increase) in other current assets.. (1,740) (8,429) 1,257
Increase in accounts payable................. 2,512 8,923 9,691
Increase (decrease) in employee compensation
and benefits................................ 478 (270) 2,139
(Decrease) increase in income taxes payable.. 577 (72) (989)
Increase (decrease) in deferred income taxes. (43) 739 4,906
-------- -------- --------
Total adjustments.......................... (497) (443) 17,946
-------- -------- --------
Net cash provided by operating activities.... 7,014 6,866 18,015
-------- -------- --------
INVESTING ACTIVITIES:
Issuance of notes receivable................... (2,089) (916) (3,142)
Principal payments of notes receivable......... 962 498 547
Additions to property and equipment............ (9,004) (26,558) (24,075)
Acquisitions of nursing centers................ (51,178) -- --
Additions to other assets...................... (3,279) (2,276) (1,657)
-------- -------- --------
Net cash used in investing activities........ (64,588) (29,252) (28,327)
FINANCING ACTIVITIES:
Increase in payable to bank.................... 826 1,193 513
Principal payments on long-term debt........... (38,225) (49,914) (17,922)
Proceeds from long-term debt................... 76,520 70,500 29,000
Net expenses from sale of common stock......... (251) -- --
Net proceeds on exercise of stock options...... 192 164 57
-------- -------- --------
Net cash provided by financing activities.... 39,062 21,943 11,648
-------- -------- --------
Increase (decrease) in cash and cash equivalents. (18,512) (443) 1,336
Cash and cash equivalents at beginning of year... 21,613 3,101 2,658
-------- -------- --------
Cash and cash equivalents at end of year......... $ 3,101 $ 2,658 $ 3,994
======== ======== ========
Supplemental disclosures of non-cash investing
and financing activities:
Acquisition notes payable...................... $ (2,814) $ -- $ --
Acquisition of nursing care centers............ 2,814 -- --
Acquisition of nursing care centers under
capital leases................................ 16,654 -- --
Capital lease obligations...................... (16,654) -- --
</TABLE>
See accompanying notes.
F-26
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS. Summit Care Corporation ("Company" or "Summit")
provides a variety of healthcare services primarily to the elderly through the
operation of sub-acute, skilled nursing, Alzheimer's and assisted living units
in skilled nursing care centers and assisted living centers in California,
Texas and Arizona. These services include nursing care, room, board and
certain specialty medical services, including rehabilitation care, infusion
therapy and other ancillary services. The Company also provides specialty
pharmaceutical and infusion therapy services to other long-term care
providers. In April 1994, OrNda HealthCorp ("OrNda") acquired the Company's
then majority shareholder, Summit Health Ltd. ("SHL"). OrNda's 7.5%
Exchangeable Subordinated Notes ("OrNda Notes") were exchangeable into its
equity interest in the Company's common stock, at the option of the holders.
OrNda redeemed 100% of the outstanding OrNda Notes in exchange for its equity
interest in the Company's common stock in August 1995. OrNda currently has no
position in the Company's common stock. In January 1997, OrNda was merged into
Tenet Healthcare Corporation ("Tenet").
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated.
USE OF ESTIMATES. The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
INVENTORIES. Inventories are stated at the lower of cost (first-in, first-
out method) or market.
REVENUES. Approximately 68 percent, 70 percent and 72 percent of the
Company's revenues in the years ended June 30, 1995, 1996 and 1997 were
derived from funds under federal and state medical assistance programs, the
continuation of which are dependent upon governmental policies. These revenues
are based, in certain cases, upon cost reimbursement principles and are
subject to audit. Revenues are recorded on an accrual basis as services are
performed at their estimated net realizable value. Differences between final
settlement and estimated net realizable value accrued in prior years are
reported as adjustments to the current year's net revenues. These adjustments
decreased net revenues by $4,892 in fiscal 1997. A significant portion of the
Company's skilled nursing care center revenues is derived from government
sponsored healthcare programs such as Medicare and Medicaid. These programs
are highly regulated and are subject to budgetary and other constraints. While
the Company's cash flow could be adversely affected by periodic government
program funding delays or shortfalls, management does not believe there are
any significant credit risks associated with these government programs.
PROPERTY AND EQUIPMENT. Depreciation and amortization (straight-line method)
is based on the estimated useful lives of the individual assets as follows:
<TABLE>
<C> <S>
Buildings and improvements....... 15-40 years
Shorter of lease term or estimated useful
Leasehold improvements........... life
Furniture and equipment.......... 3-20 years
</TABLE>
F-27
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Amortization of capital leases is included in depreciation and amortization
expense. For leasehold improvements, where the Company has acquired the right
of first refusal to purchase or to renew the lease, amortization is based on
the lesser of the estimated useful lives and the period covered by the right.
INTANGIBLE ASSETS. Goodwill of $2,321 less accumulated amortization of $182
is included in other assets at June 30, 1997 and is amortized over 35 years
using the straight-line method.
INSURANCE COVERAGE. The Company self insures for certain levels of workers'
compensation and general and professional liability coverage. The Company
utilizes a captive insurance company for the purpose of providing reinsurance
coverage for workers' compensation claims filed by its California and Arizona
employees in excess of a $250 self insurance retention per occurrence and not
subject to an annual aggregate limit. The Company has elected under Texas law
to decline to participate in the Texas workers' compensation insurance program
and maintains employer's excess and occupational indemnity insurance on claims
subject to a $150 self insurance retention per occurrence with no annual
aggregate limit. The Company maintains general and professional liability
insurance on a claims made basis, subject to a $100 self insurance retention
per occurrence and $600 on an annual aggregate basis.
Under both self insurance programs, the Company estimates its liability,
including potential legal fees and settlement amounts, based on claims filed
and estimates of claims incurred but not reported, utilizing historical
experience on an undiscounted basis. Differences between the amounts accrued
and subsequent settlements are recorded in operations in the year of
settlement.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents include highly liquid
investments with an original maturity of three months or less. The Company
places its temporary cash investments with high credit quality financial
institutions.
CASH MANAGEMENT. The Company utilizes a centralized cash management system.
Payable to bank represents checks outstanding.
ACCOUNTING FOR THE IMPAIRMENT AND DISPOSAL OF LONG-LIVED ASSETS. Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company believes, based on current
circumstances, that there are no indicators of impairment to its long-lived
assets, and the Company presently has no expectations for disposing of any
long-lived assets.
RECENT ACCOUNTING PRONOUNCEMENTS. In October 1995, Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), was issued which, if elected, would require companies to use a new fair
value method of valuing stock-based compensation plans. The Company has
elected to continue following present accounting rules under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
which uses an intrinsic value method and often results in no compensation
expense. In accordance with SFAS 123, the Company has provided pro forma
disclosure of what net income and earnings per share would have been had the
new fair value method been used (see Note 10).
F-28
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"),
which is effective for fiscal years ending after December 15, 1997, including
interim periods. Earlier adoption is not permitted. However, an entity is
permitted to disclose pro forma earnings per share amounts computed under SFAS
128 in the notes to the financial statements in periods prior to adoption. The
statement requires restatement of all prior-period earnings per share data
presented after the effective date. SFAS 128 specifies the computation,
presentation, and disclosure requirements for earnings per share and is
substantially similar to the standard recently issued by the International
Accounting Standards Committee entitled "International Accounting Standards,
Earnings per Share." The Company plans to adopt SFAS 128 in fiscal year 1998
and has not determined the impact of adoption.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"), which is effective for
fiscal years ending after December 15, 1997. SFAS 131 establishes standards
for the way that public enterprises report information about operating
segments in annual financial statements. It also requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. Under existing accounting standards,
the Company has reported its operations as one line of business because
substantially all of its revenues have been derived from its skilled nursing
care centers and assisted living centers and closely related ancillary
services. The Company is presently evaluating the new standard in order to
determine its effect, if any, on the way the Company might report its
operations in the future.
RECLASSIFICATIONS. Certain amounts have been reclassified to conform with
1997 presentations.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair market value disclosures.
CASH AND CASH EQUIVALENTS. The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
NOTES RECEIVABLE (INCLUDING CURRENT PORTION). The carrying amount, before
the allowance for doubtful accounts, is $8,434. The fair value of $8,400 is
estimated using discounted cash flow analyses, based on interest rates
currently being offered for notes with similar terms to borrowers of
similar credit quality.
LONG-TERM DEBT (INCLUDING CURRENT PORTION). The carrying value of
$121,452 of long-term debt is based on the original face value (issue
amount). The fair value of $120,300 is estimated based on the present value
of the underlying cash flows discounted at the Company's incremental
borrowing rate.
3. MATERIAL TRANSACTIONS WITH RELATED ENTITIES
TENET HEALTHCARE CORPORATION, ORNDA HEALTHCORP AND SUMMIT HEALTH LTD. The
Company had an agreement with Tenet/OrNda, which expired in March 1997, under
which the Company leased a
F-29
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. NATIONAL TRANSACTIONS WITH RELATED ENTITIES (CONTINUED)
portion of its corporate office space to OrNda and shared the cost of building
services with OrNda. The agreement also required OrNda to provide tax
accounting to the Company. The Company's rental income from OrNda for the
space exceeded the payments to OrNda for services by $31 for the year ended
June 30, 1997. For the years ended June 30, 1996 and 1995, payments to OrNda
for services exceeded rental income for the space by $50 and $23,
respectively. The Company believes that the amount reimbursed for the services
provided and the rental income received are reasonable. The agreement also
indemnified the Company against any liability arising from its divestiture of
facilities, the net assets of which were purchased by SHL during the year
ended June 30, 1992. The provisions of the indemnification survive the
termination of the agreement. Certain provisions of this agreement were
terminated or amended as a result of the redemption on August 28, 1995 by
OrNda of 100% of the OrNda Notes in exchange for the Company's common stock
(see Note 1).
In January 1994, the Company entered into a ten-year sub-lease of a nursing
care center with SHL. The Company believes the monthly lease payments of $37
are reasonable for the market areas. Lease payments to Tenet, OrNda and SHL
were $450 for each of the years ended June 30, 1995, 1996 and 1997.
At June 30, 1997, the net amount due from Tenet for transactions between the
Company and Tenet was $918 and is included in Other Current Assets (see Note
5).
4. ACQUISITIONS AND CONSTRUCTION ACTIVITY
FISCAL YEAR 1995. On September 1, 1994, the Company purchased a 220-bed
skilled nursing care center in White Settlement (Fort Worth), Texas, for
$11,925 in cash and a four-acre site for $1,500 in cash for construction of a
210-bed skilled nursing care center located in Fort Worth, Texas, which began
in May 1995.
The Company acquired on October 1, 1994 the leasehold interest in six
skilled nursing care centers and the real and personal property of a seventh
with a combined total of 783 beds located in various communities in Texas for
$30,938, including goodwill of $2,321. The purchase price consists of (i)
$11,470 in cash (of which $8,541 was funded under the Company's bank line of
credit), (ii) a $2,814 promissory note ($3,000 less a $186 discount) at 9%
interest (7% contract rate) fully amortized in seven years and (iii) a $16,654
capital lease obligation assumed by the Company. The leases on the six centers
range from eight to twenty-one years, include purchase options, the first
exercisable in July 1996, and the last exercisable in February 2005, and have
combined monthly payments of $159.
On December 1, 1994, the Company acquired four skilled nursing care centers
in three communities in East Texas with a combined total of 548 beds for
$27,000 in cash and, in a separate transaction, the leasehold interest in a
119-bed skilled nursing care center located in Big Spring, Texas, for $800 in
cash. Both transactions were funded under the Company's bank line of credit.
The Company's acquisitions have been accounted for as purchases and,
accordingly, the results of operations of the acquired centers have been
included in the consolidated statement of income since the date of
acquisition.
The Company completed in May 1995 an addition of 74 beds to a 76-bed nursing
care center which is operated under a ten-year sub-lease with OrNda (see Note
3).
FISCAL YEAR 1996. On January 8, 1996, the Company opened a 108-bed skilled
nursing care center in Fresno, California, and in August 1996, opened another
51 beds at the same site. Total cost of construction including the original
purchase price was $14,024. In March 1996, the Company added
F-30
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. ACQUISITION AND CONSTRUCTION ACTIVITY (CONTINUED)
20 licensed beds to one of its two skilled nursing care centers in Beaumont,
Texas, increasing the center's total beds to 148. Total cost of construction
was $785. In June 1996, the Company also added 54 beds to its skilled nursing
care center in Longview, Texas, increasing the total beds to 182. Total cost
of construction was $1,860. Cost of construction completed in the year ended
June 30, 1996 was financed with funds from Notes issued in December 1995 and
draws against the Company's bank line of credit (see Note 6).
FISCAL YEAR 1997. In August 1996, the Company opened a 110-bed skilled
nursing care center in Fort Worth, Texas, and in June 1997, opened another 100
beds at the same site. Total cost of construction including the original
purchase price (see this Note, Fiscal Year 1995) was $12,012. On July 1, 1997,
the Company opened a 66-bed assisted living center in Orange, California,
dedicated to Alzheimer's and other patients with dementia. Total cost of
construction, which constituted renovation of an existing building on a campus
with a 172-bed skilled nursing center and a 72-bed assisted living center, was
$3,525. Cost of construction completed in the year ended June 30, 1997 was
financed with funds from $15 million of Senior Secured Notes ("Notes") issued
in July 1996 and with cash generated from operations. The Notes represented
the second and last issuance of $70 million of Notes. The first issuance of
$55 million occurred in December 1995.
In July 1996, the Company exercised a purchase option in its lease of a 88-
bed skilled nursing care center in Rockport, Texas. The purchase price of
$2,022 was financed with funds from the Notes.
In December 1996, the Company entered into a limited liability company
("LLC") agreement to operate a pharmacy in Austin, Texas. The purchase price
for its 50% membership interest was $1,565 in cash. The pharmacy services
nursing centers in Texas operated by either the Company, the other LLC member
or non-affiliated nursing center owners. The Company accounts for its
investment in the LLC under the equity method of accounting. The Company's
equity in earnings of the LLC was insignificant during fiscal year 1997.
In June 1997, the Company purchased 10 acres of vacant land in Longview,
Texas for $648 in cash. The land will be used for new services which will
complement the 174-bed skilled nursing center currently owned and operated by
the Company.
5. OTHER CURRENT ASSETS
Other current assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------
1996 1997
------- -------
<S> <C> <C>
Due from third party payors.................................... $ 8,055 $ 2,491
Deferred tax assets............................................ 1,810 1,956
Notes receivable............................................... 672 1,253
Prepaid expenses............................................... 952 1,004
Income tax receivable.......................................... -- 4,128
Other receivables.............................................. 1,543 1,524
------- -------
$13,032 $12,356
======= =======
</TABLE>
F-31
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
------------------
1996 1997
-------- --------
<S> <C> <C>
Senior secured notes, at fixed interest rates from 7.38% to
8.14%, interest only payable semi-annually, principal due
from December 2000 to December 2010 in various annual
payments, secured by property and equipment with a book
value of approximately $91,781 at June 30, 1997........... $ 55,000 $ 70,000
Secured revolving bank line of credit expires September 30,
1998, variable interest rates approximating 7.44% in the
year ending June 30, 1997, convertible to a term loan due
in equal quarterly principal payments through September
2001, secured by property and equipment with a book value
of approximately $6,556 at June 30, 1997.................. 6,000 5,000
8.96% senior secured notes, due 2002, interest only,
payable semi-annually through June 1997, annual principal
payments of $4,150 beginning December 1997, secured by
property and equipment with a book value of approximately
$32,779 at June 30, 1997.................................. 25,000 25,000
Present value of capital lease obligations at effective
interest rates from 7% to 9%, secured by property and
equipment with a book value of approximately $23,216 at
June 30, 1997............................................. 15,680 13,133
Mortgage and other note payable, fixed interest rates from
7.75% to 9%, due in various monthly installments through
January 2026, secured by property and equipment with a
book value of approximately $7,379 at June 30, 1997....... 5,231 5,281
Promissory note, less imputed interest of $81 in the year
ended June 30, 1997, at an effective interest rate of 9%
due in October 2001, secured by the leasehold interest in
a nursing care center, with a book value of approximately
$3,060 at June 30, 1997................................... 2,304 1,944
Mortgage note payable, variable interest rates from 8.25%
to 9.0% in year ended June 30, 1997, due in equal monthly
principal installments through March 2001, secured by
property and equipment with a book value of approximately
$2,816 at June 30, 1997................................... 1,159 1,094
Less current portion....................................... (2,985) --
-------- --------
Non-current portion........................................ $107,389 $121,452
======== ========
</TABLE>
Future maturities of long-term debt (including capital lease obligations)
are as follows: years ending June 30, 1998--$-0-; 1999--$8,699; 2000--$13,788;
2001--$17,187; 2002--$10,904, and thereafter--$70,874.
In December 1995, the Company amended its secured bank line of credit which
reduced the commitment from $60,000 to $40,000, converted accounts receivable
from collateral to a negative pledge, extended the revolver to September 30,
1997 (the revolver has been subsequently extended to September 30, 1998) and
reduced the period of the term loan upon termination of the revolver from four
to three years. The interest rate is variable and at the Company's option,
will equal either the bank prime rate or the Eurodollar rate plus a margin
(reduced by the amendment) that varies depending on the ratio of certain
senior debt to earnings before certain interest, taxes, depreciation and
amortization.
F-32
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
At June 30, 1997, credit line loans outstanding were $5,000 which was used to
finance the construction described in Note 4. At June 30, 1997, the Company
classified $6,997 of current debt maturities as long-term debt based on its
intent and ability to refinance these obligations under the bank line of
credit.
The bank line of credit loan agreement and the two senior secured note
agreements contain covenants that include requirements to comply with certain
financial tests and ratios and restrict the ability of the Company to incur
additional indebtedness. Also, the Company is restricted by the agreements
from the payment of dividends (other than dividends payable in common stock)
or to acquire its common stock to the extent that such payments exceed $5,000
plus 50% of the Company's net income after June 30, 1995. The Company
currently is meeting all financial tests and ratios.
Interest expense was $6,033, $8,701 and $10,296 in fiscal years 1995, 1996
and 1997, respectively, of which $759, $1,605 and $1,678 in 1995, 1996 and
1997 were capitalized as part of the ongoing construction projects. Interest
payments were $5,712 , $7,874 and $10,124 in fiscal years 1995, 1996 and 1997,
respectively.
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Federal:
Current............................................ $4,359 $3,611 $(3,979)
Deferred........................................... (277) 19 4,003
------ ------ -------
4,082 3,630 24
State:
Current............................................ 952 798 (662)
Deferred........................................... (47) 24 757
------ ------ -------
905 822 95
------ ------ -------
$4,987 $4,452 $ 119
====== ====== =======
</TABLE>
F-33
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES (CONTINUED)
Deferred income taxes result from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements and represent differences between income for tax purposes and
income for financial statement purposes in future years. Temporary differences
are primarily attributable to reporting for income tax purposes the excess of
tax over book depreciation, bad debts and vacation benefits. The current
deferred tax assets are included in other current assets (see Note 5).
Significant components of the Company's deferred tax liabilities and assets as
of June 30 are as follows:
<TABLE>
<CAPTION>
1996 1997
------------------- -------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Income Taxes
Deferred tax liabilities:
Tax over book depreciation........ $ -- $(3,136) $ -- $(7,858)
Other............................. -- (137) -- (264)
------ ------- ------ -------
Total deferred tax liabilities.. -- (3,273) -- (8,122)
Deferred tax assets:
Vacation and deferred compensation
benefits and bad debt............ 1,810 330 1,956 452
State tax......................... -- 338 -- 159
------ ------- ------ -------
Total deferred tax assets....... 1,810 668 1,956 611
------ ------- ------ -------
Net deferred tax assets
(liabilities)...................... $1,810 $(2,605) $1,956 $(7,511)
====== ======= ====== =======
</TABLE>
A reconciliation of the provision for income taxes with the amount computed
using the federal statutory rate is as follows:
<TABLE>
<CAPTION>
JUNE 30,
-----------
1996 1997
---- -----
<S> <C> <C>
Federal rate 35.0% 34.0%
State taxes, net of federal tax benefit........................ 4.5 4.5
Tax credits.................................................... (1.6) --
Other, net..................................................... -- 24.8
---- -----
37.9% 63.3%
==== =====
</TABLE>
The increase in the effective tax rate was primarily due to certain
permanent differences between book income and taxable income. Total income tax
payments during fiscal years 1995, 1996 and 1997 were $4,876, $3,904 and
$1,828, respectively.
8. LEASES
The Company leases certain of its centers, equipment and its pharmacy space
under both noncancellable operating leases and capital leases. The leases
generally provide for payment of property taxes, insurance and repairs, and
have rent escalation clauses based upon the consumer price index or annual per
bed adjustments.
F-34
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LEASES (CONTINUED)
All capital leases contain purchase options, and the accompanying balance
sheet and following table have been prepared assuming such options will be
exercised (see Note 11). Some leases contain various renewal options and
extend up to the year 2030. Property and equipment includes the following
amounts for leases which have been capitalized:
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
<S> <C>
Land and land improvements..................................... $ 1,400
Buildings and leasehold improvements........................... 21,481
Furniture and equipment........................................ 2,405
-------
25,286
Less accumulated amortization.................................. 2,070
-------
$23,216
=======
</TABLE>
The future minimum rental payments under noncancellable operating leases and
capital leases (including purchase options when expected to be exercised) that
have initial or remaining lease terms in excess of one year as of June 30,
1997 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING JUNE 30, LEASES LEASES TOTAL
-------------------- --------- -------- --------
<S> <C> <C> <C>
1998.......................................... $ 3,054 $ 3,321 $ 6,375
1999.......................................... 2,995 4,634 7,629
2000.......................................... 2,755 4,297 7,052
2001.......................................... 2,513 350 2,863
2002.......................................... 2,176 350 2,526
Thereafter.................................... 7,827 3,525 11,352
-------- -------- --------
Total minimum lease payments.................. 21,320 16,477 37,797
Less amount representing interest............. -- 3,344 3,344
-------- -------- --------
Present value of net minimum lease payments
(capital lease amount included in long-term
debt--see Note 6)............................ $21,320 $13,133 $34,453
======== ======== ========
</TABLE>
9. CONTINGENCIES
The Company is subject to malpractice claims and other litigation arising in
the ordinary course of business. In the opinion of management, any liability
beyond amounts covered by insurance and the ultimate resolution of all pending
legal proceedings will not have a material adverse effect on the Company's
financial position or results of operations.
10. STOCK OPTION PLAN
Effective July 1, 1991, the Company adopted a stock option plan authorizing
the issuance of 250,000 shares of common stock. The plan was amended on
December 9, 1994 and again on December 8, 1995 to increase the authorized
shares to 1,400,000. Options may be granted to key employees and directors of
the Company. Options granted to employees may be either incentive stock
options or nonstatutory options. Only non-qualified options may be granted to
non-employee directors. Options granted to non-employee directors are granted
automatically pursuant to a formula grant provision contained in the plan. The
option price per share for incentive stock options shall not be less than 85%
of the fair market value at the date of the grant. The terms of each option
and the increments
F-35
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCK OPTION PLAN (CONTINUED)
in which each is exercisable are determined by a committee appointed by the
Board of Directors. No option may be exercised after ten years from the date
of the grant and no option may be granted under the plan after June 30, 2001.
The following summarizes activity in the stock option plan:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------------------------------
1995 1996 1997
----------------- ----------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE AVERAGE
OF EXERCISE OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options at beginning of
year................... 256,000 $12.97 523,000 $16.79 948,500 $18.91
Changes during year:
Granted............... 284,500 $19.94 504,000 $21.15 112,000 $13.36
Exercised............. (15,700) $12.20 (13,500) $12.13 (3,200) $17.85
Canceled.............. (1,800) $12.26 (65,000) $20.58 (26,800) $20.31
------- ------- ---------
Options outstanding at
end of year............ 523,000 $16.79 948,500 $18.91 1,030,500 $18.27
======= ======= =========
Options exercisable at
end of year............ 58,100 $12.26 161,600 $14.97 352,300 $17.10
Options available for
grant at end of year... 57,700 418,700 333,500
</TABLE>
The weighted average fair value per share of options granted during the year
was $10.14 and $6.72 for fiscal years 1996 and 1997, respectively. The
exercise prices for options outstanding at June 30, 1997 ranged from $10.50 to
$22.50. The weighted average remaining contractual life of these options is
approximately eight years.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) which uses an
intrinsic value method and, because the exercise price of the Company's stock
options equals the market price of the underlying stock on the date of grant,
results in no compensation expense. However, pro forma information regarding
net income and earnings per share is required by Statement of Financial
Accounting Standards No. 123, "Accounting and Disclosure of Stock-Based
Compensation" (SFAS 123), and, in the following disclosure, has been
determined as if the Company had accounted for its stock options under the
fair value method of SFAS 123. The fair value for these options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted average assumptions for the years ended June 30, 1997 and
1996, respectively: risk-free interest rates of 6.4% and 5.5%; dividend yields
of zero percent for both years; volatility factors of the expected market
price of the Company's common stock of 48.4% and 46.8%; and a weighted average
expected life of the options of five years.
Because the Company's stock options have characteristics significantly
different from those options used in the Black-Scholes option pricing model,
and because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of the
Company's stock options.
F-36
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCK OPTION PLAN (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The effects
of providing pro forma disclosure are not likely to be representative of the
effects on reported net income for future years. The Company's pro forma
information follows for the years ended June 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------ -----
<S> <C> <C>
Pro forma net income (loss)................................... $6,914 $(543)
</TABLE>
11. SUBSEQUENT EVENT
In September 1997, the Company exercised a purchase option in its lease of a
111-bed skilled nursing care center in La Grange, Texas. The purchase option
price of $1,871 was financed by a draw on the Company's bank line of credit
(see Note 6).
12. UNAUDITED QUARTERLY INFORMATION
Following is a summary of unaudited quarterly results of operations from the
years ended June 30, 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
------------------------------------------
1ST 2ND 3RD 4TH
QTR. QTR. QTR. QTR. TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenues..................... $41,270 $42,801 $45,232 $46,759 $176,062
Income before income taxes....... 3,924 3,400 2,077 2,360 11,761
Net income....................... 2,359 2,043 1,327 1,580 7,309
<CAPTION>
YEAR ENDED JUNE 30, 1997
------------------------------------------
1ST 2ND 3RD 4TH
QTR. QTR. QTR. QTR. TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net revenues..................... $48,907 $46,181 $52,012 $50,827 $197,927
Income (loss) before income
taxes........................... 2,587 (1,734) 2,394 (3,059) 188
Net income (loss)................ 1,565 (1,049) 1,448 (1,895) 69
</TABLE>
F-37
<PAGE>
SUMMIT CARE CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
(UNAUDITED)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 1,702
Accounts receivable, less allowance for doubtful accounts of
$2,474......................................................... 36,343
Supplies inventory, at cost..................................... 3,204
Other current assets............................................ 15,569
--------
Total current assets.......................................... 56,818
Property and equipment, at cost:
Land and land improvements...................................... 20,036
Buildings and leasehold improvements............................ 175,078
Furniture and equipment......................................... 24,361
Construction in progress........................................ 5,298
--------
224,773
Less accumulated depreciation and amortization.................. 30,220
--------
194,553
Notes receivable, less allowance for doubtful accounts of $363 ... 6,842
Other assets...................................................... 9,207
--------
Total assets.................................................. $267,420
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank................................................. $ 2,985
Accounts payable................................................ 36,776
Employee compensation and benefits.............................. 4,622
Income taxes payable............................................ 1,051
--------
Total current liabilities..................................... 45,434
Long-term debt.................................................... 129,754
Deferred income taxes............................................. 7,511
--------
Total liabilities............................................. 182,699
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value, 2,000 authorized shares, none
issued......................................................... --
Common stock, no par value, 100,000 authorized shares; 6,776 and
6,813 issued and outstanding, respectively..................... 52,020
Retained earnings............................................... 32,701
--------
Total shareholders' equity.................................... 84,721
--------
Total liabilities and shareholders' equity.................... $267,420
========
</TABLE>
See accompanying notes.
F-38
<PAGE>
SUMMIT CARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
----------------
1996 1997
------- --------
<S> <C> <C>
NET REVENUES.................................................. $95,088 $108,507
EXPENSES:
Salaries and benefits....................................... 43,386 47,742
Supplies.................................................... 10,381 10,261
Purchased services.......................................... 24,144 26,211
Provision for doubtful accounts............................. 967 1,780
Other expenses.............................................. 6,258 7,484
Rent........................................................ 1,410 1,525
Depreciation and amortization............................... 3,632 4,235
Interest (net of interest income, $371 in 1997 and $179 in
1996, respectively)........................................ 4,057 4,588
------- --------
94,235 103,826
------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES...................... 853 4,681
Provision for income taxes.................................... 337 1,849
------- --------
NET INCOME.................................................... $ 516 $ 2,832
======= ========
</TABLE>
See accompanying notes.
F-39
<PAGE>
SUMMIT CARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 516 $ 2,832
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 3,632 4,235
(Increase) in accounts receivable, net................. (5,027) (2,594)
(Increase) in supplies inventory......................... (66) (514)
(Increase) in other current assets....................... (1,602) (3,152)
Increase in accounts payable............................. 6,805 7,190
(Decrease) increase in employee compensation and
benefits.............................................. 294 (1,255)
Increase (decrease) in income taxes payable.............. (989) 1,051
-------- --------
Total adjustments...................................... 3,047 4,961
-------- --------
Net cash provided by operating activities.............. 3,563 7,793
-------- --------
INVESTING ACTIVITIES:
Issuance of notes receivable............................. (550) (2,281)
Principal payments of notes receivable................... 253 2,294
Additions to property and equipment...................... (12,049) (6,706)
Property and equipment related to purchase of nursing
center.................................................. -- (4,209)
(Increase) in other assets............................... (1,579) (470)
-------- --------
Net cash (used in) investing activities................ (13,925) (11,372)
-------- --------
FINANCING ACTIVITIES:
(Decrease) in payable to bank............................ (1,229) (1,693)
Principal payments on long-term debt..................... (8,435) (10,497)
Proceeds from long-term debt............................. 19,000 13,000
Proceeds from exercise of stock options.................. -- 477
-------- --------
Net cash provided by financing activities.............. 9,336 1,287
-------- --------
(Decrease) in cash and cash equivalents.................... (1,026) (2,292)
Cash and cash equivalents at beginning of year............. 2,658 3,994
-------- --------
Cash and cash equivalents at end of the period............. $ 1,632 $ 1,702
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ 5,161 $ 5,015
Income taxes............................................. 1,654 808
Non cash investing and financing activities:
Acquisition of nursing care center under capital lease. -- 5,799
Capital lease obligation............................... -- (5,799)
</TABLE>
See accompanying notes.
F-40
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
1. The unaudited financial information included herein, in the opinion of
management, reflects all adjustments (all of which are of a normal recurring
nature except for a special charge recorded in December 1996, see Note 5),
which are considered necessary to fairly state the Company's financial
position, its cash flows and the results of operations. These statements do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements and should be
read in conjunction with the Company's annual report filed on Form 10-K for
the year ended June 30, 1997. The interim financial information herein is not
necessarily representative of that to be expected for a full year.
2. Certain amounts have been reclassified to conform with fiscal 1998
presentations.
3. Other current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Due from third-party payors..................................... $ 4,743
Deferred tax assets............................................. 1,956
Notes receivable................................................ 1,257
Prepaid expenses................................................ 2,526
Income tax receivable........................................... 3,000
Other receivables............................................... 2,087
-------
$15,569
=======
</TABLE>
4. In December 1996, the Company recorded a special charge of $4,000 against
revenues ($2,420 against net income) as a result of adjustments proposed by
Medicare in connection with an audit of fiscal 1995 completed in the quarter
ended December 31, 1996, which would have an effect on revenues for that
fiscal year, fiscal 1996 and the six months ended December 31, 1996.
5. In July 1997, the Company opened its fifth assisted living center with 66
beds in Orange, California, at a total cost of construction of $3,924. In
September 1997, the Company exercised a purchase option in the amount of
$1,871 in its lease of a 111-bed skilled nursing care center in La Grange,
Texas. In November 1997, the Company opened 47 additional beds at one of its
two skilled nursing care centers in Lubbock, Texas, at an approximate cost of
construction of $1,900. In December 1997, the Company acquired the assets of a
194 bed skilled nursing care center in McAllen, Texas at an approximate cost
of $10,058. The Compan's bank line of credit was used to finance the two
construction projects, the exercise of the purchase option and $4,259 of the
acquisition cost of the McAllen center. The balance of the McAllen acquisition
cost of $5,799 was financed with a capitalized lease obligation.
6. In December 1997, the Company amended its secured bank line of credit by
reducing the commitment from $40,000 to $33,000. One of the four lenders was
deleted from the credit agreement, and the revolving credit termination date
was extended one year to September 30, 1999. No other terms and conditions
were added, deleted or amended.
7. Recent Accounting Pronouncement: In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), which is effective for fiscal years ending after December 15, 1997.
This Statement is not required to be applied to interim financial statements
in the
F-41
<PAGE>
SUMMIT CARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
initial year of its application. SFAS 131 establishes standards for the way
that public enterprises report information about operating segments in annual
financial statements. It also requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. Under existing accounting standards, the Company has reported
its operations as one line of business because substantially all of its
revenues have been derived from its skilled nursing care centers and assisted
living centers and closely related ancillary services. The Company is
presently evaluating the new standard in order to determine its effect, if
any, on the way the Company might report its operations in the future.
8. Subsequent Event: On February 6, 1998, the Company and Fountain View,
Inc., a privately-held skilled nursing care company based in Los Angeles,
California, entered into a definitive merger agreement for Fountain View to
acquire the Company. According to the terms of the merger agreement, the
Company's shareholders will receive $21.00 per share in cash for a total
purchase price of approximately $274 million, including the assumption of
approximately $130 million of the Company's debt.
On February 13, 1998, Fountain View commenced a cash tender offer for all
outstanding shares of the Company's stock at $21.00 per share. The tender
offer expired on March 25, 1998 and, following consummation of the tender
offer on March 27, 1998, subject to the terms and conditions contained in the
merger agreement, the Company will be merged with a subsidiary of Fountain
View, and each remaining outstanding share of the Company will be converted in
the merger into $21.00 in cash.
Fountain View has received a commitment from Heritage Fund II, L.P. for $82
million of the equity financing necessary to complete the transaction and a
bank financing commitment from Bank of Montreal covering an additional $250
million. Completion of the tender offer and the merger are subject to
customary conditions to closing, including the receipt of any applicable
regulatory approvals and the expiration of any applicable regulatory waiting
periods.
F-42
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 22
Use of Proceeds........................................................... 33
Capitalization............................................................ 33
Unaudited Pro Forma Financial Data........................................ 34
Selected Historical Financial and Other Data--Fountain View............... 40
Selected Historical Financial and Other Data--Summit...................... 41
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 42
Business.................................................................. 53
Management................................................................ 72
Principal Stockholders.................................................... 78
Certain Relationships and Related Transactions............................ 79
Description of Other Indebtedness......................................... 82
The Exchange Offer........................................................ 84
Plan of Distribution...................................................... 92
Description of Notes...................................................... 94
Certain Federal Income Tax Consequences................................... 126
Validity of the Notes..................................................... 129
Available Information..................................................... 129
Experts................................................................... 129
Special Note Regarding Forward-Looking Statements......................... 130
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FOUNTAIN VIEW, INC.
OFFER TO EXCHANGE UP TO $120,000,000 OF 11 1/4% SENIOR SUBORDINATED NOTES
DUE 2008, SERIES B WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED FOR ANY AND ALL OF ITS OUTSTANDING 11
1/4% SENIOR SUBORDINATED NOTES DUE 2008 OF WHICH $120,000,000 IN PRINCIPAL
AMOUNT IS OUTSTANDINGON THE DATE HEREOF.
-----------
PROSPECTUS
-----------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Fountain View, Inc. and certain of the Registrants (Fountain View Holdings,
Inc., Locomotion Holdings, Inc. and Locomotion Therapy, Inc.) are Delaware
corporations. Section 145 of the Delaware General Corporation Law (the "DGCL")
grants a Delaware corporation the power to indemnify any director, officer,
employee or other agent if such person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe such person's conduct was unlawful. No
indemnification may be provided, however, for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to
have acted in good faith in the reasonable belief that his action was in the
best interest of the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
With respect to indemnification of directors, Article Eight of the
Certificate of Incorporation of the Company states that the Company shall
indemnify and hold harmless any director, officer, employee or agent of the
Company from any expenses and liabilities that may be imposed upon or incurred
in connection with, or as a result of, any proceeding in which he or she may
become involved, by reason of the fact that he or she is or was such a
director, officer, employee, or agent, whether or not he or she is in such
capacity at the time such expenses and liabilities are imposed or incurred, to
the fullest extent permitted by the laws of the State of Delaware.
Certain of the Registrants (Summit Care Corporation, Summit Care California,
Inc., Summit Care Pharmacy, Inc., Summit Care Texas Equity, Inc., AIB Corp.,
Alexandria Convalescent Hospital, Inc., BIA Hotel Corp., Brier Oak
Convalescent, Inc., Elmcrest Convalescent Hospital, Fountainview Convalescent
Hospital, Fountain View Management, Inc., Rio Hondo Nursing Center, On-Track
Therapy Center, Inc., I.' NO, Inc. and Sycamore Park Convalescent Hospital)
are California corporations. The California General Corporation Law provides
that a corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the corporation to procure a judgment in its
favor) by reason of the fact that the person is or was an agent of the
corporation, against expenses, judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with the proceeding if
that person acted in good faith and in a manner the person reasonably believed
to be in the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of the person was
unlawful.
Certain of the Registrants (Summit Care Texas No. 2, Inc., Summit Care Texas
No. 3, Inc. and Summit Care Management Texas, Inc.) are Texas corporations.
Article 2.02-1 of the Texas Business Corporation Act provides that a
corporation may indemnify its officers, directors, employees and agents for
expenses and costs incurred in certain proceedings arising out of actions
taken in their official capacity only if such persons were acting in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation, except in relation to matters in which they have
been found liable (i) to the corporation, or (ii) on the basis that personal
benefit was improperly received regardless of whether or not the benefit
resulted from action taken in their official capacity. In the case of any
criminal proceeding, such persons must also have had no reasonable cause to
believe such conduct was unlawful. Article 2.02-1 further provides that a
corporation shall indemnify its officers
II-1
<PAGE>
and directors against reasonable expenses incurred in connection with
proceedings arising out of actions taken in their official capacity in which
such persons have been wholly successful, on the merits or otherwise, in the
defense of such actions.
The Companies maintain insurance, the general effect of which is to provide
coverage for the Companies with respect to amounts that they may required to
pay officers and directors under the indemnity provisions described above and
coverage for officers and directors against certain liabilities, including
certain liabilities under the federal securities law.
Summit Care Texas, L.P. is a Texas limited partnership (the "Partnership").
Article 10.2 of its Articles of Limited Partnership provides that the
Partnership shall indemnify the General Partner against all judgments,
penalties (including excise and similar taxes), fines, amounts paid in
settlement and reasonable Expenses actually incurred by the General Partner in
connection with any Proceeding to which it was, is or is threatened to be
named a defendant or respondent, or in which it was or is a witness without
being named a defendant or respondent, by reason, in whole or in part, of it
serving or having served, as a General Partner if it is determined that the
General Partner (a) acted in good faith, (b) reasonably believed, in the case
of conduct in its official capacity, that its conduct was in the Partnership's
best interests and, in all other cases, that its conduct was at least not
opposed to the Partnership's best interests, and (c) in the case of any
criminal proceeding, had no reasonable cause to believe that its conduct was
unlawful. No indemnification shall be made under this Section 10.2 in respect
of any judgment, penalty, fine, or amount paid in settlement in connection
with any Proceeding in which such General Partner shall have been (x) found
liable on the basis that personal benefit was improperly received by it
whether or not the benefit resulted form an action taken in the General
Partner's official capacity, or (y) found liable to the Partnership. However,
if the General Partner is found liable on the basis that personal benefit was
improperly received by it, or is found liable to the Partnership, or the
Limited Partner, the General Partner shall be entitled to reasonable expenses
actually incurred by it in connection with the Proceeding unless it has been
found liable for willful or intentional misconduct in the performance of its
duty to the Partnership or the Limited Partner. The termination of any
Proceeding by judgment, order, settlement or conviction, or on a plea of nolo
contendere or its equivalent, is not of itself determinative that the General
Partner did not meet the requirements set forth in clauses (a), (b) or (c) in
the first sentence of this Section 10.2. The General Partner shall be deemed
to have been found liable in respect of any claim, issue or matter only after
it shall have been so adjudged by a court of competent jurisdiction after
exhaustion of all appeals therefrom.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement dated as of April 16, 1998 by and among Fountain
View and the Initial Purchasers named therein relating to the 11 1/4%
Senior Subordinated Notes due 2008.
3.1 Certificate of Incorporation of Fountain View.
3.1(a) Certificate of Amendment amending Certificate of Incorporation of
Fountain View filed March 27, 1998.
3.1(b) Certificate of Amendment amending Certificate of Incorporation of
Fountain View filed May 6, 1998.
3.2 By-laws of Fountain View.
3.3 Articles of Incorporation of Summit Care Corporation.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.4 By-laws of Summit Care Corporation.
3.5 Articles of Incorporation of Summit Care-California, Inc.
3.6 By-laws of Summit Care-California, Inc.
3.7 Articles of Incorporation of Summit Care Pharmacy, Inc.
3.8 By-laws of Summit Care Pharmacy, Inc.
3.9 Omitted
3.10 Omitted
3.11 Articles of Incorporation of Summit Care Texas Equity, Inc.
3.12 By-laws of Summit Care Texas Equity, Inc.
3.13 Articles of Organization of Summit Care Texas, No. 2, Inc.
3.14 By-laws of Summit Care Texas, No. 2, Inc.
3.15 Articles of Organization of Summit Care Texas, No. 3, Inc.
3.16 By-laws of Summit Care Texas, No. 3, Inc.
3.17 Articles of Organization of Summit Care Texas Management, Inc.
3.18 By-laws of Summit Care Texas Management, Inc.
3.19 Certificate of Limited Partnership of Summit Care Texas, L.P.
3.20 Omitted
3.21 Certificate of Incorporation of Fountain View Holdings, Inc.
3.22 By-laws of Fountain View Holdings, Inc.
3.23 Articles of Incorporation of AIB Corp.
3.24 By-laws of AIB Corp.
3.25 Articles of Incorporation of Alexandria Convalescent Hospital, Inc.
3.26 By-laws of Alexandria Convalescent Hospital, Inc.
3.27 Articles of Incorporation of BIA Hotel Corp.
3.28 By-laws of BIA Hotel Corp.
3.29 Articles of Incorporation of Brier Oak Convalescent, Inc.
3.30 By-laws of Brier Oak Convalescent, Inc.
3.31 Articles of Incorporation of Elmcrest Convalescent Hospital
3.32 By-laws of Elmcrest Convalescent Hospital
3.33 Articles of Incorporation of Fountainview Convalescent Hospital
3.34 By-laws of Fountainview Convalescent Hospital
3.35 Articles of Incorporation of Fountain View Management, Inc.
3.36 By-laws of Fountain View Management, Inc.
3.37 Articles of Incorporation of Rio Hondo Nursing Center
3.38 By-laws of Rio Hondo Nursing Center
3.39 Certificate of Incorporation of Locomotion Holdings, Inc.
3.40 By-laws of Locomotion Holdings, Inc.
3.41 Certificate of Incorporation of Locomotion Therapy, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.42 By-laws of Locomotion Therapy, Inc.
3.43 Articles of Incorporation of On-Track Therapy Center, Inc.
3.44 By-laws of On-Track Therapy Center, Inc.
3.45 Articles of Incorporation of I.' NO, Inc.
3.46 By-laws of I.' NO, Inc.
3.47 Articles of Incorporation of Sycamore Park Convalescent Hospital
3.48 By-laws of Sycamore Park Convalescent Hospital
4.1 Indenture dated as of April 16, 1998 by and among Fountain View,
certain subsidiaries of Fountain View, and State Street Bank and
Trust Company of California, N.A., as trustee, for the 11 1/4% Senior
Subordinated Notes due 2008.
4.2 Form of the Company's 11 1/4% Senior Subordinated Notes due 2008 (see
Exhibit A-1 to Exhibit 4.1).
5.1 Opinion of Choate, Hall & Stewart.(+)
10.1 Omitted
10.2 Omitted
10.3 Omitted
10.4 Omitted
10.5 Omitted
10.7 Palmcrest Convalescent Home (now known as Palm Grove Convalescent
Center): Convalescent Hospital Lease, dated November 20, 1969,
between Palmcrest Associates, Ltd., and Century Convalescent Centers,
as amended by Lease of Convalescent Hospital Facility (as amended),
dated September 1, 1979, by which SHL and its appointed nominee
Royalwood Convalescent Hospital, Inc. (now Summit Care-California,
Inc.) are substituted as lessees.(+)
10.8 Anaheim Care Center: Lease, dated June 1, 1995, between Sam Menlo,
Trustee of the Menlo Trust U/T/I 5/22/83 and Summit Care-California,
Inc., doing business as Anaheim Care Center.(+)
10.9 Sharon Care Center: Lease, dated May 1, 1987, between Jozef Nabel and
Marie Gabrielle Nabel, as tenants in common, and Summit Care-
California, Inc.(+)
10.10 Royalwood Convalescent Hospital: Lease dated August 18, 1964, between
Jack H. Cramer and Walter Lee Brown (together, as lessors) and Albert
J. Allasandra, as amended by Amendment to Lease and Right of First
Refusal to Purchase, dated May 23, 1969, by which Alaric Corporation
is substituted as lessee, and as further amended by Amendment to
Agreement of Lease and Right of First Refusal, dated November 18,
1974, and as further amended by Second Amendment to Agreement of
Lease and Right of First Refusal and Assignment of Lease, dated July
10, 1979, by which National Accommodations, Inc. (now SHL) is
substituted as lessee(+), assigned to Summit Care Corporation by
Assignment of Lease, dated March 9, 1992, between SHL and Summit Care
Corporation.(+)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.11 Bay Crest Convalescent Hospital: Lease, dated March 1, 1980, between
South Bay Sanitarium and Convalescent Hospital and Garnet
Convalescent Hospital, Inc. (now Summit Care-California, Inc.),(+)
and Amendment to Lease dated March 1, 1994.(+)
10.12 Brier Oak Convalescent Center: Lease Agreement, dated February 18,
1985, between Bernard Bubman, Arnold Friedman, Irene Weiss and Sunset
Motel and Development Co. (collectively, as lessors), and Summit
Care-California, Inc.(+)
10.13 Valley Palms Convalescent Hospital: Lease, dated March 16, 1982,
between Uni-Cal Associates and Valley Palms Convalescent, Inc. (now
Summit Care-California, Inc.).(+)
10.14 Marina Care Center: Standard Industrial Lease--Net, dated March 1,
1989, between Summit Properties and Summit Care-California, Inc., as
modified by Addendum to Standard Industrial Lease--Net.(+)
10.15 Phoenix Resident Hotel: Lease, dated July 29, 1977, between Sierra
Land & Livestock, Inc. and Southwest Hotels, Inc., as modified by
Addendum to Lease dated August 11, 1983, assigned to Summit Care
Corporation by Assignment of Lease, dated July 1, 1982, between
Southwest Hotels, Inc. and Summit Care Corporation.(+)
10.16 Sublease of Phoenix Retirement Hotel: Sublease, dated July 1, 1987,
between Summit Care Corporation and Phoenix McDowell Properties,
Inc.(+), as assigned by Assignment of Sublease, dated March 9, 1992,
between Summit Care Corporation and Summit Health Ltd.(+)
10.17 Sublease of Marina Care Center: Nursing Home Sublease Agreement, dated
March 7, 1989, between Summit Care-California, Inc. and 5240
Sepulveda, Inc.(+), as assigned by Assignment of Sublease, dated
March 9, 1992, between Summit Care-California, Inc. and Summit Health
Ltd.(+)
10.18 Sublease of Valley Palms Care Center: Nursing Home Sublease Agreement,
dated May 11, 1989, between Summit Care-California, Inc. and Trinity
Health Systems(+), as assigned by Assignment of Sublease, dated March
9, 1992, between Summit Care-California, Inc. and Summit Health
Ltd.(+)
10.19 Sublease of Brier Oak Terrace Care Center: Nursing Home Sublease
Agreement, dated April 1, 1989, between Summit Care-California, Inc.
and Brier Oak Hospital, Inc.(+), as assigned by Assignment of
Sublease, dated March 9, 1992, between Summit Care-California, Inc.
and Summit Health Ltd.(+)
10.20 Sublease of Pharmacy: Standard Sublease, dated August 1, 1989, between
St. Luke Medical Center and Mediscript, Inc., as modified by Addendum
of the same date.(+)
10.21 Hemet Resident Hotel: Ground Lease dated June 25, 1980, between Genes,
Ltd., and SHL, assigned to Summit Care Corporation by Assignment of
Lease dated March 9, 1992, between SHL and Summit Care
Corporation.(+)
10.22 Seller Note for purchase of The Woodlands.(+)
10.23 HUD Note for purchase of The Woodlands.(+)
10.24 Sublease with Summit Health Ltd., for Phoenix Living Center dated
January 1994.(+)
10.25 Real Estate Lien Note--$3,000,000 dated September 30, 1994 and
Security Agreement dated September 30, 1994.(+)
10.26 Live Oak Nursing Center, George West, Texas Lease Agreement dated July
19, 1991; Assignment of Lease With Option to Purchase dated September
30, 1994 and Consent To Assignment Of Leasehold Estate of Live Oak
Nursing Center, George West, Texas dated August 15, 1994.(+)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.27 Guadalupe Valley Nursing Center, Sequin, Texas Lease Agreement dated
February 28, 1989; Assignment Of Lease With Option To Purchase dated
September 30, 1994 and Consent To Assignment Of leasehold Estate Of
Guadalupe Valley Nursing Center, Sequin, Texas dated August 15,
1994.(+)
10.28 Omitted
10.29 Oak Crest Nursing Center, Rockport, Texas Nursing Home Lease Agreement
dated October 18, 1990 and Consent To Assignment And Assumption
Agreement dated October 5, 1994.(+)
10.30 Omitted
10.31 Summit Care Corporation 401(k) Savings Plan.(+)
10.32 Limited Liability Company Agreement of APS-Summit Care Pharmacy,
L.L.C., dated November 30, 1996.
10.33 Robert Crone-South Texas Health Care, Inc. Agreement of Purchase and
Sale of Assets of Briarcliff Nursing and Rehabilitation Center dated
November 24, 1997.(+)
10.34 Agreement and Plan of Merger Among Summit Care Corporation, Fountain
View, Inc., FV-SCC Acquisition Corporation and Heritage Fund II,
L.P., dated February 6, 1998.(1)
10.35 Summit Care Corporation Special Severance Pay Plan dated February 6,
1998.(1)
10.36 Investment Agreement dated as of March 27, 1998 among Fountain View
and certain investors.
10.37 Stockholders Agreement dated as of March 27, 1998 among Fountain View,
the existing stockholders of Fountain View and certain investors.
10.38 Registration Rights Agreement dated as of March 27, 1998 among
Fountain View, certain stockholders of Fountain View and certain
investors.
10.39 Employment Agreement between Fountain View and Robert Snukal dated
March 27, 1998.
10.40 Employment Agreement between Fountain View and Sheila Snukal dated
March 27, 1998.
10.41 Employment Agreement between Fountain View and William Scott dated
March 27, 1998.
10.42 Promissory Note and Pledge Agreement dated April 16, 1998 issued by
William Scott to Fountain View relating to purchase of 20,000 Shares
of Series A Common Stock.
10.43 Supplemental Signature Page to Investment Agreement dated as of May 4,
1998 among Fountain View, Heritage Fund II, L.P., Baylor Health Care
System ("Baylor") and Buckner Foundation ("Buckner").
10.44 Amendment No. 1 to Stockholders Agreement dated as of May 4, 1998
among Fountain View, Heritage, Baylor, Buckner and certain other
parties.
10.45 Amendment No. 1 to Registration Rights Agreement dated as of May 4,
1998 among Fountain View, Heritage, Baylor, Buckner and certain other
parties.
10.46 Warrants to purchase Series C Common Stock of Fountain View issued by
Fountain View to Heritage, Baylor, Buckner and certain of Baylor's
brokers.
10.47 Credit Agreement Dated as of April 16, 1998 by and among Fountain
View, The Banks party thereto and the Bank of Montreal, as agent.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.48 Guaranty Agreement Dated as of April 16, 1998 by and among Fountain
View, the Guarantors, the Banks party thereto and Bank of Montreal.
10.49 Pledge Agreement Dated as of April 16, 1998 by and among Fountain
View, the Guarantors, the Banks party thereto and Bank of Montreal.
10.50 Security Agreement Dated as of April 16, 1998 by and among Fountain
View, the Guarantors, the Banks party thereto and Bank of Montreal.
10.51 Form of Revolving Note.
10.52 Form of Term Note.
12.1 Statement Re: Computation of Ratio of Earnings to Fixed Charges.
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Choate, Hall & Stewart (included as part of Exhibit
5.1).(+)
24.1 Powers of Attorney.*
25.1 Statement of eligibility of State Street Bank and Trust Company of
California, N.A., as trustee.*
99.1 Letter of Transmittal with respect to the Exchange Offer.
99.2 Notice of Guaranteed Delivery with respect to the Exchange Offer.
99.3 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.4 Letter Regarding Eligibility for use of Form S-4.
99.5 Report of Ernst & Young LLP on Schedule II.*
</TABLE>
- --------
+ To be filed by amendment.
* Previously filed.
(1) Incorporated by reference to the Company's Schedule 14D-1, filed with the
Commission on February 13, 1998.
(B)FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Account
II-7
<PAGE>
ITEM 22. UNDERTAKINGS
(a) Each of the undersigned registrants hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended ("the Act"), may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
such Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or the registrant in the successful defense of
any action, suit paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, such Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(b) Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1993;
(ii) To reflect in the prospectus and facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) of the Securities Act of
1933 if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-8
<PAGE>
SCHEDULE II
FOUNTAIN VIEW, INC.
VALUATION AND QUALIFYING ACCOUNT
<TABLE>
<CAPTION>
ADDITIONS
--------------------
BALANCE AT CHARGED CHARGED BALANCE AT
BEGINNING TO COST AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ---------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1995
Allowance for doubtful
accounts.............. $528,000 $427,000 -- $(229,000)(1) $ 726,000
======== ======== === ========= ==========
Year ended December 31,
1996
Allowance for doubtful
accounts.............. $726,000 $430,000 -- $(377,000)(1) $ 779,000
======== ======== === ========= ==========
Year ended December 31,
1997
Allowance for doubtful
accounts.............. $779,000 $395,000 -- $ (22,000)(1) $1,152,000
======== ======== === ========= ==========
</TABLE>
- --------
(1) Deductions relate to uncollectible accounts written off.
1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Fountain View, Inc. has duly caused this Amendment No. 1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
FOUNTAIN VIEW, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Chief Financial Officer and August 5, 1998
____________________________________ Treasurer (Principal
Derwin L. Williams Financial and Accounting
Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Executive Vice President and August 5, 1998
____________________________________ Director
Sheila S. Snukal
/s/ Michel Reichert* Director August 5, 1998
____________________________________
Michel Reichert
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael F. Gilligan* Director August 5, 1998
____________________________________
Michael F. Gilligan
/s/ Peter Z. Hermann* Director August 5, 1998
____________________________________
Peter Z. Hermann
/s/ Mark J. Jrolf* Director August 5, 1998
____________________________________
Mark J. Jrolf
/s/ Robert M. Snukal
*By ________________________________
Robert M. Snukal
Attorney-in-fact
</TABLE>
S-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care Corporation has duly caused this Amendment No. 1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
SUMMIT CARE CORPORATION
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
/s/ Robert M. Snukal
*By ________________________________
Robert M. Snukal
Attorney-in-fact
</TABLE>
S-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care-California, Inc. has duly caused this Amendment No. 1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Los Angeles, State of California, on August 5, 1998.
SUMMIT CARE-CALIFORNIA, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care Pharmacy, Inc. has duly caused this Amendment No. 1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
SUMMIT CARE PHARMACY, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care Texas Equity, Inc. has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Los Angeles, State of California, on August 5, 1998.
SUMMIT CARE TEXAS EQUITY, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care Texas No. 2, Inc. has duly caused this Amendment No. 1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
SUMMIT CARE TEXAS NO. 2, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* - Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* - Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* - Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care Texas No. 3, Inc. has duly caused this Amendment No. 1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
SUMMIT CARE TEXAS NO. 3, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care Management Texas, Inc. has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on August 5, 1998.
SUMMIT CARE MANAGEMENT TEXAS, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Summit Care Texas, L.P. has duly caused this Amendment No. 1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
SUMMIT CARE TEXAS, L.P.
By: ____Summit Care Management Texas,
Inc.
Its: General Partner
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal of Summit Care Management
Texas, Inc. (Principal
Executive Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________ of Summit Care Management
William C. Scott Texas, Inc.
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________ of Summit Care Management
Sheila S. Snukal Texas, Inc.
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Fountain View Holdings, Inc. has duly caused this Amendment No. 1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
FOUNTAIN VIEW HOLDINGS, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, AIB
Corp. has duly caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on August 5, 1998.
AIB CORP.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Alexandria Convalescent Hospital, Inc. has duly caused this Amendment No. 1 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on August 5, 1998.
ALEXANDRIA CONVALESCENT HOSPITAL,
INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, BIA
Hotel Corp. has duly caused this Amendment No. 1 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Los Angeles, State
of California, on August 5, 1998.
BIA HOTEL CORP.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Brier Oak Convalescent, Inc. has duly caused this Amendment No. 1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Los Angeles, State of California, on August 5, 1998.
BRIER OAK CONVALESCENT, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Elmcrest Convalescent Hospital has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on August 5, 1998.
ELMCREST CONVALESCENT HOSPITAL
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Fountainview Convalescent Hospital has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on August 5, 1998.
FOUNTAINVIEW CONVALESCENT HOSPITAL
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Fountain View Management, Inc. has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on August 5, 1998.
FOUNTAIN VIEW MANAGEMENT, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, Rio
Hondo Nursing Center has duly caused this Amendment No. 1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
RIO HONDO NURSING CENTER
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Locomotion Holdings, Inc. has duly caused this Amendment No. 1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
LOCOMOTION HOLDINGS, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Locomotion Therapy, Inc. has duly caused this Amendment No. 1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
LOCOMOTION THERAPY, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal Chief Executive Officer and August 5, 1998
____________________________________ Director (Principal
Robert M. Snukal Executive Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Keith Abrahams* President and Director August 5, 1998
____________________________________
Keith Abrahams
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, On-
Track Therapy Center has duly caused this Amendment No. 1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on August 5, 1998.
ON-TRACK THERAPY CENTER
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal Chief Executive Officer and August 5, 1998
____________________________________ Director (Principal
Robert M. Snukal Executive Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Keith Abrahams* President and Director August 5, 1998
____________________________________
Keith Abrahams
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
I.'NO, Inc. has duly caused this Amendment No. 1 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Los Angeles, State
of California, on August 5, 1998.
I.'NO, INC.
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Sycamore Park Convalescent Hospital has duly caused this Amendment No. 1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Los Angeles, State of California, on August 5, 1998.
SYCAMORE PARK CONVALESCENT HOSPITAL
/s/ Robert M. Snukal
By: _________________________________
Robert M. Snukal
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 has been signed by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Snukal President, Chief Executive August 5, 1998
____________________________________ Officer and Director
Robert M. Snukal (Principal Executive
Officer)
/s/ Derwin L. Williams* Treasurer (Principal August 5, 1998
____________________________________ Financial and Accounting
Derwin L. Williams Officer)
/s/ William C. Scott* Director and Chairman August 5, 1998
____________________________________
William C. Scott
/s/ Sheila S. Snukal* Vice President and Director August 5, 1998
____________________________________
Sheila S. Snukal
</TABLE>
/s/ Robert M. Snukal
*By ___________________________
Robert M. Snukal
Attorney-in-fact
S-24
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement dated as of April 16, 1998 by and among Fountain
View and the Initial Purchasers named therein relating to the 11 1/4%
Senior Subordinated Notes due 2008.
3.1 Certificate of Incorporation of Fountain View.
3.1(a) Certificate of Amendment amending Certificate of Incorporation of
Fountain View filed March 27, 1998.
3.1(b) Certificate of Amendment amending Certificate of Incorporation of
Fountain View filed May 6, 1998.
3.2 By-laws of Fountain View.
3.3 Articles of Incorporation of Summit Care Corporation.
3.4 By-laws of Summit Care Corporation.
3.5 Articles of Incorporation of Summit Care-California, Inc.
3.6 By-laws of Summit Care-California, Inc.
3.7 Articles of Incorporation of Summit Care Pharmacy, Inc.
3.8 By-laws of Summit Care Pharmacy, Inc.
3.9 Omitted
3.10 Omitted
3.11 Articles of Incorporation of Summit Care Texas Equity, Inc.
3.12 By-laws of Summit Care Texas Equity, Inc.
3.13 Articles of Organization of Summit Care Texas, No. 2, Inc.
3.14 By-laws of Summit Care Texas, No. 2, Inc.
3.15 Articles of Organization of Summit Care Texas, No. 3, Inc.
3.16 By-laws of Summit Care Texas, No. 3, Inc.
3.17 Articles of Organization of Summit Care Texas Management, Inc.
3.18 By-laws of Summit Care Texas Management, Inc.
3.19 Certificate of Limited Partnership of Summit Care Texas, L.P.
3.20 Omitted
3.21 Certificate of Incorporation of Fountain View Holdings, Inc.
3.22 By-laws of Fountain View Holdings, Inc.
3.23 Articles of Incorporation of AIB Corp.
3.24 By-laws of AIB Corp.
3.25 Articles of Incorporation of Alexandria Convalescent Hospital, Inc.
3.26 By-laws of Alexandria Convalescent Hospital, Inc.
3.27 Articles of Incorporation of BIA Hotel Corp.
3.28 By-laws of BIA Hotel Corp.
3.29 Articles of Incorporation of Brier Oak Convalescent, Inc.
3.30 By-laws of Brier Oak Convalescent, Inc.
3.31 Articles of Incorporation of Elmcrest Convalescent Hospital
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.32 By-laws of Elmcrest Convalescent Hospital
3.33 Articles of Incorporation of Fountainview Convalescent Hospital
3.34 By-laws of Fountainview Convalescent Hospital
3.35 Articles of Incorporation of Fountain View Management, Inc.
3.36 By-laws of Fountain View Management, Inc.
3.37 Articles of Incorporation of Rio Hondo Nursing Center
3.38 By-laws of Rio Hondo Nursing Center
3.39 Certificate of Incorporation of Locomotion Holdings, Inc.
3.40 By-laws of Locomotion Holdings, Inc.
3.41 Certificate of Incorporation of Locomotion Therapy, Inc.
3.42 By-laws of Locomotion Therapy, Inc.
3.43 Articles of Incorporation of On-Track Therapy Center, Inc.
3.44 By-laws of On-Track Therapy Center, Inc.
3.45 Articles of Incorporation of I.' NO, Inc.
3.46 By-laws of I.' NO, Inc.
3.47 Articles of Incorporation of Sycamore Park Convalescent Hospital
3.48 By-laws of Sycamore Park Convalescent Hospital
4.1 Indenture dated as of April 16, 1998 by and among Fountain View,
certain subsidiaries of Fountain View, and State Street Bank and
Trust Company of California, N.A., as trustee, for the 11 1/4%
Senior Subordinated Notes due 2008.
4.2 Form of the Company's 11 1/4% Senior Subordinated Notes due 2008 (see
Exhibit A-1 to Exhibit 4.1).
5.1 Opinion of Choate, Hall & Stewart.(+)
10.1 Omitted
10.2 Omitted
10.3 Omitted
10.4 Omitted
10.5 Omitted
10.7 Palmcrest Convalescent Home (now known as Palm Grove Convalescent
Center): Convalescent Hospital Lease, dated November 20, 1969,
between Palmcrest Associates, Ltd., and Century Convalescent
Centers, as amended by Lease of Convalescent Hospital Facility (as
amended), dated September 1, 1979, by which SHL and its appointed
nominee Royalwood Convalescent Hospital, Inc. (now Summit Care-
California, Inc.) are substituted as lessees.(+)
10.8 Anaheim Care Center: Lease, dated June 1, 1995, between Sam Menlo,
Trustee of the Menlo Trust U/T/I 5/22/83 and Summit Care-California,
Inc., doing business as Anaheim Care Center.(+)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.9 Sharon Care Center: Lease, dated May 1, 1987, between Jozef Nabel and
Marie Gabrielle Nabel, as tenants in common, and Summit Care-
California, Inc.(+)
10.10 Royalwood Convalescent Hospital: Lease dated August 18, 1964, between
Jack H. Cramer and Walter Lee Brown (together, as lessors) and Albert
J. Allasandra, as amended by Amendment to Lease and Right of First
Refusal to Purchase, dated May 23, 1969, by which Alaric Corporation
is substituted as lessee, and as further amended by Amendment to
Agreement of Lease and Right of First Refusal, dated November 18,
1974, and as further amended by Second Amendment to Agreement of
Lease and Right of First Refusal and Assignment of Lease, dated July
10, 1979, by which National Accommodations, Inc. (now SHL) is
substituted as lessee(+), assigned to Summit Care Corporation by
Assignment of Lease, dated March 9, 1992, between SHL and Summit Care
Corporation.(+)
10.11 Bay Crest Convalescent Hospital: Lease, dated March 1, 1980, between
South Bay Sanitarium and Convalescent Hospital and Garnet
Convalescent Hospital, Inc. (now Summit Care-California, Inc.),(+)
and Amendment to Lease dated March 1, 1994.(+)
10.12 Brier Oak Convalescent Center: Lease Agreement, dated February 18,
1985, between Bernard Bubman, Arnold Friedman, Irene Weiss and Sunset
Motel and Development Co. (collectively, as lessors), and Summit
Care-California, Inc.(+)
10.13 Valley Palms Convalescent Hospital: Lease, dated March 16, 1982,
between Uni-Cal Associates and Valley Palms Convalescent, Inc. (now
Summit Care-California, Inc.).(+)
10.14 Marina Care Center: Standard Industrial Lease--Net, dated March 1,
1989, between Summit Properties and Summit Care-California, Inc., as
modified by Addendum to Standard Industrial Lease--Net.(+)
10.15 Phoenix Resident Hotel: Lease, dated July 29, 1977, between Sierra
Land & Livestock, Inc. and Southwest Hotels, Inc., as modified by
Addendum to Lease dated August 11, 1983, assigned to Summit Care
Corporation by Assignment of Lease, dated July 1, 1982, between
Southwest Hotels, Inc. and Summit Care Corporation.(+)
10.16 Sublease of Phoenix Retirement Hotel: Sublease, dated July 1, 1987,
between Summit Care Corporation and Phoenix McDowell Properties,
Inc.(+), as assigned by Assignment of Sublease, dated March 9, 1992,
between Summit Care Corporation and Summit Health Ltd.(+)
10.17 Sublease of Marina Care Center: Nursing Home Sublease Agreement, dated
March 7, 1989, between Summit Care-California, Inc. and 5240
Sepulveda, Inc.(+), as assigned by Assignment of Sublease, dated
March 9, 1992, between Summit Care-California, Inc. and Summit Health
Ltd.(+)
10.18 Sublease of Valley Palms Care Center: Nursing Home Sublease Agreement,
dated May 11, 1989, between Summit Care-California, Inc. and Trinity
Health Systems(+), as assigned by Assignment of Sublease, dated March
9, 1992, between Summit Care-California, Inc. and Summit Health
Ltd.(+)
10.19 Sublease of Brier Oak Terrace Care Center: Nursing Home Sublease
Agreement, dated April 1, 1989, between Summit Care-California, Inc.
and Brier Oak Hospital, Inc.(+), as assigned by Assignment of
Sublease, dated March 9, 1992, between Summit Care-California, Inc.
and Summit Health Ltd.(+)
10.20 Sublease of Pharmacy: Standard Sublease, dated August 1, 1989, between
St. Luke Medical Center and Mediscript, Inc., as modified by Addendum
of the same date.(+)
10.21 Hemet Resident Hotel: Ground Lease dated June 25, 1980, between Genes,
Ltd., and SHL, assigned to Summit Care Corporation by Assignment of
Lease dated March 9, 1992, between SHL and Summit Care
Corporation.(+)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.22 Seller Note for purchase of The Woodlands.(+)
10.23 HUD Note for purchase of The Woodlands.(+)
10.24 Sublease with Summit Health Ltd., for Phoenix Living Center dated
January 1994.(+)
10.25 Real Estate Lien Note--$3,000,000 dated September 30, 1994 and
Security Agreement dated September 30, 1994.(+)
10.26 Live Oak Nursing Center, George West, Texas Lease Agreement dated July
19, 1991; Assignment of Lease With Option to Purchase dated September
30, 1994 and Consent To Assignment Of Leasehold Estate of Live Oak
Nursing Center, George West, Texas dated August 15, 1994.(+)
10.27 Guadalupe Valley Nursing Center, Sequin, Texas Lease Agreement dated
February 28, 1989; Assignment Of Lease With Option To Purchase dated
September 30, 1994 and Consent To Assignment Of leasehold Estate Of
Guadalupe Valley Nursing Center, Sequin, Texas dated August 15,
1994.(+)
10.28 Omitted
10.29 Oak Crest Nursing Center, Rockport, Texas Nursing Home Lease Agreement
dated October 18, 1990 and Consent To Assignment And Assumption
Agreement dated October 5, 1994.(+)
10.30 Omitted
10.31 Summit Care Corporation 401(k) Savings Plan.(+)
10.32 Limited Liability Company Agreement of APS-Summit Care Pharmacy,
L.L.C., dated November 30, 1996.
10.33 Robert Crone-South Texas Health Care, Inc. Agreement of Purchase and
Sale of Assets of Briarcliff Nursing and Rehabilitation Center dated
November 24, 1997.(+)
10.34 Agreement and Plan of Merger Among Summit Care Corporation, Fountain
View, Inc., FV-SCC Acquisition Corporation and Heritage Fund II,
L.P., dated February 6, 1998.(1)
10.35 Summit Care Corporation Special Severance Pay Plan dated February 6,
1998.(1)
10.36 Investment Agreement dated as of March 27, 1998 among Fountain View
and certain investors.
10.37 Stockholders Agreement dated as of March 27, 1998 among Fountain View,
the existing stockholders of Fountain View and certain investors.
10.38 Registration Rights Agreement dated as of March 27, 1998 among
Fountain View, certain stockholders of Fountain View and certain
investors.
10.39 Employment Agreement between Fountain View and Robert Snukal dated
March 27, 1998.
10.40 Employment Agreement between Fountain View and Sheila Snukal dated
March 27, 1998.
10.41 Employment Agreement between Fountain View and William Scott dated
March 27, 1998.
10.42 Promissory Note and Pledge Agreement dated April 16, 1998 issued by
William Scott to Fountain View relating to purchase of 20,000 Shares
of Series A Common Stock.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.43 Supplemental Signature Page to Investment Agreement dated as of May 4,
1998 among Fountain View, Heritage Fund II, L.P., Baylor Health Care
System ("Baylor") and Buckner Foundation ("Buckner").
10.44 Amendment No. 1 to Stockholders Agreement dated as of May 4, 1998
among Fountain View, Heritage, Baylor, Buckner and certain other
parties.
10.45 Amendment No. 1 to Registration Rights Agreement dated as of May 4,
1998 among Fountain View, Heritage, Baylor, Buckner and certain other
parties.
10.46 Warrants to purchase Series C Common Stock of Fountain View issued by
Fountain View to Heritage, Baylor, Buckner and certain of Baylor's
brokers.
10.47 Credit Agreement Dated as of April 16, 1998 by and among Fountain
View, The Banks party thereto and the Bank of Montreal, as agent.
10.48 Guaranty Agreement Dated as of April 16, 1998 by and among Fountain
View, the Guarantors, the Banks party thereto and Bank of Montreal.
10.49 Pledge Agreement Dated as of April 16, 1998 by and among Fountain
View, the Guarantors, the Banks party thereto and Bank of Montreal.
10.50 Security Agreement Dated as of April 16, 1998 by and among Fountain
View, the Guarantors, the Banks party thereto and Bank of Montreal.
10.51 Form of Revolving Note.
10.52 Form of Term Note.
12.1 Statement Re: Computation of Ratio of Earnings to Fixed Charges.
21.1 List of Subsidiaries
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Choate, Hall & Stewart (included as part of Exhibit 5.1).
24.1 Powers of Attorney.*
25.1 Statement of eligibility of State Street Bank and Trust Company of
California, N.A., as trustee.*
99.1 Letter of Transmittal with respect to the Exchange Offer.
99.2 Notice of Guaranteed Delivery with respect to the Exchange Offer.
99.3 Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
99.4 Letter Regarding Eligibility for use of Form S-4.
99.5 Report of Ernst & Young LLP on Schedule.*
</TABLE>
- --------
+ To be filed by amendment.
* Previously filed
(1) Incorporated by reference to the Company's Schedule 14D-1, filed with the
Commission on February 13, 1998.
<PAGE>
EXHIBIT 1.1
FOUNTAIN VIEW, INC.
11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
------------------
April 9, 1998
Goldman, Sachs & Co.
Nesbitt Burns Securities Inc.
Paribas Corporation
Sutro & Co. Incorporated
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Fountain View, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of
$120,000,000 principal amount of the 11 1/4% Senior Subordinated Notes due 2008
of the Company specified above (the "Notes"). The Notes will be fully and
unconditionally guaranteed (the "Guarantees", and together with the Notes, the
"Securities") as to payment of principal, interest, liquidated damages, if any,
and premium, if any, on a senior subordinated basis, jointly and severally, by
each of the Company's current subsidiaries, which are set forth in Schedule II
attached hereto, and specified future subsidiaries (each a "Guarantor", and
collectively, the "Guarantors"). All references to "subsidiaries" contained
herein, assume the consummation of all transactions contemplated by the
Acquisition Documents (as defined herein) as of the date hereof.
1. The Company and each of the Guarantors, jointly and severally,
represents and warrants to, and agrees with, each of the Purchasers that:
(a) A preliminary offering circular, dated March 27, 1998 (the
"Preliminary Offering Circular") and an offering circular, dated April
9, 1998 (the "Offering Circular"), in each case including the
international supplement thereto, have been prepared in connection with
the offering of the Securities. Any reference to the Preliminary
Offering Circular or the Offering Circular shall be deemed to refer to
and include any Additional Issuer Information (as defined in Section
5(f)) furnished by the Company prior to the completion of the
distribution of the Securities. The Preliminary Offering Circular or
the Offering Circular and any amendments or supplements thereto did not
and will not, as of their respective dates, and in the case of the
Offering Circular, as of the Time of Delivery (as defined below),
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however,
1
<PAGE>
that this representation and warranty shall not apply to any statements
or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by a Purchaser through Goldman,
Sachs & Co. expressly for use therein;
(b) No registration of the Securities under the Securities Act of
1933, as amended (the "Act"), and no qualification of an indenture under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act")
with respect thereto, is required for the offer, sale and initial resale
of the Notes by the Purchasers in the manner contemplated by this
Agreement;
(c) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Offering Circular which would have a material adverse effect on the
current or future financial position or prospects, stockholders' equity
or results of operations of the Company and its subsidiaries, taken as a
whole (a "Material Adverse Effect"); and, since the respective dates as
of which information is given in the Offering Circular, there has not
been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Offering Circular;
(d) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Offering Circular or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings
by the Company and its subsidiaries;
(e) Each of the Company and its subsidiaries has been duly
incorporated or organized as a limited partnership and is validly
existing as a corporation or limited partnership in good standing under
the laws of its jurisdiction of incorporation or organization, with
corporate or partnership power and authority to own its properties and
conduct its business as described in the Offering Circular, and has been
duly qualified as a foreign corporation or partnership for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction;
2
<PAGE>
(f) The Company and each of the Guarantors has all requisite
corporate or partnership power and authority to execute, deliver and
perform its respective obligations under this Agreement, the Indenture
(as defined below), the Notes, the Guarantees, the Registration Rights
Agreement (as defined below), the Exchange Notes (as defined below) and
the Exchange Guarantees (as defined below) (collectively, the "Operative
Documents") to which they are, or will be, a party and to consummate the
transactions contemplated hereby and thereby, including, without
limitation, the corporate or partnership power and authority to issue,
sell and deliver the Notes and the Exchange Notes and to issue the
Guarantees and the Exchange Guarantees, as applicable, as provided
herein and therein;
(g) Each of the Preliminary Offering Circular and the Offering
Circular, as of their respective dates, contains the information
specified in Rule 144A(d)(4) under the Act;
(h) The Company has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued and are
fully paid and non-assessable; all of the issued shares of capital stock
or other equity interests of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and non-
assessable and (except for directors' qualifying shares) are owned, or
upon consummation of the Transactions will be owned, directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims except such as are described in the Offering
Circular; and the Company has no subsidiaries other than the Guarantors
listed on the signature pages hereto;
(i) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors;
(j) The registration rights agreement in the form attached hereto
as Annex II (the "Registration Rights Agreement"), has been duly
authorized by the Company and each of the Guarantors and, when duly
executed and delivered by the Company and each of the Guarantors, will
be the valid and legally binding obligation of the Company and each of
the Guarantors, enforceable against the Company and each of the
Guarantors in accordance with its terms, subject as to enforcement,
bankruptcy, reorganization, insolvency or other similar laws affecting
creditors' rights generally or by general principles of equity and, as
to rights of indemnification or contribution, to principles of public
policy or federal or state securities laws relating thereto; pursuant to
the Registration Rights Agreement, the Company will agree to file with
the Securities and Exchange Commission (the "Commission"), under the
circumstances set forth therein a registration statement under the Act
relating to another series of debt securities and Guarantees of the
Company and the Guarantors, respectively, with terms identical to the
Notes (the "Exchange Notes") and the Guarantees (the "Exchange
Guarantees" and together with the Exchange Notes, the "Exchange
Securities") to be offered in exchange for the Securities (the "Exchange
Offer"), and to the extent required by the Registration Rights
Agreement, a shelf registration statement pursuant to Rule 415 under the
Act relating to the resale of the Securities by holders thereof, and, as
provided in the Registration Rights Agreement, to use commercially
reasonable efforts to
3
<PAGE>
cause such applicable registration statement or registration statements
to be declared effective; and the Registration Rights Agreement will
conform to the description thereof in the Offering Circular;
(k) The Notes have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Indenture among the Company, the Guarantors and State
Street Bank and Trust Company of California, N.A., as Trustee (the
"Trustee"), under which they are to be issued (the "Indenture"), which
will be substantially in the form previously delivered to you; the
Indenture has been duly authorized and, when executed and delivered by
the Company and the Trustee, the Indenture will constitute a valid and
legally binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, reorganization, insolvency
and other similar laws relating to or affecting creditors' rights
generally and to general principles of equity; and the Notes and the
Indenture will conform to the descriptions thereof in the Offering
Circular and will be in substantially the form previously delivered to
you;
(l) The Exchange Notes have been duly authorized for issuance by
the Company, and when issued and authenticated in accordance with the
terms of the Indenture and the Registration Rights Agreement, will be
the valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or at
law); and the Exchange Notes, when issued, will conform to the
description thereof in the Offering Circular;
(m) The Guarantees have been duly authorized by each of the
Guarantors and, when executed and delivered in accordance with the terms
of the Indenture and when the Notes have been issued and authenticated
in accordance with the terms of the Indenture and delivered to and paid
for by the Purchasers in accordance with the terms of this Agreement,
will be the valid and legally binding obligations of the Guarantors,
enforceable against the Guarantors in accordance with their terms,
except as the enforcement thereof may be limited by applicable
bankruptcy, reorganization, insolvency or other similar laws affecting
creditors' rights generally or by general principles of equity; and the
Guarantees, when issued, will conform to the description thereof in the
Offering Circular;
(n) The Exchange Guarantees have been duly authorized by each of
the Guarantors and, when executed and delivered in accordance with the
terms of the Indenture and when the Exchange Notes are issued and
authenticated in accordance with the terms of the Indenture and the
Registration Rights Agreement, will be the valid and legally binding
obligation of the Guarantors, enforceable against the Guarantors in
accordance with their terms, except as the enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency or other
similar laws affecting creditors' rights generally or by general
principles of
4
<PAGE>
equity; and the Exchange Guarantees, when issued, will conform to the
description thereof in the Offering Circular;
(o) The Company and each of its subsidiaries, as applicable, has
all requisite corporate or partnership power and authority to execute,
deliver and perform its respective obligations under (i) the credit
agreement (the "New Credit Facility") by and among the Company, Bank of
Montreal and the various other lenders named therein, and (ii) any and
all other agreements and instruments ancillary to or entered into in
connection with the transactions contemplated by the New Credit Facility
(items (i) and (ii) are referred to collectively as the "Credit
Documents"). Each of the Credit Documents has been, or will prior to
the Time of Delivery (as defined in Section 4(a) below) be, duly
authorized by the Company and each of its subsidiaries named therein
and, when duly executed and delivered by the Company and each of its
subsidiaries named therein will be the valid and legally binding
obligation of the Company and each of its subsidiaries named therein,
enforceable against each of them in accordance with its terms, subject,
as to enforcement, to bankruptcy, reorganization, insolvency and other
similar laws relating to or affecting creditors' rights generally and to
general principles of equity. The Company will have at least $11.0
million of borrowings available to it under the New Credit Facility
after giving effect to the Transactions. All representations and
warranties to be made by the Company or any of its subsidiaries under
any of the Credit Documents will be true and correct in all material
respects as of the Time of Delivery as if made at the Time of Delivery;
provided, that any such representations and warranties that speak as of
a specific date shall be deemed to be made as of such date;
(p) The Company and each of its subsidiaries, as applicable, has
all requisite corporate power and authority to execute, deliver and
perform its respective obligations under (i) the Investment Agreement
(the "Investment Agreement"), dated as of March 27, 1998, by and among
the Company, Robert M. Snukal, Sheila S. Snukal, William C. Scott,
Heritage Fund II, L.P., Heritage Investors II, L.L.C., Heritage Fund II
Investment Corporation, HFV Holdings, LLC, Nassau Capital Partners II,
L.P., NAS Partners I LLC, Paribas North America, Inc., Phoenix Home Life
Mutual Insurance Company, PMI Mezzanine Fund, L.P., GS Private Equity
Partners, L.P., GS Private Equity Partners Offshore, L.P., and Sutro
Investment Partners V, LLC, (ii) the Agreement and Plan of Merger, dated
as of February 6, 1998 (the "Merger Agreement"), by and among the
Company, FV-SCC Acquisition Corp., Summit Care Corporation and Heritage
Fund II, L.P. and (iii) any and all other agreements and side letters
ancillary to or entered into in connection with the transactions
contemplated by any of the foregoing (items (i), (ii) and (iii) are
referred to collectively as the "Acquisition Documents"). Each of the
Acquisition Documents has been duly authorized, and has been, or prior
to the Time of Delivery of any such Acquisition Document will be,
executed and delivered by the Company and each of its subsidiaries named
therein, and, constitutes or will constitute the valid and legally
binding obligation of the Company and each of its subsidiaries named
therein, enforceable against each of them in accordance with its terms,
subject, as to enforcement, to bankruptcy, reorganization, insolvency
and other similar laws relating to or affecting creditors' rights
generally and to general principles of equity and except that certain
indemnification and contribution
5
<PAGE>
provisions may be limited by considerations of public policy or federal
or state securities laws relating thereto. All representations and
warranties made by any party under any of the Acquisition Documents,
dated and delivered prior to this Agreement, are true and correct in all
material respects as of the date hereof (except to the extent that any
such representations and warranties are expressly made with respect to a
specific date) and all of the representations and warranties made by any
party under any of the Acquisition Documents to be dated and delivered
after the date of this Agreement will be true and correct in all
material respects as of the date of such Acquisition Documents;
(q) The Company has delivered to the Purchasers true and correct,
executed copies of each of the Acquisition Documents that have been
executed and delivered to date and there have not been, and prior to the
Time of Delivery will not be, any amendments, alterations, modifications
or waivers to any of the Acquisition Documents or the exhibits or
schedules thereto other than those as to which the Purchasers shall
previously have been advised and shall not have reasonably objected in
writing after being furnished a copy thereof. The Company has delivered
to the Purchasers true and correct executed copies of the Credit
Documents, and there have been and prior to the Time of Delivery will
not be any alterations, modifications or waivers to any of such Credit
Documents or the exhibits or schedules thereto other than those as to
which the Purchasers shall previously have been advised and shall not
have reasonably objected in writing after being furnished a copy
thereof. The Acquisition Documents and Credit Documents will conform in
all material respects to the descriptions thereof in the Offering
Circular;
(r) Except as disclosed in the Preliminary Offering Circular and
the Offering Circular, and after giving effect to the transactions
contemplated by the Acquisition Documents, there are no outstanding (i)
securities or obligations of the Company or any of the Guarantors
convertible into or exchangeable for any capital stock of the Company or
any such Guarantor, (ii) warrants, rights or options to subscribe for or
purchase from the Company or any of the Guarantors any such capital
stock or any such convertible or exchangeable securities or obligations,
or (iii) obligations of the Company or any of the Guarantors to issue
any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options;
(s) There are no holders of securities of the Company or any of
the Guarantors who, by reason of the execution of this Agreement or any
other Operative Document by the Company or the Guarantors, as the case
may be, or the consummation of the transactions contemplated hereby and
thereby, have the right to request or demand that the Company or any of
the Guarantors register under the Act or analogous foreign laws and
regulations any securities held by them (other than pursuant to the
Registration Rights Agreement or the Investor Registration Rights
Agreement, as defined in the Offering Circular);
(t) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934,
6
<PAGE>
as amended (the "Exchange Act"), or any regulation promulgated
thereunder, including, without limitation, Regulations T, U, and X of
the Board of Governors of the Federal Reserve System;
(u) Prior to the date hereof, neither the Company nor any of its
affiliates has taken any action which is designed to or which has
constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the
Company in connection with the offering of the Securities;
(v) Except for certain consents required in connection with the
transactions contemplated by the Acquisition Documents, which will
either be obtained prior to the Time of Delivery or are not material,
the issue and sale of the Securities and the compliance by the Company
and each of the Guarantors with all of the provisions of this Agreement,
each of the other Operative Documents, the Credit Documents and the
Acquisition Documents and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation, Articles of
Incorporation, Bylaws, or other governing documents, as applicable, of
the Company or any of the Guarantors or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Securities or the consummation
by the Company or any of its subsidiaries of the other transactions
contemplated by this Agreement, the other Operative Documents, the
Credit Documents and the Acquisition Documents, except for the filing of
a registration statement pertaining to the Exchange Securities by the
Company and each of the Guarantors with the Commission pursuant to the
Act, the Registration Rights Agreement and Section 5(k) hereof, such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the Purchasers
and such filings (all of which have been made) as may be required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "Hart-Scott-Rodino Act"); and the applicable waiting period under
the Hart-Scott-Rodino Act has expired or been terminated in accordance
with the provisions thereof without any action by the United States
Department of Justice or Federal Trade Commission to prevent
consummation of any of the foregoing transactions;
(w) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation, Articles of
Incorporation, Bylaws or other governing documents or in default in any
material respect in the performance or observance of any obligation,
covenant or condition contained in any indenture, mortgage, deed
7
<PAGE>
of trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be
bound;
(x) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to constitute a
summary of the terms of the Securities, and under the captions "Offering
Circular Summary--The Transactions", "Certain Relationships and Related
Transactions", "Certain Federal Income Tax Consequences", "Description
of Other Indebtedness" and "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate, complete and fair in all material respects;
(y) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(z) Neither the Company nor any of the Guarantors is, or after
giving effect to the offering and sale of the Securities will be, an
"investment company", or an entity "controlled" by an "investment
company", as such terms are defined in the United States Investment
Company Act of 1940, as amended (the "Investment Company Act");
(aa) When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the
meaning of Rule 144A under the Act ("Rule 144A")) as securities which
are listed on a national securities exchange registered under Section 6
of the Exchange Act or quoted in a U.S. automated inter-dealer quotation
system;
(bb) None of the Company, the Guarantors, or any person acting on
its or their behalf has offered or sold the Securities by means of any
general solicitation or general advertising within the meaning of Rule
502(c) under the Act or, with respect to Securities sold outside the
United States to non-U.S. persons (as defined in Rule 902 under the
Act), by means of any directed selling efforts within the meaning of
Rule 902 under the Act and the Company, the Guarantors, any affiliate of
the Company and the Guarantors, and any person acting on its or their
behalf has complied with and will implement the "offering restriction"
within the meaning of such Rule 902;
(cc) Within the preceding six months, none of the Company, the
Guarantors or any other person acting on its or their behalf has offered
or sold to any person any Securities, or any securities of the same or a
similar class as the Securities, other than Securities offered or sold
to the Purchasers hereunder. The Company and the Guarantors will take
reasonable precautions designed to insure that any offer or sale, direct
or indirect, in the United States or to any U.S. person (as defined in
Rule 902 under the Act) of any Securities or any substantially similar
8
<PAGE>
security issued by the Company and the Guarantors, within six months
subsequent to the date on which the distribution of the Securities has
been completed (as notified to the Company by Goldman, Sachs & Co.), is
made under restrictions and other circumstances reasonably designed not
to affect the status of the offer and sale of the Securities in the
United States and to U.S. persons contemplated by this Agreement as
transactions exempt from the registration provisions of the Act. None of
the Company, the Guarantors or any of its or their affiliates or any
person acting on its or their behalf (other than the Purchasers, as to
whom the Company and the Guarantors make no representation) has engaged
or will engage in any directed selling efforts within the meaning of
Regulation S under the Act with respect to the Notes or the Guarantees;
(dd) The Company and each of the Guarantors maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect thereto;
(ee) The consolidated historical financial statements of the
Company and Summit Care Corporation, together with the notes thereto,
set forth in the Preliminary Offering Circular and the Offering Circular
comply as to form in all material respects with the requirements under
Regulation S-X of the Commission and fairly present the consolidated
financial position of the Company and its subsidiaries and Summit Care
Corporation and its subsidiaries as of the dates indicated and the
results of their operations and their cash flows for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied throughout such periods (except as otherwise
disclosed therein). The pro forma financial statements contained in the
Preliminary Offering Circular and the Offering Circular comply as to
form in all material respects with the requirements of the rules
promulgated under the Act and have been prepared on a basis consistent
with the historical statements, except for the pro forma adjustments
specified therein, and give effect to assumptions made on a reasonable
basis and present fairly the historical and proposed transactions
contemplated by this Agreement, the other Operative Documents, the
Credit Documents and the Acquisition Documents. The other financial and
statistical information and data included in the Preliminary Offering
Circular and the Offering Circular, historical and pro forma, are, in
all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of
the Company and the Guarantors. The statistical and market-related data
included in the Preliminary Offering Circular and the Offering Circular
are based on or derived from sources which the Company and the
Guarantors believe to be reliable and accurate in all material respects;
(ff) Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, and of Summit Care
Corporation and its
9
<PAGE>
subsidiaries, are independent public accountants as required by the Act
and the rules and regulations of the Commission thereunder;
(gg) The Company and each of the Guarantors has complied in all
respects with all laws, regulations and orders applicable to them or
their businesses the violation of which would have a Material Adverse
Effect;
(hh) Except as would not, individually or in the aggregate, have a
Material Adverse Effect, (i) the Company and each of the Guarantors has
all certificates, consents, exemptions, orders, permits, licenses,
authorizations, or other approvals (each, an "Authorization") of and
from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, necessary or required
to engage in the business currently conducted by it in the manner
described in the Offering Circular; (ii) all such Authorizations are
valid and in full force and effect; and (iii) the Company and each of
the Guarantors is in compliance in all material respects with the terms
and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto;
(ii) The Company and each of the Guarantors owns or possesses or
has the right to use the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
the "Intellectual Property") presently employed by it in connection
with, and material to, individually or in the aggregate, the operation
of the businesses now operated by it, and neither the Company nor any of
the Guarantors has received any notice of infringement of or conflict
with asserted rights of others with respect to the foregoing which,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.
To the best knowledge of the Company and the Guarantors, the use of such
Intellectual Property in connection with the business and operations of
the Company and the Guarantors does not infringe on the rights of any
person, except as would not, individually or in the aggregate, result in
a Material Adverse Effect;
(jj) All tax returns required to be filed by the Company or any of
the Guarantors in all jurisdictions have been timely and duly filed,
other than those filings being contested in good faith, except where the
failure to so file any such returns could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
There are no tax returns of the Company or any of the Guarantors that
are currently being audited by state, local or federal taxing
authorities or agencies (and with respect to which the Company or any of
the Guarantors has received notice), where the findings of such audit,
if adversely determined, would result in a Material Adverse Effect. All
taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities have
been paid, other than those being contested in good faith and for which
adequate reserves have been provided or those currently payable without
penalty or interest;
10
<PAGE>
(kk) The Company and each of the Guarantors maintains insurance
covering their properties, operations, personnel and businesses which
insures against such losses and risks as is adequate in accordance with
its reasonable business judgment to protect the Company and the
Guarantors and their businesses. Neither the Company nor the Guarantors
has received notice from any insurer or agent of such insurer that
substantial capital improvements or other expenditures will have to be
made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be outstanding
and duly in force at the Time of Delivery;
(ll) Except as disclosed in the Preliminary Offering Circular and
the Offering Circular, there are no business relationships or related
party transactions which would be required to be disclosed therein by
Item 404 of Regulation S-K promulgated under the Act and each business
relationship or related party transaction described therein is a fair
and accurate description of the relationships and transactions so
described in all material respects;
(mm) The Company and each of the Guarantors is in compliance in all
material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) for which the Company or any
Guarantor would have any liability; neither the Company nor any of the
Guarantors has incurred or expects to incur liability under (i) Title IV
of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Section 412 or 4971 of the Internal Revenue Code
of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for
which the Company or any Guarantor would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such
qualification, except, in each case, as would not have a Material
Adverse Effect;
(nn) There is (i) no material unfair labor practice complaint
pending against the Company or any of the Guarantors, or, to the best
knowledge of the Company, threatened against any of them, before the
National Labor Relations Board or any state or local labor relations
board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement
is so pending against the Company or any of the Guarantors, or, to the
best knowledge of the Company, threatened against any of them, (ii) no
material strike, labor dispute, slowdown or stoppage pending against the
Company or any of the Guarantors nor, to the best knowledge of the
Company and the Guarantors, threatened against the Company or any of the
Guarantors and (iii) to the best knowledge of the Company and the
Guarantors, no union representation question existing with respect to
the employees of the Company or any of the Guarantors and, to the best
knowledge of the Company and the Guarantors, no union organizing
activities are taking place, except, in each case, as would not have a
Material Adverse Effect;
11
<PAGE>
(oo) The Company and each of the Guarantors has reviewed the effect
of Environmental Laws (as defined below) and the disposal of hazardous
or toxic substances, wastes, pollutants and contaminants on the
business, assets, operations and properties of the Company and each of
the Guarantors, and identified and evaluated associated costs and
liabilities (including, without limitation, any material capital and
operating expenditures required for clean-up, closure of properties and
compliance with environmental, safety or similar laws or regulations
applicable to it or its business or property relating to the protection
of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"),
all permits, licenses and approvals, all related constraints on
operating activities and all potential liabilities to third parties). On
the basis of such reviews, the Company and the Guarantors have
reasonably concluded that such associated costs and liabilities would
not have a Material Adverse Effect. Neither the Company nor any of the
Guarantors (i) has violated any Environmental Laws, (ii) lacks any
permit, license or other approval required of it under applicable
Environmental Laws or (iii) is violating any term or condition of such
permit, license or approval, which could reasonably be expected to,
either individually or in the aggregate, have a Material Adverse Effect;
(pp) None of the Company, the Guarantors or, to the Company's and
the Guarantors' knowledge, any director, officer, agent, employee or
other person associated with or acting on behalf of the Company or any
of the Guarantors, has used any corporate funds during the last five
years for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment,
except, in each case, such as would not have a Material Adverse Effect;
(qq) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes;
(rr) Other than as contemplated by or described in this Agreement,
there is no broker, finder or other party that is entitled to receive
from the Company or any of the Guarantors any brokerage or finder's fee
or other fee or commission as a result of any of the transactions
contemplated by this Agreement or any of the Operative Documents; and
(ss) Each certificate signed by any officer of the Company or any
Guarantor and delivered at the Time of Delivery to the Purchasers or
counsel for the Purchasers shall be deemed to be a representation and
warranty by the Company or such Guarantor, as the case may be, to the
Purchasers as to the matters covered thereby.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees, severally and not
12
<PAGE>
jointly, to purchase from the Company, at a purchase price of 97.0% of the
principal amount thereof, the principal amount of Notes (together with the
Guarantees thereof) set forth opposite the name of such Purchaser in Schedule I
hereto.
3. Upon the authorization by you of the release of the Securities, the
several Purchasers propose to offer the Securities for sale upon the terms and
conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Company and the
Guarantors that:
(a) It will offer and sell the Securities only to: (i) persons who it
reasonably believes are "qualified institutional buyers" ("QIBs") within the
meaning of Rule 144A in transactions meeting the requirements of Rule 144A or
(ii) upon the terms and conditions set forth in Annex I to this Agreement;
(b) It is an institutional "accredited investor" (within the meaning of
Rule 501 of the Act); and
(c) It will not offer or sell the Securities by any form of general
solicitation or general advertising, including but not limited to the methods
described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Purchaser hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefor by
certified or official bank check or checks, payable to the order of the Company
in Federal (same day) funds, by causing DTC to credit the Securities to the
account of Goldman, Sachs & Co. at DTC. The Company will cause the certificates
representing the Securities to be made available to Goldman, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery (as defined
below) at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be 9:30 a.m.,
New York City time, on April 16, 1998 or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing. Such time and date are
herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross-receipt
for the Securities and any additional documents requested by the Purchasers
pursuant to Section 7 hereof, will be delivered at such time and date at the
offices of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles,
California 90071 (the "Closing Location"), and the Securities will be delivered
at the Designated Office, all at the Time of Delivery. A meeting will be held
at the Closing Location at 1:00 p.m., New York City time, on the New York
Business Day next preceding the Time of Delivery, at which meeting the final
drafts of the documents to be delivered pursuant to the preceding sentence will
be available for review by the parties hereto. For the purposes of this Section
4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
13
<PAGE>
5. Each of the Company and the Guarantors party hereto, jointly and
severally, agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to make no
amendment or any supplement to the Offering Circular which shall be disapproved
by you promptly after reasonable notice thereof; and to furnish you with copies
thereof;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith neither the Company nor any Guarantor
shall be required to qualify as a foreign corporation or to file a general
consent to service of process or become subject to taxation in any jurisdiction;
(c) To furnish the Purchasers with six copies of the Offering Circular and
each amendment or supplement thereto signed by an authorized officer of the
Company with the independent accountants' reports in the Offering Circular, and
any amendment or supplement containing amendments to the financial statements
covered by such reports, signed by the accountants, and additional copies
thereof in such quantities as you may from time to time reasonably request, and
if, at any time prior to the expiration of nine months after the date of the
Offering Circular, any event shall have occurred as a result of which the
Offering Circular as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary or desirable during such same
period to amend or supplement the Offering Circular, to notify you and upon your
request to prepare and furnish without charge to each Purchaser and to any
dealer in securities as many copies as you may from time to time reasonably
request of an amended Offering Circular or a supplement to the Offering Circular
which will correct such statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and continuing until
the date six months after the Time of Delivery, not to offer, sell contract to
sell or otherwise dispose of, except as provided hereunder any securities of the
Company or any of its subsidiaries that are substantially similar to the
Securities (other than the Exchange Securities pursuant to the Exchange Offer);
(e) Not to be or become, at any time prior to the expiration of three
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act;
(f) At any time when the Company and the Guarantors are not subject to
Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to
time of Securities, to furnish at its expense, upon request, to holders of
Securities and prospective purchasers of securities information (the "Additional
Issuer Information") satisfying the requirements of subsection (d)(4)(i) of Rule
144A under the Act;
14
<PAGE>
(g) If requested by you, to use its best efforts to cause the Securities
to be eligible for the PORTAL trading system of the National Association of
Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), consolidated summary financial information of the Company
and its subsidiaries for such quarter in reasonable detail (the foregoing shall
be deemed satisfied by the delivery of Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q);
(i) During a period of five years from the date of the Offering Circular,
to furnish to you copies of all reports or other communications (financial or
other) of the type that would be customarily furnished to public stockholders of
the Company, and to deliver to you (i) as soon as they are available, copies of
any reports and financial statements furnished to or filed with the Commission
or any securities exchange on which the Securities or any class of securities of
the Company are listed; and (ii) such additional information concerning the
business and financial condition of the Company and its subsidiaries as you may
from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders generally
or to the Commission);
(j) During the period of two years after the Time of Delivery, the Company
will not, and will not permit any of its "affiliates" (as defined in Rule 144
under the Act ("Rule 144")) to, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by any of them;
(k) To comply with all terms of the Registration Rights Agreement,
including, without limitation, filing on or prior to 90 days after the Time of
Delivery and using commercially reasonable efforts to cause to be declared or
become effective under the Act, on or prior to 150 days after the Time of
Delivery, a registration statement on Form S-4 providing for the registration of
the Exchange Securities, and the exchange of the Securities for the Exchange
Securities, all in a manner which will permit persons who acquire the Exchange
Securities to resell the Exchange Securities pursuant to Section 4(1) of the
Act; and
(l) To use the net proceeds received by them from the sale of the
Securities pursuant to this Agreement in the manner specified in the Offering
Circular under the caption "Use of Proceeds".
6. Each of the Company and the Guarantors party hereto, jointly and
severally, covenant and agree with the several Purchasers that the Company
and/or the Guarantors will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's and the Guarantors' counsel and
accountants in connection with the issue of the Securities and all other
expenses in connection with the preparation, printing and filing of the
Preliminary Offering Circular and the Offering Circular and any amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Purchasers and dealers; (ii) the cost of printing or producing any agreement
among Purchasers, this Agreement, the Registration Rights Agreement, the
Indenture, the Blue Sky Memoranda, closing documents
15
<PAGE>
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities; (iii) all expenses
in connection with the qualification of the Securities for offering and sale
under state securities laws as provided in Section 5(b) hereof, including the
reasonable and customary fees and disbursements of counsel for the Purchasers in
connection with such qualification and in connection with the Blue Sky and legal
investment surveys; (iv) any fees charged by securities rating services for
rating the Securities; (v) the cost of preparing the Securities; (vi) the fees
and expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities; (vii) any cost incurred in connection with the designation of
the Securities for trading in PORTAL; and (viii) all other costs and expenses
incident to the performance of their obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Purchasers will pay all of their own costs and expenses, including the fees of
their counsel, and transfer taxes on resale of any of the Securities by them.
7. The obligations of the Purchasers hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and the Guarantors herein are, at and as of the Time
of Delivery, true and correct, the condition that the Company and the Guarantors
shall have performed all of their obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) Latham & Watkins, counsel for the Purchasers, shall have furnished to
you such opinion or opinions, dated the Time of Delivery, with respect to such
matters as you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to pass
upon such matters;
(b) Counsel for the Company shall have furnished to you their written
opinions, dated the Time of Delivery, in form and substance satisfactory to you,
to substantially the effect set forth below, with the opinions as to federal and
Delaware law to be provided by Choate, Hall & Stewart and the opinions as to
California, Texas and New York Law to be provided by Brobeck, Phleger & Harrison
LLP, subject in the case of each such opinion to reasonable and customary
qualifications and assumptions:
(i) The Company and each of the Guarantors is validly existing as a
corporation or limited partnership in good standing under the laws of its
jurisdiction of organization, with corporate or partnership power and
authority to own its properties and conduct its business as described in
the Offering Circular;
(ii) The Company has an authorized capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully paid
and non-assessable;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction (such counsel being entitled to
16
<PAGE>
rely in respect of the opinion in this clause upon certificates provided by
the relevant officers of the Secretaries of State in specified
jurisdictions);
(iv) All of the issued shares of capital stock or other equity
interests of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable, and (except for
directors' qualifying shares) are owned directly or indirectly by the
Company;
(v) To the best of such counsel's knowledge and other than as set
forth in the Offering Circular, there are no legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject, which would, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of the Company and
its subsidiaries, taken as a whole;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and the Guarantors;
(vii) The Notes have been duly authorized, executed and delivered by
the Company, and constitute valid and legally binding obligations of the
Company entitled to the benefits provided by the Indenture;
(viii) The Exchange Notes have been duly authorized by the Company,
and when executed, authenticated and delivered in accordance with the terms
of the Indenture, will constitute valid and legally binding obligations of
the Company entitled to the benefits provided by the Indenture;
(ix) The Guarantees have been duly authorized, executed and
delivered by each of the Guarantors, and constitute valid and legally
binding obligations of the Guarantors;
(x) The Exchange Guarantees have been duly authorized by each of
the Guarantors, and when issued and delivered and the Exchange Notes have
been executed, authenticated and delivered in accordance with the terms of
the Indenture, will constitute valid and legally binding obligations of the
Guarantors;
(xi) The Indenture has been duly authorized, executed and delivered
by the Company and the Guarantors and constitutes a valid and legally
binding instrument of the Company and the Guarantors, enforceable in
accordance with its terms;
(xii) The issue and sale of the Securities and the compliance by the
Company and the Guarantors with all of the provisions of the Securities,
the Indenture, the Registration Rights Agreement and this Agreement and
the consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument identified
to such counsel as material to the Company or any of its subsidiaries, nor
will such actions result in any violation of the provisions of the
respective Certificate of
17
<PAGE>
Incorporation, Articles of Incorporation, Bylaws or other governing
documents of the Company or its subsidiaries or any statute or any order,
rule or regulation of any court or governmental agency or body known to be
applicable to the Company or any of its subsidiaries or any of their
properties;
(xiii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities by the Company and the
Guarantors or the consummation by the Company or the Guarantors of the
transactions contemplated by this Agreement or the Indenture or the
Registration Rights Agreement, except such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers, and except for
authorizations required to be obtained from the Commission under the
Registration Rights Agreement;
(xiv) The statements set forth in the Offering Circular under the
caption "Description of Notes", insofar as they purport to constitute a
summary of the terms of the Securities, and under the captions "Offering
Circular Summary--The Transactions", "Certain Relationships and Related
Transactions", "Certain Federal Income Tax Consequences", "Description of
Other Indebtedness" and "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to therein, are
true and accurate summaries thereof in all material respects;
(xv) No registration of the Securities under the Act, and no
qualification of an indenture under the Trust Indenture Act, with respect
thereto, is required for the offer, sale and initial resale of the
Securities by the Purchasers in the manner contemplated by this Agreement
assuming (i) the accuracy of, and compliance with, the Purchasers'
representations and agreements contained in Section 3 and Annex I of this
Agreement, and (ii) the accuracy of, and compliance with, the
representations and agreements of the Company and the Guarantors set forth
in Sections 1(g), 1(aa), 1(bb), 1(cc) and 5 of this Agreement;
(xvi) Neither the Company nor any of its subsidiaries is an
"investment company" or an entity "controlled" by an "investment company",
as such terms are defined in the Investment Company Act.
In addition, the opinion of Choate, Hall & Stewart shall state that
such counsel have participated in conferences with officers and other
representatives of the Company and the Guarantors, representatives of the
independent public accountants for the Company and the Guarantors,
representatives of the Purchasers and their counsel in connection with the
preparation of the Offering Circular and have considered the matters required to
be stated therein and the statements contained therein and, although such
counsel have not independently verified and are not passing upon and assume no
responsibility for the accuracy, completeness or fairness of such statements
(except as indicated in clause (xiv) above), on the basis of the foregoing, such
counsel shall confirm that no facts came to their attention that caused them to
believe that the Offering Circular, as of its date or as of the Time of
Delivery, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood
18
<PAGE>
that such counsel express no view as to any of the financial statements, the
notes thereto and schedules and other financial and statistical data included in
the Offering Circular);
(c) On the date of the Offering Circular prior to the execution of this
Agreement and also at the Time of Delivery, Ernst & Young LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you;
(d) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Offering Circular any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Offering Circular, and (ii) since the
respective dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in clause (i) or (ii),
is in the judgment of the Purchasers so material and adverse as to make it
impracticable or inadvisable to proceed with the offering or the delivery of the
Securities on the terms and in the manner contemplated in this Agreement and in
the Offering Circular;
(e) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities;
(f) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on the Nasdaq National Market
("NASDAQ"); (ii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; (iii) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this clause (iii) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the offering or the delivery of the
Securities on the terms and in the manner contemplated in the Offering Circular;
or (iv) the occurrence of any material adverse change in the existing,
financial, political or economic conditions in the United States or elsewhere
which, in the judgment of the Representatives, would materially and adversely
affect the financial markets or the markets for Securities and other debt
securities;
(g) The Securities shall have been designated for trading on PORTAL;
(h) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of Offering Circulars on the New York
Business Day next succeeding the date of this Agreement;
19
<PAGE>
(i) The Company, the Guarantors and the Trustee shall have entered into
the Indenture and the Purchasers shall have received counterparts, conformed as
executed, thereof.
(j) The Company, the Guarantors and the Purchasers shall have entered into
the Registration Rights Agreement in the form attached hereto as Annex II and
the Purchasers shall have received counterparts, conformed as executed, thereof.
(k) Prior to or simultaneously with the closing of the transactions
contemplated by Section 2 hereof, the Company and the Guarantors shall have
consummated the Merger (as defined in the Offering Circular) and the other
transactions contemplated by the Acquisition Documents to be effective on or
prior to such date, and shall have entered into the New Credit Facility.
(l) Prior to or simultaneously with the closing of the transactions
contemplated by Section 2 hereof, the Company shall have entered into each of
the Employment Agreements (as defined in the Offering Circular) and each of such
Employment Agreements shall be in the form previously agreed to by the
Purchasers and described in the Offering Circular.
(m) Latham & Watkins, counsel for the Purchasers, shall have been
furnished with final, executed copies of each of the documents set forth above
and such other documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 7 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(n) Choate, Hall & Stewart, and each other counsel for the Company or the
Guarantors, shall have furnished to you copies of all of their opinions, along
with reliance letters addressed to you and dated the Time of Delivery, delivered
in connection with the Credit Documents and the transactions contemplated
thereby;
(o) The Company shall have furnished or caused to be furnished to you at
the Time of Delivery certificates of officers of the Company and the Guarantors
satisfactory to you as to the accuracy of the representations and warranties of
the Company and the Guarantors herein at and as of such Time of Delivery, as to
the performance by the Company and the Guarantors of all of their obligations
hereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in this Section and as to such other matters as you may
reasonably request.
8. (a) The Company and the Guarantors will, jointly and severally,
indemnify and hold harmless each Purchaser against any losses, claims, damages
or liabilities, joint or several, to which such Purchaser may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such action or claim as such expenses are
20
<PAGE>
incurred; provided, however, that the Company and the Guarantors shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Purchaser through Goldman, Sachs & Co. expressly for use therein.
(b) Each Purchaser will, severally and not jointly, indemnify and hold
harmless the Company and the Guarantors against any losses, claims, damages or
liabilities to which the Company or the Guarantors may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Offering Circular or the Offering Circular, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Offering Circular or the Offering Circular or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Purchaser through Goldman, Sachs &
Co. expressly for use therein; and will reimburse the Company and the Guarantors
for any legal or other expenses reasonably incurred by the Company or the
Guarantors in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any
21
<PAGE>
losses, claims, damages or liabilities (or actions in respect thereof) referred
to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Guarantors on
the one hand and the Purchasers on the other from the offering of the
Securities. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Guarantors on the one hand
and the Purchasers on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Guarantors on the one hand and
the Purchasers on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Purchasers, in each case as set forth in the Offering Circular. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Guarantors on the one hand or the Purchasers on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Guarantors and
the Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to
investors were offered to investors exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. The Purchasers' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company and the Guarantors under this Section 8
shall be in addition to any liability which the Company and the Guarantors may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Purchaser within the meaning of the Act; and
the obligations of the Purchasers under this Section 8 shall be in addition to
any liability which the respective Purchasers may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company and the Guarantors and to each person, if any, who controls the Company
within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If
22
<PAGE>
within thirty-six hours after such default by any Purchaser you do not arrange
for the purchase of such Securities, then the Company shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Securities on such terms. In
the event that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Securities, or the Company
notifies you that it has so arranged for the purchase of such Securities, you or
the Company shall have the right to postpone the Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Offering Circular, or in any other documents or
arrangements, and the Company agrees to prepare promptly any amendments to the
Offering Circular which in your opinion may thereby be made necessary. The term
"Purchaser" as used in this Agreement shall include any person substituted under
this Section with like effect as if such person had originally been a party to
this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities, then the Company shall have
the right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder and, in
addition, to require each non-defaulting Purchaser to purchase its pro rata
share (based on the principal amount of Securities which such Purchaser agreed
to purchase hereunder) of the Securities of such defaulting Purchaser or
Purchasers for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Purchaser or Purchasers by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Purchasers to purchase
Securities of a defaulting Purchaser or Purchasers, then this Agreement shall
thereupon terminate, without liability on the part of any non-defaulting
Purchaser or the Company, except for the expenses to be borne by the Company and
the Purchasers as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Guarantors and the several Purchasers,
as set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Purchaser or any controlling person of any Purchaser, or the
Company, the Guarantors or any officer or director or controlling person of the
Company or the Guarantors, and shall survive delivery of and payment for the
Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Purchaser except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company and the Guarantors
as provided herein, the Company and the Guarantors will reimburse the Purchasers
through you for all reasonable out-of-pocket expenses approved in
23
<PAGE>
writing by you, including fees and disbursements of counsel, reasonably incurred
by the Purchasers in making preparations for the purchase, sale and delivery of
the Securities, but the Company and the Guarantors shall then be under no
further liability to any Purchaser except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, Goldman, Sachs & Co. shall act on behalf of
each of the Purchasers, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Purchaser made
or given by Goldman, Sachs & Co.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Purchasers shall be delivered or sent by mail, telex or
facsimile transmission to you in care of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004, Attention: Registration Department, with a copy to
Greg Pettigrew, Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles
90071; and if to the Company or any of the Guarantors shall be delivered or sent
by mail, telex or facsimile transmission to the address of the Company set forth
in the Offering Circular, Attention: Secretary, with a copy to Stephen M.L.
Cohen, Esq., Choate Hall & Stewart, Exchange Place, 53 State Street, Boston,
Massachusetts 02109; provided, however, that any notice to a Purchaser pursuant
to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Purchaser at its address set forth in its Purchasers'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Purchasers, the Company, the Guarantors and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and the
Guarantors and each person who controls the Company, the Guarantors or any
Purchaser, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of any of the Securities from any Purchaser
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
24
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers, the Company
and each of the Guarantors named below. It is understood that your acceptance
of this letter on behalf of each of the Purchasers is pursuant to the authority
set forth in a form of Agreement among Purchasers, the form of which shall be
submitted to the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
FOUNTAIN VIEW, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE CORPORATION
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE CALIFORNIA, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE PHARMACY, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SKILLED CARE NETWORK
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SNF PHARMACY, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
S-1
<PAGE>
SUMMIT CARE TEXAS EQUITY, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE-TEXAS NO. 2, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE-TEXAS NO. 3, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE MANAGEMENT TEXAS, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE TEXAS, L.P.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
FOUNTAIN VIEW HOLDINGS, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
AIB CORP.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
S-2
<PAGE>
ALEXANDRIA CONVALESCENT HOSPITAL, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
BIA HOTEL CORP.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
BRIER OAK CONVALESCENT, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
ELMCREST CONVALESCENT HOSPITAL
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
FOUNTAINVIEW CONVALESCENT HOSPITAL
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
FOUNTAIN VIEW MANAGEMENT, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
RIO HONDO NURSING CENTER
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
S-3
<PAGE>
LOCOMOTION HOLDINGS, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
LOCOMOTION THERAPY, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
ON-TRACK THERAPY CENTER, INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
I.'N O., INC.
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
SYCAMORE PARK CONVALESCENT CENTER
By: /s/ William C. Scott
-----------------------
Name: William C. Scott
Title: Chairman
Accepted as of the date hereof:
Goldman, Sachs & Co.
Nesbitt Burns Securities Inc.
Paribas Corporation
Sutro & Co. Incorporated
By:________________________________________
(Goldman, Sachs & Co.)
S-4
<PAGE>
LOCOMOTION HOLDINGS, INC.
By:______________________________
Name:
Title:
LOCOMOTION THERAPY, INC.
By: _____________________________
Name:
Title:
ON-TRACK THERAPY CENTER, INC.
By: _____________________________
Name:
Title:
I.'N O., INC.
By: _____________________________
Name:
Title:
SYCAMORE PARK CONVALESCENT CENTER
By:______________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Nesbitt Burns Securities Inc.
Paribas Corporation
Sutro & Co. Incorporated
By: /s/ Goldman, Sachs & Co.
------------------------------------
(Goldman, Sachs & Co.)
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
PURCHASER PURCHASED
--------- --------------
<S> <C>
Goldman, Sachs & Co........................................ $ 71,667,000
Nesbitt Burns Securities Inc............................... 29,667,000
Paribas Corporation........................................ 17,666,000
Sutro & Co. Incorporated................................... 1,000,000
--------------
Total................................................... $120,000,000
</TABLE>
<PAGE>
SCHEDULE II
GUARANTORS
Summit Care Corporation, a California corporation
Summit Care-California, Inc., a California corporation
Summit Care Pharmacy, Inc., a California corporation
Skilled Care Network, a California corporation
Summit Care Texas Equity, Inc., a California corporation
AIB Corp., a California corporation
Alexandria Convalescent Hospital, Inc., a California corporation
BIA Hotel Corp., a California corporation
Brier Oak Convalescent, Inc., a California corporation
Elmcrest Convalescent Hospital, a California corporation
Fountainview Convalescent Hospital, a California corporation
Fountain View Management, Inc., a California corporation
Rio Honda Nursing Center, a California corporation
On-Track Therapy Center, Inc., a California corporation
I.'N O., Inc., a California corporation
Sycamore Park Convalescent Hospital, a California corporation
SNF Pharmacy, Inc., a California corporation
Summit Care-Texas No. 2, Inc., a Texas corporation
Summit Care-Texas No. 3, Inc., a Texas corporation
Summit Care Management Texas, Inc., a Texas corporation
Summit Care Texas, L.P., a Texas limited partnership
Fountain View Holdings, Inc., a Delaware corporation
Locomotion Holdings, Inc., a Delaware corporation
Locomotion Therapy, Inc., a Delaware corporation
<PAGE>
ANNEX I
TERMS AND CONDITIONS OF SALES
UNDER REGULATION S UNDER THE ACT
(1) The Securities have not been and will not be registered under the Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with Regulation S under
the Act or pursuant to an exemption from the registration requirements of the
Act. Each Purchaser represents that it has offered and sold the Securities, and
will offer and sell the Securities (i) as part of their distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering and the Time of Delivery, only in accordance with Rule 903 of
Regulation S or Rule 144A or pursuant to Paragraph 2 of this Annex I under the
Act. Accordingly, each Purchaser agrees that neither it, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any directed
selling efforts with respect to the Securities, and it and they have complied
and will comply with the offering restrictions requirement of Regulation S.
Each Purchaser agrees that, at or prior to confirmation of sale of Securities
(other than a sale pursuant to Rule 144A) or pursuant to Paragraph 2 of this
Annex I, it will have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Act") and may not be offered and
sold within the United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering and the
closing date, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Act. Terms used above have the meaning
given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not enter
into any contractual arrangement with respect to the distribution or delivery of
the Securities, except with its affiliates or with the prior written consent of
the Company.
(2) Notwithstanding the foregoing, Securities in registered form may be
offered, sold and delivered by the Purchasers in the United States and to U.S.
persons pursuant to Section 3 of this Agreement without delivery of the written
statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has not
offered or sold and will not offer or sell any Securities to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only
Annex I-1
<PAGE>
issue or pass on in the United Kingdom any document received by it in connection
with the issuance of the Securities to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver any of
the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
Annex I-2
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
Fountain View Management, Inc.
------------------------------
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the
provisions of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: The name of the Corporation is Fountain View Management, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, 19801 and the name of the Corporation's registered agent
at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 3,000 shares of Class A Common Stock, $.01 par value.
FIFTH: The name and the mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Kathleen M. Sablone Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
SIXTH: The Directors shall have power to adopt, amend, or repeal the By-
Laws of the Corporation.
SEVENTH: Election of Directors need not be by written ballot unless the
By-Laws of the Corporation so provide.
EIGHTH: The Corporation shall indemnify and hold harmless any director,
officer employee or agent of the Corporation from and against any and all
expenses and liabilities that may be imposed upon or incurred in connection
with, or as a result of, any proceeding in which he or she may become involved,
as a party or otherwise, by reason of the fact that
<PAGE>
he or she is or was such a director, officer, employee or agent, whether or not
he or she continues to be such at the time such expenses and liabilities shall
have been imposed or incurred, to the fullest extent permitted by the laws of
the State of Delaware as they may be amended from time to time.
NINTH: No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title 8 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The undersigned incorporator hereinbefore named, for the purpose of forming
a corporation pursuant to the General Corporation Law of the State of Delaware,
does make this certificate, hereby declaring and certifying that this is her act
and deed and the facts stated herein are true and accordingly has hereunto set
her hand this 14th day of July, 1997.
/s/ Kathleen M. Sablone
-----------------------------------------------
Kathleen M. Sablone, Incorporator
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FOUNTAIN VIEW MANAGEMENT, INC.", CHANGING ITS NAME FROM "FOUNTAIN VIEW
MANAGEMENT, INC." TO "FOUNTAIN VIEW, INC.", FILED IN THIS OFFICE ON THE FIRST
DAY OF AUGUST, A.D. 1997, AT 2:30 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
2772638 8100 AUTHENTICATION:
9027443
DATE:
981143230 04-15-98
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FOUNTAIN VIEW MANAGEMENT, INC.
IT IS HEREBY CERTIFIED THAT:
1. The name of the Corporation (hereinafter, the "Corporation") is
-----------
Fountain View Management, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended
by deleting ARTICLE 1 thereof and by substituting in lieu thereof the following
new ARTICLE 1:
ARTICLE 1. The name of the Corporation is Fountain View, Inc. (the
"Corporation").
3. The Certificate of Incorporation of the Corporation is hereby amended
by deleting ARTICLE 4 thereof and by substituting in lieu thereof the following
new ARTICLE 4:
ARTICLE 4. A description of each class and series of stock of the
Corporation and the voting rights, designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof is as follows:
Section 1. Capital Stock.
--------- -------------
1.1 General. The Corporation shall have two classes of capital stock (the
-------
"Capital Stock"): Common Stock, $.01 par value per share (the "Common Stock"),
------------- ------------
and Preferred Stock, $.01 par value per share (the "Preferred Stock").
---------------
1.2 Number of Shares. The total authorized number of shares of each class
----------------
of Capital Stock is (a) 200,000 shares of Common Stock and (b) 7,000 shares of
Preferred Stock.
1.3 Series of Preferred Stock. The shares of Preferred Stock shall be
-------------------------
designated "Series A Preferred Stock" (the "Series A Preferred Stock").
------------------------
1.4 Series of Common Stock. 53,850 shares of the Common Stock shall be
----------------------
designated "Series A-1 Common Stock" (the "Series A-1 Common Stock"). 99,950
-----------------------
shares of the Common Stock shall be designated "Series A-2 Common Stock" (the
"Series A-2 Common Stock"). 46,200 shares of the Common Stock shall be
- ------------------------
designated "Series A-3 Common Stock" (the "Series A-3 Common Stock").
-----------------------
<PAGE>
Section 2. Dividends and Other Distributions and Benefits.
--------- ----------------------------------------------
2.1 Dividends on the Series A Preferred Stock.
-----------------------------------------
(a) The holders of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board, out of funds legally available
therefor, a dividend at the annual rate of 10% of the Base Amount (as
hereinafter defined) of each share of Series A Preferred Stock from and
including the date of issuance of such share to and including the day on which
the Liquidation Value (as hereinafter defined) of such share is paid. Such
dividends shall accrue from day to day, whether or not earned or declared, on
each issued and outstanding share of Series A Preferred Stock, and shall be
cumulative. The date on which the Corporation initially issues any share of
Series A Preferred Stock will be deemed to be its "date of issuance" regardless
of the number of times transfer of such share is made on the stock records of
the Corporation and regardless of the number of certificates which may be issued
to evidence such share.
(b) If declared by the Board of Directors, dividends on each share of
Series A Preferred Stock shall be paid on each July 1 while such share is
outstanding (the "Dividend Reference Date").
-----------------------
(c) Any dividends that accrue on any share of Series A Preferred Stock
during the one-year period (or lesser period in the case of the first Dividend
Reference Date) ending upon such Dividend Reference Date, and are not paid on
such Dividend Reference Date, shall automatically be added to the Base Amount of
such share and will remain a part thereof until such dividends are paid, at
which time the Base Amount shall be reduced by such payment.
(d) The "Base Amount" of any share of Series A Preferred Stock as of a
-----------
particular date shall be an amount equal to the sum of $1,000 plus any unpaid
dividends on such share added to the Base Amount of such share as provided above
and not thereafter paid.
2.2 Other Dividends and Distributions on Capital Stock. Any dividend
--------------------------------------------------
payable in shares of the Corporation's Common Stock, and any split or other
subdivision of such Common Stock, shall not be deemed to be a distribution of
property pursuant to this paragraph 2.2. Dividends on the Common Stock shall be
made among the holders thereof pro rata to the number of shares of Common Stock
held by each holder (but, in the case of a stock dividend, shall be made only in
shares of the respective series of Common Stock held by each holder).
-5-
<PAGE>
Section 3. Voting Rights.
--------- -------------
At every meeting of the stockholders (or for actions by written consent of
stockholders), except as otherwise required by law or specified in this
Certificate of Incorporation, on all matters to be voted on by the stockholders
of the Corporation, the following provisions shall apply:
3.1 Voting by Series A Preferred Stock. The Preferred Stock shall be non-
----------------------------------
voting, and the holders thereof, as such, shall not be entitled to vote on
matters to be voted upon by the stockholders of the Corporation, provided that
as long as any Series A Preferred Stock is outstanding, the Corporation shall
not, without the affirmative vote or written consent of the then holders of a
majority of the outstanding shares of Series A Preferred Stock, alter or change
the powers, preferences or rights of the Series A Preferred Stock or the
qualifications, limitations or restrictions thereof.
3.2 Class Voting by Common Stock. Subject to the following paragraphs of
----------------------------
this Section 3, the holders of all series of Common Stock shall vote together as
a single class on all matters to be voted on by the holders of the Common Stock.
3.3 Voting by Series A-1 Common Stock. In any matter to be voted on by
---------------------------------
the holders of the Common Stock, each holder of shares of Series A-1 Common
Stock shall have three votes for each such share held by such holder.
3.4 Voting by Series A-2 Common Stock. In any matter to be voted on by
---------------------------------
the holders of the Common Stock, each holder of shares of Series A-2 Common
Stock shall have one vote for each such share held by such holder.
3.5 Voting by Series A-3 Common Stock. The Series A-3 Common Stock shall
---------------------------------
be non-voting, and the holders thereof, as such, shall not be entitled to vote
on matters to be voted upon by the stockholders of the Corporation.
Section 4. Liquidation.
--------- -----------
4.1 Preference of Series A Preferred Stock. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series A Preferred Stock shall be entitled, before any
distribution or payment is made upon any shares of Common Stock, to be paid in
cash, in respect of each share of Series A Preferred Stock held by such holder,
an amount equal to the Base Amount of such share on such date, plus all unpaid
dividends accrued on such share through the close of business on such date and
not previously added to such Base Amount (the "Liquidation Value"). If upon
-----------------
such liquidation, dissolution or winding up, the assets to be
-6-
<PAGE>
distributed among the holders of the shares of Series A Preferred Stock shall be
insufficient to permit payment to the holders thereof of such amounts, then all
of the assets of the Corporation then remaining shall be distributed ratably
among the holders of the shares of Series A Preferred Stock.
4.2 Preference of Series A-1 Common Stock and Series A-2 Common Stock.
-----------------------------------------------------------------
Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, after payment in full of the Liquidation Value of the
Series A Preferred Stock, the holders of Series A-1 Common Stock and Series A-2
Common Stock shall be entitled, before any distribution or payment is made upon
any other shares of Common Stock, to be paid in cash, in respect of each share
of Series A-1 Common Stock and Series A-2 Common Stock held by such holder, an
amount equal to $130 (the "Common Stock Preference"). If upon such liquidation,
-----------------------
dissolution or winding up, the assets to be distributed among the holders of the
shares of Series A-1 Common Stock and Series A-2 Common Stock shall be
insufficient to permit payment to the holders thereof of such amounts, then all
of the assets of the Corporation then remaining shall be distributed ratably
among the holders of the shares of Series A-1 Common Stock and Series A-2 Common
Stock.
4.3 Preference of Series A-3 Common Stock. Upon any liquidation,
-------------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment in full of the Liquidation Value of the Series A Preferred Stock
and the Common Stock Preference of the Series A-1 Common Stock and Series A-2
Common Stock, the holders of Series A-3 Common Stock shall be entitled, before
any distribution or payment is made upon any other shares of Common Stock, to be
paid in cash, in respect of each share of Series A-3 Common Stock held by such
holder, an amount equal to the Common Stock Preference. If upon such
liquidation, dissolution or winding up, the assets to be distributed among the
holders of the shares of Series A-3 Common Stock shall be insufficient to permit
payment to the holders thereof of such amounts, then all of the assets of the
Corporation then remaining shall be distributed ratably among the holders of the
shares of Series A-3 Common Stock.
4.4 Distribution of Remaining Assets. Upon any liquidation, dissolution
--------------------------------
or winding up of the Corporation, whether voluntary or involuntary, after
provision is made for holders of Series A Preferred Stock and Common Stock as
provided in the preceding paragraphs, the holders of Common Stock shall be
entitled to receive ratably all remaining assets of the Corporation to be
distributed, based on the number of shares of Common Stock held by each such
holder.
-7-
<PAGE>
4.5 Treatment of Certain Transactions. The occurrence of a "Trigger
---------------------------------
Event", as such term is defined in the Stockholders Agreement dated as of August
1, 1997 among the Company, Robert Snukal, Sheila Snukal and Heritage Fund II
Investment Corporation, as amended from time to time, shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of Section 4.1, and shall be subject to all of the provisions
thereof, and no such transaction shall be consummated unless the Corporation has
received (or upon the consummation of such transaction will receive) payment in
cash of the Liquidation Value as provided in Section 4.1.
4. That such amendment has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
The foregoing Certificate of Amendment has been signed and attested as of
August __, 1997.
/s/ Robert Snukal
--------------------------------
Robert Snukal, President
ATTEST:
/s/ Sheila Snukal
- ----------------------------
Sheila Snukal, Secretary
-8-
<PAGE>
EXHIBIT 3.1(A)
FORM OF AMENDMENT TO
--------------------
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
FOUNTAIN VIEW, INC.
-------------------
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION OF
FOUNTAIN VIEW, INC.
IT IS HEREBY CERTIFIED THAT:
1. The name of the Corporation is Fountain View, Inc. (hereinafter, the
"Corporation").
-----------
2. The Certificate of Incorporation of the Corporation is hereby amended
by deleting Article 4 thereof and substituting in lieu thereof the following new
Article 4:
ARTICLE 4. A description of each class and series of stock of the
Corporation and the voting rights, designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof is as follows:
Section 1. Capital Stock.
--------- -------------
1.1 General. The Corporation shall have two classes of capital stock (the
-------
"Capital Stock"): Common Stock, $.01 par value per share (the "Common Stock"),
------------- ------------
and Preferred Stock, $.01 par value per share (the "Preferred Stock").
---------------
1.2 Number of Shares. The total authorized number of shares of each class
----------------
of Capital Stock is (a) 3,000,000 shares of Common Stock and (b) 1,000,000
shares of Preferred Stock.
1.3 Preferred Stock. The Preferred Stock may be issued from time to time
---------------
in one or more series. The Board of Directors of the Corporation (the "Board")
-----
is hereby authorized, within the limitations and restrictions stated in this
Certificate of Incorporation, to determine or alter the rights, preferences,
<PAGE>
powers, privileges and the restrictions, qualifications and limitations granted
to or imposed upon any wholly unissued series of Preferred Stock, and the number
of shares constituting any such series and the designation thereof; to increase
or decrease the number of shares constituting any such series; and to increase
or decrease the number of shares of any series subsequent to the issue of shares
of that series, but not below the number of shares of such series as are then
issued and outstanding, and if any series shall be so decreased, the shares then
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
1.4 Series of Preferred Stock. 200,000 shares of the Preferred Stock
-------------------------
shall be designated "Series A Preferred Stock" (the "Series A Preferred Stock").
------------------------
1.5 Series of Common Stock. 1,500,000 shares of the Common Stock shall be
----------------------
designated "Series A Common Stock" (the "Series A Common Stock"). 200,000
---------------------
shares of the Common Stock shall be designated "Series B Non-Voting Common
Stock" (the "Series B Common Stock"). 1,300,000 shares of the Common Stock
---------------------
shall be designated "Series C Common Stock" (the "Series C Common Stock").
---------------------
Section 2. Dividends and Other Distributions.
--------- ---------------------------------
2.1 Dividends on the Series A Preferred Stock.
-----------------------------------------
(a) Subject to the rights of series of Preferred Stock which may from
time to time come into existence, the holders of Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board, out of funds
legally available therefor, a dividend at the annual rate of 12% of the Base
Amount (as hereinafter defined) of each share of Series A Preferred Stock from
and including the date of issuance of such share to and including the day on
which the Liquidation Value (as hereinafter defined) of such share is paid. Such
dividends shall accrue from day to day, whether or not earned or declared, on
each issued and outstanding share of Series A Preferred Stock, and shall be
cumulative. The date on which the Corporation initially issues any share of
Series A Preferred Stock will be deemed to be its "date of issuance" regardless
----------------
of the number of times transfer of such share is made on the stock records of
the Corporation and regardless of the number of certificates which may be issued
to evidence such share, provided however that all shares of Series A Preferred
Stock issued prior to the first Dividend Reference Date (as hereinafter defined)
shall be deemed, for purposes of this Subsection (a), to have been issued on
March 27, 1998.
(b) If declared by the Board, dividends on each share of Series A
Preferred Stock shall be paid on each March 31,
-2-
<PAGE>
commencing March 31, 1999 (the "Dividend Reference Dates"), while such share is
------------------------
outstanding.
(c) Any dividends that accrue on any share of Series A Preferred
Stock during the period ending upon such Dividend Reference Date that are not
paid on such Dividend Reference Date shall automatically be added to the Base
Amount of such share and will remain a part thereof until such dividends are
paid, at which time the Base Amount shall be reduced by such payment.
(d) The "Base Amount" of any share of Series A Preferred Stock as of
-----------
a particular date shall be an amount equal to the sum of $1,000.00 plus any
unpaid dividends on such share added to the Base Amount of such share as
provided above and not thereafter paid.
2.2 Other Dividends. Dividends on any series of Preferred Stock shall be
---------------
determined by the Board. Dividends on the Common Stock shall be made among the
holders thereof pro rata to the number of shares of Common Stock held by each
holder (but, in the case of a stock dividend, shall be made only in shares of
the respective series of Common Stock held by each holder), unless otherwise
specified by the Company's Board of Directors.
Section 3. Voting Rights. Subject to the rights of series of Preferred
--------- -------------
Stock which may from time to time come into existence, at every meeting of the
stockholders (or for actions by written consent of stockholders), except as
otherwise required by law, on all matters to be voted on by the stockholders of
the Corporation, the following provisions shall apply:
3.1 Voting by Series A Preferred Stock. The Series A Preferred Stock
----------------------------------
shall be non-voting, and the holders thereof, as such, shall not be entitled to
vote on matters to be voted upon by the stockholders of the Corporation.
3.2 Voting by Series A Common Stock. In any matter to be voted on by the
-------------------------------
holders of the Common Stock, each holder of shares of Series A Common Stock
shall have one vote for each such share held by such holder.
3.3 Voting by Series B Common Stock. The Series B Common Stock shall be
-------------------------------
non-voting, and the holders thereof, as such, shall not be entitled to vote on
matters to be voted upon by the stockholders of the Corporation.
3.4 Voting by Series C Common Stock. In any matter to be voted on by the
-------------------------------
holders of the Common Stock, each holder of shares of Series C Common Stock
shall have one vote for each such share held by such holder.
-3-
<PAGE>
Section 4. Liquidation.
--------- -----------
4.1 Series A Preferred Stock. Subject to the rights of any series of
------------------------
Preferred Stock which may from time to time come into existence, upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of Series A Preferred Stock shall be entitled, before
any distribution or payment is made upon any shares of Common Stock, to be paid
in cash, in respect of each share of Series A Preferred Stock held by such
holder, an amount equal to the Base Amount of such share on such date, plus all
unpaid dividends accrued on such share from the previous Dividend Reference Date
through the close of business on the date of payment (the "Liquidation Value").
-----------------
If upon such liquidation, dissolution or winding up, the assets to be
distributed among the holders of the shares of Series A Preferred Stock shall be
insufficient to permit payment to the holders thereof of such amounts, then all
of the assets of the Corporation then remaining and legally available for
distribution shall be distributed ratably among the holders of the shares of
Series A Preferred Stock.
4.2 Common Stock. Upon any liquidation, dissolution or winding up of the
------------
Corporation, whether voluntary or involuntary, after payment in full of the
Liquidation Value of the Series A Preferred Stock and the liquidation value of
any other series of Preferred Stock which may from time to time come into
existence, the assets available for distribution to the holders of Common Stock
shall be distributed ratably among the holders of (a) the Series A Common Stock
and the Series B Common Stock, on the one hand, and (b) the holders of the
Series C Common Stock, on the other, based on the relative number of shares of
Common Stock outstanding and held by such holders, provided that for all
purposes of this Section 4.2 the aggregate number of outstanding shares of
Series A Common Stock and Series B Common Stock shall be deemed to be 1,114,202
(appropriately adjusted for stock splits, stock dividends, combinations and
similar transactions), regardless of the number of shares actually outstanding.
4.3 Distribution among the Holders of Series A Common Stock and Series B
--------------------------------------------------------------------
Common Stock. All amounts distributable in respect of the Series A Common Stock
- ------------
and the Series B Common Stock shall be divided among such shares in the
following proportions:
(a) Preference of Series A Common Stock. Upon any liquidation,
-----------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series A Common Stock shall be entitled, before any distribution
or payment is made upon any Series B Common Stock, to be paid in cash, in
respect of each share of Series A Common Stock an amount equal to $126.53 plus a
22% internal rate of return thereon calculated from the date of initial issuance
of such share (without regard for any prior transfers of such share) and taking
into account
-4-
<PAGE>
any prior dividends or other distributions thereon (the "Series A Common Stock
---------------------
Preference"). If upon such liquidation, dissolution or winding up, the assets to
- ----------
be distributed among the holders of the shares of Series A Common Stock and the
Series B Common Stock shall be insufficient to permit payment to the holders of
the Series A Common Stock of the Series A Common Stock Preference, then all of
the assets of the Corporation to be distributed among the Series A Common Stock
and the Series B Common Stock pursuant to Section 4.2 shall be distributed
ratably among the holders of the shares of Series A Common Stock.
(b) Preference of Series B Common Stock. Upon any liquidation,
-----------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment in full of the Series A Common Stock Preference, the holders of
Series B Common Stock shall be entitled, before any other distribution or
payment is made upon any shares of Series A Common Stock, to be paid in cash, in
respect of each share of Series B Common Stock held by such holder, an amount
equal to the Series A Common Stock Preference. If upon such liquidation,
dissolution or winding up, after payment in full of the Series A Common Stock
Preference to the holders of the Series A Common Stock, the remaining assets to
be distributed among the holders of the Series A Common Stock and the Series B
Common Stock shall be insufficient to permit payment of an amount to the holders
of the Series B Common Stock equal to the Series A Common Stock Preference, then
all of the assets of the Corporation then remaining and which are to be
distributed among the Series A Common Stock and Series B Common Stock shall be
distributed ratably among the holders of the shares of Series B Common Stock.
(c) Distribution of Remaining Assets. Upon any liquidation,
--------------------------------
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment is made to the holders of the Series A Common Stock and the Series
B Common Stock as provided in the preceding Sections, the holders of the Series
A Common Stock and the Series B Common Stock shall be entitled to receive
ratably all remaining assets of the Corporation to be distributed among them
pursuant to Section 4.2, based on the number of shares of Series A Common Stock
and Series B Common Stock held by each such holder.
Section 5. Redemption of Series A Preferred Stock.
--------- --------------------------------------
5.1 Redemption Upon Initial Public Offering.
---------------------------------------
(a) Promptly after the closing of an underwritten, initial public
offering of the Corporation's Common Stock for cash pursuant to a registration
statement under the Securities Act of 1933, as amended, the Corporation shall
redeem, out of funds legally available therefor, all outstanding shares of the
Series A Preferred Stock by paying in cash to the holders thereof
-5-
<PAGE>
an amount equal to the Liquidation Value thereof. Such payment shall be made to
the record holders of the Series A Preferred Stock and shall be accompanied by
written notice specifying the number of shares that are being redeemed from each
holder.
(b) If the funds legally available to redeem shares of Series A
Preferred Stock under this Section 5.1 are insufficient to redeem all of the
outstanding shares of Series A Preferred Stock at any time, the Corporation
shall redeem the maximum number of shares of Series A Preferred Stock that the
Corporation has funds legally available therefor on a pro rata basis among all
of the holders of Series A Preferred Stock according to the number of shares of
Series A Preferred Stock owned by each holder, and shall quarterly thereafter
redeem the maximum number of shares of Series A Preferred Stock that the
Corporation has funds legally available therefor on a pro rata basis among all
of the holders of Series A Preferred Stock according to the number of shares of
Series A Preferred Stock then owned by each holder.
(c) Promptly after each holder of Series A Preferred Stock has
received payment of the Liquidation Value thereof, such holder shall surrender
certificates evidencing the Series A Preferred Stock so redeemed, and shall
thereupon be entitled to receive a replacement certificate for any shares not
redeemed.
(d) After any payment under this Section, the redeemed shares shall
be canceled on the Corporation's records and shall cease to be outstanding.
5.2 Redemption at Corporation's Option.
----------------------------------
(a) The Corporation may at any time, at its option, redeem some or
all shares of Series A Preferred Stock, out of funds legally available therefor,
at a price per share equal to the Liquidation Value as of the date of
redemption. Such redemption shall be made by paying such amount to the record
holders of the Series A Preferred Stock and shall be accompanied by written
notice specifying the number of shares that are being redeemed from each holder.
All such redemptions shall be pro rata among the holders of Series A Preferred
Stock.
(b) Promptly after each record holder of Series A Preferred Stock has
received payment of the Liquidation Value thereof pursuant to this Section 5.2,
such holder shall surrender certificates evidencing the Series A Preferred Stock
so redeemed, and shall thereupon be entitled to receive a replacement
certificate for any shares not redeemed.
(c) After any payment under this Section, the redeemed shares shall
be canceled on the Corporation's records and shall cease to be outstanding.
-6-
<PAGE>
3. At the time this amendment becomes effective, (a) each share of (i)
prior Series A-1 Common Stock, (ii) prior Series A-2 Common Stock and (iii)
prior Series A-3 Common Stock then issued and outstanding shall be reclassified
and converted into 1.3824 fully paid and nonassessable shares of the authorized
Series A Common Stock of the Corporation, rounded to the nearest whole share,
and (b) each share of prior Series A Preferred Stock then issued and outstanding
shall be reclassified and converted into 7.9226 fully paid and nonassessable
shares of the authorized Series A Common Stock of the Corporation, rounded to
the nearest whole share, all without any further act of this Corporation or its
shareholders.
4. That such amendment has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
The foregoing Certificate of Amendment has been signed and attested as of
March 27, 1998.
/s/ Robert Snukal
---------------------------
Robert Snukal, President
ATTEST:
/s/ Sheila Snukal
- ----------------------------
Sheila Snukal, Secretary
-7-
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY "FOUNTAIN VIEW, INC." IS DULY INCORPORATED UNDER THE LAWS OF THE STATE
OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE SO FAR
AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE TWENTY-SEVENTH DAY OF MARCH, A.D.
1998.
AND I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO
DATE.
[CORPORATE SEAL /s/ Edward J. Freel
APPEARS HERE] -----------------------------------
Edward J. Freel, Secretary of State
2772638 8300 AUTHENTICATION:
8998994
DATE:
981119858 03-27-98
<PAGE>
EXHIBIT 3.1(B)
CERTIFICATE OF AMENDMENT
------------------------
TO
--
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
FOUNTAIN VIEW, INC.
-------------------
IT IS HEREBY CERTIFIED THAT:
1. The name of the Corporation is Fountain View, Inc. (hereinafter, the
"Corporation").
- ------------
2. The Certificate of Incorporation of the Corporation is hereby amended
as follows:
2.1. Section 4.2 of Article 4 is hereby amended by deleting the text
thereof in its entirety and inserting in lieu thereof the following:
"4.2 Common Stock. Upon any liquidation, dissolution or winding up
------------
of the Corporation, whether voluntary or involuntary, after payment in
full of the Liquidation Value of the Series A Preferred Stock and the
liquidation value of any other series of Preferred Stock which may
from time to time come into existence, the assets available for
distribution to the holders of Common Stock shall be distributed
ratably among the holders of (a) the Series A Common Stock and the
Series B Common Stock, on the one hand, and (b) the holders of the
Series C Common Stock, on the other, based on the relative number of
shares of Common Stock outstanding and held by such holders, provided
that for all purposes of this Section 4.2 the aggregate number of
outstanding shares of Series A Common Stock and Series B Common Stock
shall be deemed to be the number of shares of Series A Common Stock
--------
and Series B Common Stock then outstanding plus the number of shares
----
of Series B Common Stock previously outstanding but forfeited pursuant
to Article II of the Stockholders Agreement dated as of March 27, 1998
by and among the Corporation, Robert Snukal, Sheila Snukal, William
Scott, Heritage Fund II, L.P. and certain other parties, as amended
from time to time."
<PAGE>
2.2. Section 5 of Article 4 is hereby amended by inserting after
Section 5.2 a new Section 5.3, as follows:
"5.3 Mandatory Redemption.
--------------------
(a) The Corporation shall, on the first business day following May 1,
2010 (or, if the Corporation's 11 1/4% Senior Subordinated Notes due 2008 have
not then been paid in full, immediately after the date on which such Notes have
been paid in full), redeem all shares of Series A Preferred Stock then
outstanding, out of funds legally available therefor, at a price per share equal
to the Liquidation Value as of the date of redemption. Such redemption shall be
made by paying such amount to the record holders of the Series A Preferred Stock
and shall be accompanied by written notice specifying the number of shares that
are being redeemed from each holder. In the event the funds legally available
to redeem shares of Series A Preferred Stock are insufficient to redeem all of
the outstanding shares of Series A Preferred Stock, the Corporation shall redeem
the maximum number of shares of Series A Preferred Stock that the Corporation
has funds legally available therefor on a pro rata basis among the holders of
Series A Preferred Stock and shall quarterly thereafter redeem the maximum
number of shares of Series A Preferred Stock that the Corporation has funds
legally available therefor on a pro rata basis among the holders of Series A
Preferred Stock, at the then applicable Liquidation Value. All such redemptions
shall be pro rata among the holders of Series A Preferred Stock.
(b) Promptly after each record holder of Series A Preferred Stock has
received payment of the Liquidation Value thereof pursuant to this Section 5.3,
such holder shall surrender certificates evidencing the Series A Preferred Stock
so redeemed, and shall thereupon be entitled to receive a replacement
certificate for any shares not redeemed.
(c) After any payment under this Section, the redeemed shares shall
be canceled on the Corporation's records and shall cease to be outstanding."
3. That such amendment has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
-2-
<PAGE>
The foregoing Certificate of Amendment has been signed and attested as of
April 30, 1998.
/s/ Robert Snukal
---------------------------
Robert Snukal, President
ATTEST:
/s/ Sheila Snukal
- -------------------------
Sheila Snukal, Secretary
-3-
<PAGE>
EXHIBIT 3.2
BY - LAWS
---------
OF
--
FOUNTAIN VIEW, INC. (formerly known as
--------------------------------------
FOUNTAIN VIEW MANAGEMENT, INC.)
-------------------------------
(A Delaware Corporation)
----------------
ARTICLE I
---------
STOCKHOLDERS
------------
l. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
-------------------------------
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation certifying the number of shares owned by him in the corporation. Any
and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than
one class of stock or more than one series of any class of stock, and whenever
the corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not
--------------------------
be required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (l) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions
<PAGE>
are determined, or (3) issue scrip or warrants in registered or bearer form
which shall entitle the holder to receive a certificate for a full share upon
the surrender of such scrip or warrants aggregating a full share. A certificate
for a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
---------------
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
----------------------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. For the purpose of
determining the stockholders entitled to express consent to corporate action in
writing without a meeting, the directors may fix a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted by
the board of directors, and which shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at any meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
-2-
<PAGE>
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right
------------------------
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such right
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation.
6. STOCKHOLDER MEETINGS.
--------------------
- TIME. The annual meeting shall be held on the date and at the time
----
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
- PLACE. Annual meetings and special meetings shall be held at such
-----
place, within or without the State of Delaware, as the directors may, from time
to time fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
----
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
--------------------------
given, stating the place, date and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual
meeting shall state that the meeting is called for the election of directors and
for the transaction of other business which may properly come before the
meeting, and shall, (if any other action which could be taken at a special
meeting is to be taken at such annual meeting) state the purpose or purposes.
The notice of a special meeting shall in all instances state the purpose or
purposes for which the meeting is called. The notice of any meeting shall also
include, or be accompanied by, any additional statements, information, or
documents prescribed by the General Corporation Law. Except as otherwise
provided by the General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten days nor more than
sixty days before the date of the meeting, unless the
-3-
<PAGE>
lapse of the prescribed period of time shall have been waived, and directed to
each stockholder at his record address or at such other address which he may
have furnished by request in writing to the Secretary of the corporation. Notice
by mail shall be deemed to be given when deposited, with postage thereon
prepaid, in the United States mail. If a meeting is adjourned to another time,
not more than thirty days hence, and/or to another place, and if an announcement
of the adjourned time and/or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice need not be
given to any stockholder who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
----------------
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
------------------
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another
--------------------
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in
-4-
<PAGE>
law to support an irrevocable power. A proxy may be made irrevocable regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
----------
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of
------
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one
------
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by a majority of the votes cast except
where the General Corporation Law prescribes a different percentage of votes
and/or a different exercise of voting power, and except as may be otherwise
prescribed by the provisions of the certificate of incorporation and these By-
Laws. In the election of directors, and for any other action, voting need not
be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
-----------------------------------
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meetings
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
-5-
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
l. FUNCTIONS AND DEFINITION. The business and affairs of the
------------------------
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
-------------------------
a citizen of the United States, or a resident of the State of Delaware. The
property, affairs and business of the corporation shall be managed by its Board
of Directors. The number of directors may be fixed from time to time by action
of the stockholders or of the directors and may be increased or decreased by
action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
-----------------
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. In the
interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of directors and/or for the removal of one
or more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
--------
- TIME. Meetings shall be held at such time as the Board shall fix,
----
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
-----
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
----
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
-6-
<PAGE>
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
---------------------------------------
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
-----------------
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these By-Laws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
-----------------------
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
--------------------
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. Whenever its number consists of three or more, the
----------
Board of Directors may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two or more of
the directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees, the member
or
-7-
<PAGE>
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation with the exception of any authority the delegation of which is
prohibited by Section l4l of the General Corporation Law, and may authorize the
seal of the corporation to be affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at
--------------
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting, without prior notice and without a vote if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
ARTICLE III
-----------
OFFICERS
--------
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board
of Directors choosing him, no officer other than the Chairman or Vice-Chairman
of the Board, if any, need be a director. Any number of officers may be held by
the same person, as the directors may determine, except that no person may hold
the offices of President and Secretary simultaneously.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may
-8-
<PAGE>
be removed, with or without cause, by the Board of Directors. Any vacancy in any
office may be filled by the Board of Directors.
ARTICLE IV
----------
CORPORATE SEAL
--------------
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
---------
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VI
----------
CONTROL OVER BY-LAWS
--------------------
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter or repeal
these By-Laws and to adopt new By-Laws may be exercised by the Board of
Directors or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy
of the By-Laws of Fountain View, Inc., a Delaware corporation, as in effect on
the date hereof.
IN WITNESS WHEREOF, I set my hand this 14th day of July, 1997.
/s/ Sheila Snukal
------------------------------------------
Secretary of Fountain View Management, Inc.
-9-
<PAGE>
Exhibit 3.3
FILED
In the office of the Secretary of State
of the State of California
AMENDED AND RESTATED MAY 15 1991
ARTICLES OF INCORPORATION
OF
SUMMIT CARE CORPORATION /s/ March Fong Eu
----------------------- MARCH FONG EU,
Secretary of State
William C. Scott and Frank S. Osen certify that:
1. They are the President and the Secretary, respectively, of Summit
Care Corporation, a California corporation.
2. The Articles of Incorporation of this corporation are amended and
restated to read in their entirety as follows:
One: The name of this corporation is Summit Care Corporation.
---
Two: The purpose of this corporation is to engage in any lawful act
---
or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be
incorporated under the California Corporations Code.
Three: This corporation is authorized to issue two classes of shares
-----
designated, respectively, "Common Stock" and "Preferred Stock." The number
of shares of Common Stock is 100,000,000 and the number of shares of
Preferred Stock is 2,000,000.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of
any series of Preferred Stock and to determine the designation of any such
series. The Board of Directors is also authorized to determine or alter the
rights, preferences, privileges, voting and other powers, and restrictions
granted to or imposed upon any wholly unissued series or Preferred Stock
and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of
shares constituting any series, to increase or decrease (but not below the
number of shares of any such series then outstanding) the number of shares
of any such series subsequent to the issue of shares of that series.
<PAGE>
Upon the amendment and restatement of this Article Three to read as
set forth herein, each issued and outstanding share of the corporation
shall be reclassified and converted into and become 2,500 shares of Common
Stock of this corporation.
Four: The liability of the directors of the corporation for
----
monetary damages shall be eliminated to the fullest extent permissible
under California law.
Five: The corporation is authorized to provide indemnification
----
of agents (as defined in Section 317 of the General Corporation Law of
California) for breach of duty to the corporation and its shareholders
through bylaw provisions or through agreements with the agents, or
otherwise, in excess of the indemnification otherwise permitted by Section
317 of the General Corporation Law of California, subject to any
limitations on indemnification under the General Corporation Law of
California which cannot be waived.
Six: The number of directors of the corporation shall be six.
---
The following provisions shall become effective only when the corporation
becomes a listed corporation within the meaning of Section 301.5 of the
California Corporations Code. The Board of Directors shall be divided into
two classes to serve for terms of two years, with one-half of the directors
(or as close an approximation as possible) to be elected at each annual
meeting of shareholders. In addition, cumulative voting shall be
eliminated.
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the California Corporations Code. The total
number of outstanding shares of this corporation is 1,000. The number of shares
voting in
- 2 -
<PAGE>
favor of the amendment and the restatement equaled or exceeded the vote
required. The percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true are true and
correct of our own knowledge.
Date: May 15, 1991
/s/ William C. Scott
------------------------------------
William C. Scott, President
/s/ Frank S. Osen
------------------------------------
Frank S. Osen, Secretary
-3-
<PAGE>
A404444
F I L E D
In the office of the
Secretary of State of
CERTIFICATE OF AMENDMENT the State of California
TO
ARTICLES OF INCORPORATION JUN 13 1991
OF
SUMMIT CARE CORPORATION MARCH FONG EU, SECRETARY
----------------------- OF STATE
Melodye Stok and Frank S. Osen certify that:
1. They are the Vice President-Finance and the Secretary, respectively,
of Summit Care Corporation, a California corporation.
2. That Article Three of the Articles of Incorporation of this
-----
corporation is amended to read in its entirety as follows:
Three: This corporation is authorized to issue two classes of shares
-----
designated, respectively, "Common Stock" and "Preferred Stock." The number
of shares of Common Stock is 100,000,000 and the number of shares of
Preferred Stock is 2,000,000.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of
any series of Preferred Stock and to determine the designation of any such
series. The Board of Directors is also authorized to determine or alter the
rights, preferences, privileges, voting and other powers and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock
and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of
shares constituting any series, to increase or decrease (but not below the
number of shares of any such series then outstanding) the number of shares
of any such series subsequent to the issue of shares of that series.
Upon the amendment of this Article Three to read as set forth herein,
each issued and outstanding share of the corporation shall be reclassified
and converted into and become 1.08 shares of Common Stock of this
corporation.
3. The foregoing amendment of the Articles of Incorporation has been duly
approved by the Board of Directors.
<PAGE>
4. The foregoing amendment of the Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the California Corporations Code. The total number of outstanding shares of
this corporation is 2,500,000. The number of shares voting in favor of the
amendment and the restatement equaled or exceeded the vote required. The
percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true and correct
of our own knowledge.
Date: June 6, 1991
/s/ Melodye Stok
------------------------------------
Melodye Stok, Vice President-Finance
/s/ Frank S. Osen
------------------------------------
Frank S. Osen, Secretary
-2-
<PAGE>
Exhibit 3.4
AMENDED AND RESTATED
BYLAWS
OF
SUMMIT CARE CORPORATION
Article 1
Offices
---------
1.1 Principal Office. The board of directors shall fix the
----------------
location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office is
located outside the State of California, and the corporation has one or more
business offices in the State of California, the board of directors shall
likewise fix and designate a principal business office in the State of
California.
1.2 Other Offices. The corporation may also establish
-------------
offices at such other places, both within and outside the State of California,
as the board of directors may from time to time determine or the business of
the corporation may require.
Article 2
Meetings of Shareholders
------------------------
2.1 Place of Meetings. Meetings of shareholders shall be held
-----------------
at any place within or outside the State of California designated by the board
of directors. In the absence of any such designation, shareholders' meetings
shall be held at the principal executive office of the corporation.
2.2 Annual Meetings. The annual meeting of shareholders shall
---------------
be held on the 15th day of November in each year at 10:00 o'c1ock, a.m., or such
other date or time as may be fixed by the board of directors; provided, however,
that should said day fall upon a legal holiday, such annual meeting of
shareholders shall be held at the same time on the next succeeding day which is
a full business day. At such meeting, directors shall be elected and any other
proper business may be transacted.
2.3 Special Meetings. A special meeting of the shareholders
----------------
may be called at any time by the board of directors, the chairman of the board,
the president, or one or more shareholders holding in the aggregate shares
entitled to cast not less than ten percent of the votes at any such meeting. If
a special meeting is called by any one other than the board of directors, the
request shall be in writing, specifying the time of the meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the
-1-
<PAGE>
corporation. The officer receiving such request forthwith shall cause notice to
be given to the shareholders entitled to vote, in accordance with the provisions
of Sections 2.4 and 2.5, that a meeting will be held at the time requested by
the person or persons calling the meeting, not less than 35 nor more than 60
days after the receipt of the request. If the notice is not given within 20 days
after receipt of the request, the person or persons requesting the meeting may
give the notice. Nothing contained in this Section 2.3 shall be construed as
limiting, fixing or affecting the time when a meeting of shareholders called by
action of the board of directors may be held.
2.4 Notice of Meetings. All notices of meetings of
------------------
shareholders shall be sent or otherwise given in accordance with Section 2.5 not
1ess than ten nor more than 60 days before the date of the meeting being
noticed. The notice shall specify the place, date and hour of the meeting and
(a) in the case of a special meeting, the general nature of the business to be
transacted, or (b) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the shareholders. The notice of any meeting at which directors are to
be elected shall include the name of any nominee or nominees whom, at the time
of the notice, the board intends to present for election
If action is proposed to be taken at any meeting for approval
of (i) a contract or transaction in which a director has a direct or indirect
financial interest, pursuant to Section 310 of the California Corporations Code
(the "Code"), (ii) an amendment of the articles of incorporation, pursuant to
Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to
Section 1201 of the Code, (iv) a voluntary dissolution of the corporation,
pursuant to Section 1900 of the Code, or (v) a distribution in dissolution other
than in accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of the Code, the notice shall also state the general nature of such
proposal.
2.5 Manner of Giving Notice. Notice of any meeting of
-----------------------
shareholders shall be given personally or by first-class mail or telegraphic or
other written communication, charges prepaid, addressed to the shareholder at
the shareholder's address appearing on the books of the corporation or given by
the shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail or telegraphic or
other written communication to the corporation's principal executive office, or
if published at least once in a newspaper of general circulation in the county
in which the principal executive office is located. Notice shall be deemed to
have been given when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
-2-
<PAGE>
If any notice addressed to a shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
Service is unable to deliver the notice to the shareholder at such address, all
future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the shareholder upon written
demand at the principal executive office of the corporation for a period of one
year from the date of the giving of such notice or report to all other
shareholders.
An affidavit of the mailing or other means of giving any
notice of any shareholders' meeting may be executed by the secretary, assistant
secretary or any transfer agent of the corporation, and shall be filed and
maintained in the minute book of the corporation.
2.6 Quorum. Unless otherwise provided in the articles of
------
incorporation, the presence in person or by proxy of the holders of a majority
of the shares entitled to vote at any meeting of shareholders shall constitute a
quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 Adjournment. Any shareholders' meeting, annual or
-----------
special, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares represented at such meeting, either in
person or by proxy, but, in the absence of a quorum, no other business may be
transacted at such meeting, except as provided in Section 2.6.
When any meeting of shareholders, annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than 45 days from the date set for
the original meeting, in which case the board of directors shall set a new
record date. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 2.4 and 2.5. At any adjourned meeting, the
corporation may transact any business which might have been transacted at the
original meeting.
2.8 Voting. The shareholders entitled to notice of and to
------
vote at any meeting of shareholders shall be determined in accordance with the
provisions of Section 2.11, subject to the provisions of Sections 702 to 704 of
the Code (relating to voting shares held by a fiduciary, in the name of a
corporation, or in
-3-
<PAGE>
the names of two or more persons). The vote may be by voice vote or by ballot;
provided, however, that any election for directors must be by ballot if demanded
by a shareholder at the meeting and before the voting begins. Any shareholder
entitled to vote on any matter (other than elections of directors) may vote part
of the shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, but, if the shareholder fails to
specify the number of shares such shareholder is voting affirmatively, it will
be conclusively presumed that the shareholder's approving vote is with respect
to all shares such shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by the Code or the articles of incorporation.
At a shareholders' meeting involving the election of
directors, no shareholder shall be entitled to cumulate votes on behalf of any
candidate for director (i.e., cast for any candidate a number of votes greater
----
than the number of votes which such shareholder normally is entitled to cast)
unless such candidate or candidates' names have been placed in nomination prior
to the voting and the shareholder has given notice prior to the voting of the
shareholder's intention to cumulate votes. If any shareholder has given such
notice, every shareholder entitled to vote may cumulate votes for candidates in
nomination and give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which such share-
holder's shares are normally entitled, or distribute the shareholder's votes on
the same principle among as many candidates as the shareholder thinks fit. The
candidates receiving the highest number of affirmative votes, up to the number
of directors to be elected, shall be elected; votes against the director and
votes withheld shall have no legal effect.
2.9 Waiver of Notice and Consent. The transactions of any
----------------------------
meeting of shareholders, annual or special, however called and noticed, and
wherever held, shall be as valid as though they had occurred at a meeting duly
held after regular call and notice, if a quorum is present either in person or
by proxy, and if, either before or after the meeting, each person entitled to
vote, who was not present in person or by proxy, signs a written waiver of
notice, or a consent to a holding of the meeting, or an approval of the minutes
thereof. Neither the waiver of notice nor the consent to holding of the meeting
nor the approval of the minutes thereof need specify either the business to be
transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any
matters specified in the second paragraph of section 2.4, the waiver of notice
or the consent to the holding of the meeting and the approval of the minutes
thereof shall state the general nature
-4-
<PAGE>
of the proposal. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened, and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice of such meeting if such
objection is expressly made at the meeting.
2.10 Action Without Meeting. Unless otherwise provided in the
----------------------
articles of incorporation, any action which may be taken at any annual or
special meeting of shareholders may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, is signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. In the case of
election of directors, such consent shall be effective only if signed by the
holders of all outstanding shares entitled to vote for the election of
directors; provided, however, that a director may be elected at any time to fill
a vacancy on the board of directors not filled by the directors, by the written
consent of the holders of a majority of the outstanding shares entitled to vote
for the election of directors. All such consents shall be filed with the
secretary of the corporation and shall be maintained in the corporate records.
Any shareholder giving a written consent, or the shareholder's proxy holder, or
a transferee of the shares or a personal representative of the shareholder or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been filed with
the secretary.
Unless the consents of all shareholders entitled to vote have
been solicited in writing, the secretary shall give prompt notice of any
corporate action approved by the shareholders without a meeting by less than
unanimous written consent to those shareholders entitled to vote who have not
consented in writing. Such notice shall be given in the manner specified in
Section 2.5. In the case of approval of (a) contracts or transactions in which a
director has a direct or indirect financial interest, pursuant to Section 310 of
the Code, (b) indemnification of agents of the corporation, pursuant to Section
317 of the Code, (c) a reorganization of the corporation, pursuant to Section
1201 of the Code, or (d) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, pursuant to Section 2007 of the
Code, such notice shall be given at least ten days before the consummation of
the action authorized by any such approval.
-5-
<PAGE>
2.11 Record Data. For purposes of determining the
-----------
shareholders entitled to notice or any meeting or to vote or entitled to give
consent to corporate action without a meeting the board of directors may fix, in
advance, a record date, which shall not be more than 60 days nor less than ten
days prior to the date of the meeting nor more than 60 days prior to the action
without a meeting, and in such case only shareholders of record at the close of
business on the date so fixed are entitled to notice and to vote or to give
consents, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise provided
in the California General corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting, (i)
when no prior action by the board has been taken, shall be the day on which the
first written consent is given, or (ii) when prior action of the board has been
taken, shall be at the close of business on the day on which the board adopts
the resolution relating thereto, or the sixtieth day prior to the date of such
other action, whichever is later.
2.12 Proxies. Every person entitled to vote for directors
-------
or on any other matter shall have the right to do so either in person or by one
or more agents authorized by a written proxy signed by the person and filed
with the secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (a)
revoked by the person executing it, prior to the vote pursuant thereto, by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy which is executed by the person executing the prior proxy and
is presented to the meeting, or as to any meeting by attendance at such meeting
and voting in person by the person executing the proxy; or (b) written notice of
the death or incapacity of the maker of the proxy is received by the corporation
before the vote pursuant thereto is counted; provided, however, that no such
proxy shall be valid after the expiration of eleven months from the date of the
proxy, unless otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
Section 705(e) and (f) of the Code.
-6-
<PAGE>
2.13 Inspectors of Election. Before any meeting of
----------------------
shareholders, the board of directors may appoint any persons (other than
nominees for office) to act as inspectors of election at the meeting or any
adjournments thereof. If inspectors of election are not so appointed, the
chairman of the meeting may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one or three. If inspectors are appointed
at a meeting on the request of one or more shareholders or proxies, the majority
of shares represented in person or by proxy shall determine whether one or three
inspectors are to be appointed. If any person appointed as inspector fails to
appear or refuses to act, the chairman of the meeting may, and upon the request
of any shareholder or a shareholder's proxy shall, appoint a person to replace
the one who so failed or refused. If there are three inspectors of election, the
decision, act or certificate of a majority of them is effective in all respects
as the decision, act or certificate of all. Any report or certificate made by
the inspectors of election is prima facie evidence of the facts stated therein.
Article 3
Directors
3.1 Powers. Subject to the provisions of the California
------
General Corporation Law and any limitations in the articles of incorporation and
these bylaws relating to action required to be approved by the shareholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
3.2 Number. The authorized number of directors shall be six
------
until changed by an amendment to the articles of incorporation or, if permitted
by section 212 of the Code, by an amendment to this bylaw, duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the number of
directors to a number less than five cannot be adopted if the votes cast against
its adoption at a meeting, or the shares not consenting in the case of action by
written consent, are equal to more than 16-2/3% of the outstanding shares
entitled to vote.
3.3 Election and Term of Office. Directors shall be elected
---------------------------
at each annual meeting of the shareholders to hold office until the next annual
meeting. Each director, including a director elected to fill a vacancy, shall
hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.
3.4 Removal. Any or all of the directors may be removed by
-------
order of court pursuant to Section 304 of the Code, or by the shareholders
pursuant to the provisions of Section 303 of the Code.
-7-
<PAGE>
3.5 Vacancies. Vacancies in the board of directors may be
---------
filled by a majority of the remaining directors, though less than a quorum, or
by a sole remaining director, except that a vacancy created by the removal of a
director may be filled only by the vote of a majority of the shares entitled to
vote represented at a duly held meeting at which a quorum is present, or by the
written consent of holders of a majority of the outstanding shares entitled to
vote. Each director so elected shall hold office until the next annual meeting
of the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be
deemed to exist in the case of the death, resignation or removal of any
director, or if the board of directors by resolution declares vacant the office
of a director who had been declared of unsound mind by an order of court or who
has been convicted of a felony, or if the authorized number of directors is
increased, or if the shareholders fail, at any meeting of shareholders at which
any director or directors are elected, to elect the number of directors to be
voted for at that meeting
The shareholders may elect a director or directors at any
time to fill any vacancy or vacancies not filled by the directors, but any such
election by written consent other than to fill a vacancy created by removal
shall require the consent of a majority of the outstanding shares entitled to
vote.
Any director may resign effective upon giving written notice
to the chairman of the board, the president, the secretary or the board of
directors, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation of a director is effective at a future
time, the board of directors may elect a successor to take office when the
resignation becomes effective.
No reduction of the authorized number of directors shall
have the effect of removing any director prior to the expiration of his or her
term of office.
3.6 Place of Meetings and Meetings by Telephone. Regular
-------------------------------------------
meetings of the board of directors may be held at any place within or outside
the State of California that has been designated from time to time by resolution
of the board. In the absence of such designation, regular meetings shall be held
at the principal executive office of the corporation. Special meetings of the
board shall be held at any place within or outside the State of California that
has been designated in the notice of the meeting or, if not stated in the notice
or if there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating can hear one
another, and all such directors shall be deemed to be present in person at such
meeting.
-8-
<PAGE>
3.7 Regular Meetings. Immediately following each annual
----------------
meeting of shareholders, the board of directors shall hold a regular meeting for
the purpose of organization any, desired election of officers and the
transaction of other business. Other regular meetings of the board of directors
shall be held without call at such time as shall from time to time be fixed by
the board of directors. Notice of regular meetings shall not be required.
3.8 Special Meetings. Special meetings of the board of
----------------
directors for any purpose or purposes may be called at any time by the chairman
of the board or the president or any vice president or the secretary or any two
directors.
Notice of the time and place of special meetings shall be
delivered to each director personally or by telephone or sent by first-class
mail or telegram, charges prepaid, addressed to each director at his or her
address as it is shown on the records of the corporation. In case the notice is
mailed, it shall be deposited in the United States mail at least four days prior
to the time of the holding of the meeting. In case such notice is delivered
personally or by telephone or telegraph, it shall be delivered personally or by
telephone or to the telegraph company at least 48 hours prior to the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose of the meeting and
it need not specify the place if the meeting is to be held at the principal
executive office of the corporation.
3.9 Quorum. A majority of the authorized number of directors
------
shall constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (appointment of committees), and Section 317(e) of the Code
(indemnification of directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for such meeting.
3.10 Contents of Notice and Waiver of Notice. The waiver of
---------------------------------------
notice or consent need not specify the purpose of the meeting nor the business
to be transacted thereat. All such waivers, consents and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
Notice of a meeting need not be given to any director who signs a waiver of
notice or a consent to holding the meeting or an approval of the
-9-
<PAGE>
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
that director.
3.11 Adjournment. A majority of the directors present, whether
-----------
or not constituting a quorum, may adjourn any meeting to another time and
place. Notice of the time and place of holding an adjourned meeting need not be
given, unless the meeting is adjourned for more than 24 hours, in which case
notice of such time and place shall be given prior to the time of the adjourned
meeting, in the manner specified in Section 3.8, to the directors who were not
present at the time of the adjournment.
3.12 Action Without Meeting. Any action required or
----------------------
permitted to be taken by the board of directors may be taken without a meeting,
if all members of the board shall individually or collectively consent in
writing to such action. Such action by written consent shall have the same force
and effect as a unanimous vote of the board of directors. The written consent or
consents shall be filed with the minutes of the proceedings of the board.
3.13 Fees and Compensation. Directors and members of
---------------------
committees may receive such, compensation, if any, for their services, and such
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. Nothing contained herein shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for such service.
Article 4
Committees
----------
4.1 Committees of Directors. The board of directors may, by
-----------------------
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors, to
serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors. Any such committee, to the extent provided in the resolution of
the board, may have all the authority of the board, except with respect to:
(a) the approval of any action which, under the California
General Corporation Law, also requires shareholders' approval or approval of the
outstanding shares;
(b) the filling of vacancies on the board of directors or
in any committee
-10-
<PAGE>
(c) the fixing of compensation of the directors for serving on the
board or an any committee;
(d) the amendment or repeal of bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate, in a periodic amount or within a price range set forth in the articles of
incorporation or determined by the board of directors; or
(g) the appointment of any other committees of the board of directors
or the members thereof.
4.2 Meetings and Action. Meetings and action of committees shall be
-------------------
governed by, and held and taken in accordance with, the provisions of Sections
3.6 (place of meetings and meetings by telephone), 3.7 (regular meetings), 3.8
(special meetings), 3.9 (quorum), 3.10 (contents of notice and waiver of
notice), 3.11 (adjournment) and 3.12 (action without meeting), with such changes
in the context of those bylaws as are necessary to substitute the committee and
its members for the board of directors and its members, except that: the time of
regular meetings of committees may be determined by resolution of the board of
directors as well as the committee; special meetings of committees may also be
called by resolution of the board of directors; and notice of special meetings
of committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
Article 5
Officers
--------
5.1 Officers. The officers of the corporation shall be a president, a
--------
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more vice
presidents, one or more assistant secretaries, one or more assistant treasurers,
and such other officers as may be appointed in accordance with the provisions of
Section 5.3. Any number of offices may be held by the same person.
5.2 Election. The officers of the corporation, except such officers as may
--------
be appointed in accordance with the provisions of Section 5.3 or 5.5, shall be
chosen by the board of directors, and each shall serve at the pleasure of the
board, subject to the rights, if any, of an officer under any contract of
employment.
-11-
<PAGE>
5.3 Other Officers. The board of directors may appoint, and may empower the
--------------
president to appoint, such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in the bylaws or as the board of directors
may from time to time determine.
5.4 Removal and Resignation. Subject to the rights, if any, of any officer
-----------------------
under any contract of employment, any officer may be removed, either with or
without cause, by the board of directors or, except in case of an officer chosen
by the board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. Any such resignation is without prejudice to the rights, if
any, of the corporation under any contract to which the officer is a party.
5.5 Vacancies. A vacancy in any office because of death, resignation,
---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in these bylaws for regular appointments to such office.
5.6 Chairman of the Board. The chairman of the board, if such an officer be
---------------------
elected, shall, if present, preside at meetings of the board of directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him or her by the board of directors or prescribed by the bylaws. If
there is no president, the chairman of the board shall in addition be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.9.
5.7 Vice Chairman of the Board. The vice chairman of the board, if such an
--------------------------
officer be elected, shall exercise and perform such powers and duties as may be
from time to time assigned to him or her by the board of directors or prescribed
by the bylaws.
5.8 Chief executive Officer. The chief executive officer, if such an
-----------------------
officer be elected, shall exercise and perform such powers and duties as may be
from time to time assigned to him or her by the board of directors or prescribed
by the bylaws.
5.9 President. Subject to such supervisory powers, if any, as may be given
---------
by the board of directors to the chairman of the board or the chief executive
officer, if there be such officers, the president shall be the chief executive
officer of the corporation and shall, subject to the control of the board of
directors, have general supervision, direction and control of the
-12-
<PAGE>
business and the officers of the corporation. He or she shall preside at all
meetings of the shareholders and, in the absence of the chairman of the board,
or if there be none, at all meetings of the board of directors. He or she shall
have the general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the board of directors.
5.10 Vice Presidents. In the absence or disability of the president, the
---------------
vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors and the president or the chairman of the board.
5.11 Secretary. The secretary shall keep, or cause to be kept, at the
---------
principal executive office or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present at directors' and committee meetings, the number of
shares present or represented at shareholders' meetings, and the proceedings
thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, a
share register, or a duplicate share register, showing the names of all
shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required by the bylaws or by law
to be given, and he or she shall keep the seal of the corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors.
5.12 Chief Financial Officer. The chief financial officer shall keep and
-----------------------
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities receipts,
disbursements, gains, losses, capital, retained earnings and shares.
The chief financial officer shall deposit, or cause to be deposited, all
moneys and other valuables in the name and to
-13-
<PAGE>
the credit of the corporation with such depositaries as may be designated by the
board of directors. He or she shall disburse, or cause to be disbursed, the
funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all financial transactions and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the board of directors.
Article 6
Indemnification of Directors, Officers,
Employees and Other Agents
--------------------------------------
6.1 Indemnification. The corporation shall, to the maximum extent permitted
---------------
by the California General Corporation Law, have power to indemnify each of its
agents against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact any such person is or was an agent of the corporation. For
purposes of this Article 6, an "agent" of the corporation includes any person
who is or was a director, officer, employee or other agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 Advance of Expenses. Expenses incurred in defending any proceeding may
-------------------
be advanced by this corporation prior to the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of the agent to repay
such amount unless it shall be determined ultimately that the agent is entitled
to be indemnified as authorized in this Article 6.
6.3 Other Contractual Rights. Nothing contained in this Article shall
------------------------
affect any right to indemnification to which persons other than directors and
officers of this corporation or of any subsidiary of this corporation may be
entitled by contract or otherwise.
6.4 Insurance. Upon and in the event of a determination by the board of
---------
directors of this corporation to purchase such insurance, this corporation shall
purchase and maintain insurance on behalf of any agent of the corporation
against any liability asserted against or incurred by the agent in such capacity
or arising out of the agent's status as such whether or not this corporation
would have the power to indemnify the agent against such liability.
-14-
<PAGE>
Article 7
Certain Loans and Guarantees
----------------------------
7.1. Shareholder Approval. Except as otherwise provided in this Article 7,
--------------------
the corporation shall not make any loan of money or property to, or guarantee
the obligation of, any director or officer of the corporation or of its parent
corporation, if any, unless the transaction, or an employee benefit plan
authorizing the loan or guarantee after disclosure of the right under such a
plan to include officers or directors, is approved by a majority of the
shareholders entitled to act thereon (without counting any shares owned by any
officer or director eligible to participate in the plan or transaction that is
subject to approval).
7.2 Security. The corporation shall not make any loan of money or property
--------
to, or guarantee the obligation of, any person upon the security of shares of
the corporation or of its parent corporation, if any, if the corporation's
recourse in the event of default is limited to the security for the loan or
guarantee, unless (a) the loan or guarantee is adequately secured without
considering such shares, or (b) the loan or guarantee is approved by a majority
of the shareholders entitled to act thereon (without counting any shares owned
by any officer or director eligible to participate in the plan or transaction
that is subject to approval).
7.3 Exceptions. The provisions of Section 7.1 do not apply to:
----------
(a) Any advance of money to a director or officer of the corporation or
of its parent corporation, if any, for any expenses reasonably anticipated to be
incurred in the performance of the duties of the director or officer, provided
that in the absence of the advance the director or officer would be entitled to
be reimbursed for the expenses by the corporation, its parent corporation, if
any, or any subsidiary corporation;
(b) The payment of premiums in whole or in part by the corporation on a
life insurance policy on the life of a director or officer, so long as repayment
to the corporation of the amount of premiums so paid is secured by the proceeds
of the policy and its cash surrender value; or
(c) Any transaction, plan, or agreement permitted under Section 408 of
the Code.
Article 8
Records and Reports
-------------------
8.1 Maintenance and Inspection of Share Register. The corporation shall
--------------------------------------------
keep at its principal executive office, or at the office of its transfer agent
or registrar, if either be appointed, a record of its shareholders, giving the
names and
-15-
<PAGE>
addresses of all shareholders and the number and class of shares held by each
shareholder.
A shareholder or shareholders of the corporation holding at least five
percent in the aggregate of the outstanding voting shares of the corporation may
(a) inspect and copy the records of shareholders' names and addresses and
shareholdings during usual business hours upon five days' prior written demand
upon the corporation, or (b) obtain from the transfer agent of the corporation,
upon written demand and upon the tender of the transfer agent's usual charges
for such list, a list of the shareholders' names and addresses, who are entitled
to vote for the election of directors, and their shareholdings, as of the most
recent record date for which such list has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. The list shall be
made available to that shareholder on or before the later of five days after the
demand is received or the date specified therein as the date as of which the
list is to be compiled. The record of shareholders shall also be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any time during usual business hours, for a purpose
reasonably related to such holder's interests as a shareholder or as the
holder of a voting trust certificate. Any inspection and copying under this
Section 8.1 may be made in person or by an agent or attorney of the shareholder
or holder of a voting trust certificate making such demand.
8.2 Maintenance and Inspection of Bylaws. The corporation shall keep at its
------------------------------------
principal executive office, or if its principal executive office is not in the
State of California, at its principal business office in that State, the
original or a copy of the bylaws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is outside the State of
California and the corporation has no principal business office in that State,
the Secretary shall, upon the written request of any shareholder, furnish to
such shareholder a copy of the bylaws as amended to date.
8.3 Maintenance and Inspection of Other Corporate Records. The accounting
-----------------------------------------------------
books and records and minutes of proceedings of the shareholders and the board
of directors and any committee or committees of the board of directors shall be
kept at such place or places designated by the board of directors or, in the
absence of such designation, at the principal executive office of the
corporation. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any other form capable of
being converted into written form. Such minutes and accounting books and records
shall be open to inspection upon the written demand of any shareholder or holder
of a voting trust certificate, at any reasonable time during usual business
hours, for a purpose reasonably related to the holder's interests as a
shareholder or as the holder of a voting trust certificate. The inspection may
be made in person or by an agent or
-16-
<PAGE>
attorney, and shall include the right to copy and make extracts. The foregoing
rights of inspection shall extend to the records of each subsidiary of the
corporation.
8.4 Inspection by Directors. Every director shall have the absolute right
-----------------------
at any reasonable time to inspect all books, records and documents of every kind
and the physical properties of the corporation and each subsidiary corporation.
Such inspection by a director may be made in person or by agent or attorney and
the right of inspection includes the right to copy and make extracts.
8.5 Annual Reports. The annual report to shareholders referred to in
--------------
Section 1501 of the Code is expressly dispensed with, but nothing herein shall
be interpreted as prohibiting the board of directors from issuing annual or
other periodic reports to the shareholders of the corporation as they may deem
appropriate.
If no annual report meeting the requirements of Section 1501(a) of the Code
has been delivered or mailed by the corporation to the shareholders covering the
immediately preceding fiscal year, the corporation shall deliver or mail such
financial statements and other information requested by a shareholder relating
to the immediately preceding fiscal year as such shareholder may be entitled to
receive pursuant to Section 1501(c) or other provisions of the Code.
8.6 Financial Statements. A copy of any annual financial statement and any
--------------------
income statement of the corporation for each quarterly period of each fiscal
year, and any accompanying balance sheet of the corporation as of the end of
each such period, that has been prepared by the corporation shall be kept on
file in the principal executive office of the corporation for 12 months.
If a shareholder or shareholders holding at least five percent of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than 30 days prior to the date of the request, and a balance sheet of
the corporation as of the end of such period, the chief financial officer shall
cause such statement or statements to be prepared, if not already prepared, and
shall deliver personally or mail such statement or statements to the person
making the request within 30 days after the receipt of such request. If the
corporation has not sent to the shareholders its annual report for the last
fiscal year, this report shall likewise be delivered or mailed to such
shareholder or shareholders within 30 days after such request.
-17-
<PAGE>
Article 9
General Matters
---------------
9.1 Record Date for Purposes Other Than Notice and Voting. For purposes of
-----------------------------------------------------
determining the shareholders entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any other lawful action (other than action by shareholders
by written consent without a meeting), the board of directors may fix, in
advance, a record date, which shall not be more than 60 days prior to any such
action, and in such case only shareholders of record on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the California General Corporation Law.
If the board of directors does not so fix a record date, the record date
for determining shareholders for any such purpose shall be at the close of
business on the date on which the board adopts the resolution relating thereto,
or the sixtieth day prior to the date of such action, whichever is later.
9.2 Checks, Drafts, Evidences of Indebtedness. All checks, drafts or other
-----------------------------------------
orders for payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the board of directors.
9.3 Corporate Contracts and Instruments; How Executed. The board of
-------------------------------------------------
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
9.4 Certificates for Shares. A certificate or certificates for shares of
-----------------------
the capital stock of the corporation shall be issued to each shareholder when
any such shares are fully paid, and the board of directors may authorize the
issuance of certificates or shares as partly paid provided that such
certificates shall state the amount of the consideration to be paid therefor and
the amount paid thereon. All certificates shall be signed in the name of the
corporation by the chairman of the board or vice chairman of the board or the
president or vice president and by the chief financial officer or an assistant
treasurer or the secretary or any assistant secretary, certifying the number of
-18-
<PAGE>
shares and the class or series of shares owned by the shareholder. Any or all of
the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate has ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if such person were an officer, transfer agent or
registrar at the date of issue.
9.5 Lost Certificates. Except as provided in this Section 9.5, no new
-----------------
certificates for shares shall be issued in lieu of an old certificate unless the
latter is surrendered to the corporation and cancelled. The board of directors
may, in case any share certificate or certificate for any other security is
lost, stolen or destroyed, authorize the issuance of a new certificate in lieu
thereof, upon such terms and conditions as the board may require, including
provision for indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of such certificate or the issuance of a
replacement certificate.
9.6 Representation of Shares of Other Corporations. The chairman of the
----------------------------------------------
board, the president, or any vice president, or any other person authorized by
resolution of the board of directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any and all shares
of any other corporation or corporations, foreign or domestic, standing in the
name of the corporation. The authority granted to said officers to vote or
represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised by any
such officer in person or by any person authorized to do so by a proxy duly
executed by said officer.
9.7 Construction and Definitions. Unless the context requires otherwise,
----------------------------
the general provisions, rules of construction, and definitions in the California
General Corporation Law shall govern the construction of these bylaws. Without
limiting the generality of the foregoing, the singular number includes the
plural, the plural number included the singular, and the term "person" includes
both a corporation and a natural person. All references in these bylaws to the
California General Corporation Law or to sections of the Code shall be deemed to
be to such Law or sections as they may be amended and in effect and, if
renumbered, to such renumbered provisions at the time of any action taken under
the bylaws. References to Articles and Sections are to Articles and Sections of
these bylaws unless the context expressly indicates otherwise.
-19-
<PAGE>
Article 10
Amendments
----------
10.1 Shareholders. New bylaws may be adopted or these bylaws may be amended
------------
or repealed by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that if the articles of
incorporation set forth the number of authorized directors of the corporation,
the authorized number of directors may be changed only by an amendment of the
articles of incorporation.
10.2 Board of Directors. Subject to the rights of the shareholders to
------------------
adopt, amend or repeal bylaws as provided in Section 10.1, bylaws, other than a
bylaw amendment changing the authorized number of directors, may be adopted,
amended or repealed by the board of directors.
* * * *
-20-
<PAGE>
Exhibit 3.5
NAME CHG. TO: SUMMIT CARE - CALIFORNIA, INC.
443151
FILED
A276830 In the office of the
Secretary of State of
the State of California
JAN 27 1984
RESTATED MARCH EU,
Secretary of State
ARTICLES OF INCORPORATION /s/ James E. Harris
-------------------
Deputy
THOMAS KONIG and DOROTHY CRAWFORD certify that:
1. They are the President and the Secretary, respectively, of
Fountain Convalescent Hospital, Inc., a California corporation.
2. The articles of incorporation of this corporation are amended and
restated to read in full as follows:
One: The name of this corporation is:
---
Summit Care - California, Inc.
Two: The purpose of this corporation is to engage in any lawful act or
---
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
Three: This corporation is authorized to issue only one class of
-----
shares of stock. The total number of such
<PAGE>
authorized shares shall be twenty-five thousand (25,000); each of such shares
shall have a par value of One Dollar ($1.00); and the aggregate par value of all
such shares shall be Twenty-five Thousand Dollars ($25,000).
Four: This corporation elects to be governed by all of the provisions
----
of Division 1 of Title 1 of the California corporations Code (as amended by act
of the California Legislature, 1975-1976 regular session, effective January 1,
1977, as defined in Section 2300 of the California General Corporation Law), as
amended from time to time, not otherwise applicable to this corporation under
Chapter 23 of said Division 1.
3. The foregoing amendment and restatement of articles of
incorporation has been duly approved by the board of directors.
4. The foregoing amendment and restatement of articles of
incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the Corporations Code. The total number of
outstanding shares of the corporation is 1,798.64. The number of shares
-2-
<PAGE>
voting in favor of the amendment equaled or exceeded the vote required. The
percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of our own knowledge.
DATED: January 3, 1984
/s/ Thomas Konig
-----------------------------
Thomas Konig, President
/s/ Dorothy Crawford
-----------------------------
Dorothy Crawford, Secretary
-3-
<PAGE>
[LOGO OF SUMMIT CARE CORPORATION APPEARS HERE]
January 9, 1984
Secretary of State
State of California
Suite 4001
107 South Broadway
Los Angeles, CA 90012
Gentlemen:
The undersigned, a California Corporation, hereby consents to use the name
Summit Care-California, Inc. as a Corporate name and agrees and acknowledges
that such name is not confusingly similar to the name Summit Care Corporation.
Very truly yours,
SUMMIT CARE CORPORATION
/s/ Thomas Konig
Thomas Konig, President
and Chief Operating Officer
TK/he
<PAGE>
Exhibit 3.6
RESTATED BY-LAWS
OF
SUMMIT CARE - CALIFORNIA, INC.
a California corporation
ARTICLE I
OFFICES
-------
Section 1. Principle Office. The principal executive office of the
corporation is hereby fixed and located at: 1800 Avenue of the Stars, 12th
Floor, Los Angeles, California. The Board of Directors (hereinafter the
"Board") is hereby granted full power and authority to change said principal
executive office from one location to another.
Section 2. Other Offices. Branch or subordinate office may be established
at any time by the Board at any other place or places.
ARTICLE II
SHAREHOLDERS
------------
Section 1. Place of Meetings. Meetings of the Shareholders of this
corporation shall be held either at the principal executive office of the
corporation, or at any other place which may be designated either by the Board
or by the written consent of the Shareholders, given either before or after the
meeting and filed with the Secretary of the corporation.
Section 2. Annual Meetings. The annual meeting of the Shareholders shall
be held on such date and at such time as may be fixed by the Board or the
Shareholders.
Section 3. Special Meetings. Special meetings of the Shareholders, for
any purpose or purposes whatsoever, may be called at any time by the Board, the
President, or by a Shareholder.
Section 4. Action Without a Meeting. Any action(s) which may be taken at
a meeting of the Shareholders may be taken without a meeting by a written
consent to such action(s) signed by all the Shareholders, which document shall
be inserted in the Minute Book of the corporation.
ARTICLE III
DIRECTORS
---------
Section 1. Powers. Subject to limitations of the Articles, these Restated
By-laws, and the laws of the State of California as to action required to be
approved by the Shareholders, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the direction
of the Board.
1.
<PAGE>
Section 2. Number of Qualification. The authorized number of directors
shall be not less than two (2) nor more than the maximum authorized by law. The
exact number of directors may be fixed, from time to time to time, by the Board
or the Shareholders. The number of directors shall be two (2) until changed by
action of the Board or the Shareholders as permitted by law.
Section 3. Vacancies. Vacancies in the Board may be filled by a majority
of the remaining directors, though less than a quorum, or by the Shareholders.
Each director so elected shall hold office until his successor is elected at an
annual meeting of the Shareholders or a special meeting called for that purpose.
Section 4. Action by Directors Without a Meeting. Any action(s) which may
be taken at a meeting of the Board may be taken without a meeting if authorized
by a writing signed by all of the members of the Board, which document shall be
inserted in the Minute Book of the corporation.
ARTICLE IV
OFFICERS
--------
Section 1. Officers. The officers of the corporation shall be selected
and removed by the Board in its discretion and shall consist of a President, any
appropriate number of Vice Presidents, a Secretary, and a Chief Financial
Officer who shall hold the office of Treasurer. The corporation may also have,
at the discretion of the Board, such other officers as the corporation may
require; all such officers shall hold their respective office for such period,
have authority, and perform such duties as the Board may from time to time
determine.
Section 2. Authority of Certain Officers. Anything herein to the contrary
notwithstanding, the following described officers shall have the authority set
forth after their respective designation:
A. President. The President shall be the general manager and
chief executive officer of the corporation and shall have responsibility for,
subject to the control of the Board, general supervision, direction, and control
of the business and affairs of the corporation. The President shall preside at
all meeting of the Shareholders and at all meetings of the Board. The President
shall have the general powers and duties of management usually vesting in the
office of president and general manager of a corporation and such other powers
and duties as may be prescribed by the Board.
B. Vice President. In the absence or disability of the President,
any Vice President so designated by the Board or the President shall perform all
the duties of the President and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. All Vice Presidents,
if any, shall have such powers and perform such duties as from time to time may
be prescribed by the Board or delegated by the President.
2.
<PAGE>
C. Secretary. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board may order, (i) a
book containing minutes of all meetings of the Shareholders and the Board, and
(ii) a share register or a duplicate share register. The Secretary shall give,
or cause to be given, notice of all the meetings of the Shareholders and of the
Board required by these Restated By-laws or by law to be given, shall keep the
seal of the corporation in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the Board.
D. Chief Financial Officer and Treasurer. The Chief Financial
Officer of the Corporation shall hold the office of Treasurer and shall keep and
maintain, or cause to be kept and maintained, adequate and correct accounts of
the properties and business transactions of the corporation. Such officer shall
send or cause to be sent to the Shareholders such financial statements and
reports as are by law or these Restated By-laws required to be sent to said
Shareholders. The books of account shall at all times be open to inspection by
any director. Such officer shall cause all moneys and other valuables to be
deposited in the name and to the credit of the corporation. Such officer shall
(i) disburse or cause to be disbursed the funds of the corporation as may be
ordered by the Board, (ii) render to the President and the directors, whenever
they request it, an account of all transactions and of the financial condition
of the corporation, and (iii) have such other powers and perform such other
duties as may be prescribed by the Board.
ARTICLE V
OTHER PROVISIONS
----------------
Section 1. Checks and Drafts. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board.
Section 2. Execution of Contracts. The Board may authorize any officers
or agents to enter into any contract or execute any instrument in the name of
and on behalf of the corporation. Such authority may be general or confined to
specific instances. Unless so authorized by the Board, no officers, agent,
employee or other person shall have any other person shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit, or to render it liable for any purpose or amount.
Section 3. Annual Report to Shareholders. Annual reports to the
Shareholders are expressly waived, but nothing herein shall be interpreted as
precluding the issuance of annual or other periodic reports to the Shareholders.
ARTICLE VI
AMENDMENTS
----------
These Restated By-laws may be amended or repealed either by the
Shareholders or otherwise as authorized under the laws of the State of
California.
3.
<PAGE>
Exhibit 3.7
FILED
In the office of the Secretary of State
of the State of California
JUNE 29 1982
MARCH FONG EU. Secretary of State
by [SIGNATURE APPEARS HERE]
----------------------------
Deputy
ARTICLES OF INCORPORATION
OF
SUMMIT CARE PHARMACY,INC.
------------------------
One: The name of this corporation is;
---
Summit Care Pharmacy, Inc.
Two: The purpose of this corporation is to engage in any
---
lawful act or activity for which a corporation may be organized under the
General Corporation Law of California other than the banking business, the
trust company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
Three: The name and address in the State of California of
-----
this corporation's initial agent for service of process are:
William L. Pierpoint
4070 Laurel Canyon Boulevard
Studio City, California 91604
Four: This corporation is authorized to issue 100,000
----
shares, all of which shall be of one class.
IN WITNESS WHEREOF, for the purpose of forming this
corporation under the General Corporation Law of the State of California, the
undersigned has executed these Articles of Incorporation this 29th day of June,
1982.
/s/ Jeffrey S. Allen
-----------------------------
JEFFREY S. ALLEN
I declare that I am the person who executed the foregoing
Articles of Incorporation, which execution is my act and deed.
/s/ Jeffrey S. Allen
-----------------------------
JEFFREY S. ALLEN
<PAGE>
[LOGO OF SUMMIT PHARMACY, INC. APPEARS HERE]
June 21, 1982
TO WHOM IT MAY CONCERN:
I hereby authorize the use of the name SUMMIT CARE PHARMACY by Summit Care
Corporation, a California Corporation, 2600 W. Magnolia Burbank, California
91305.
/s/ William L. Pierpoint
-------------------------------------
William L. Pierpoint
President,
SUMMIT PHARMACY INC.
6/23/82
-------------------------------------
Date
[SEAL OF OFFICE OF THE SECRETARY OF STATE APPEARS HERE]
<PAGE>
Exhibit 3.8
RESTATED BY-LAWS
OF
SUMMIT CARE PHARMACY, INC.
a California corporation
ARTICLE I
OFFICES
-------
Section 1. Principle Office. The principal executive office of the
corporation is hereby fixed and located at: 1800 Avenue of the Stars, 12th
Floor, Los Angeles, California. The Board of Directors (hereinafter the
"Board") is hereby granted full power and authority to change said principal
executive office from one location to another.
Section 2. Other Offices. Branch or subordinate office may be established
at any time by the Board at any other place or places.
ARTICLE II
SHAREHOLDERS
------------
Section 1. Place of Meetings. Meetings of the Shareholders of this
corporation shall be held either at the principal executive office of the
corporation, or at any other place which may be designated either by the Board
or by the written consent of the Shareholders, given either before or after the
meeting and filed with the Secretary of the corporation.
Section 2. Other Offices. Branch or subordinate office may be established
at any time by the Board at any other place or places.
ARTICLE II
SHAREHOLDERS
------------
Section 1. Place of Meetings. Meetings of the Shareholders of this
corporation shall be held either at the principal executive office of the
corporation, or at any other place which may be designated either by the Board
or by the written consent of the Shareholders, given either before or after the
meeting and filed with the Secretary of the corporation.
Section 2. Annual Meetings. The annual meeting of the Shareholders shall
be held on such date and at such time as may be fixed by the Board or the
Shareholders.
Section 3. Special Meetings. Special meetings of the Shareholders, for any
purpose or purposes whatsoever, may be called at any time by the Board, the
President, or by a Shareholder.
Section 4. Action Without a Meeting. Any action(s) which may be taken at a
meeting of the Shareholders may be taken without a meeting by a written consent
to such action(s) signed by all the Shareholders, which document shall be
inserted in the Minute Book of the corporation.
ARTICLE III
DIRECTORS
---------
Section 1. Powers. Subject to limitations of the Articles, these Restated
By-laws, and the laws of the State of California as to action required to be
approved by the Shareholders, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the direction
of the Board.
<PAGE>
Section 2. Number and Qualification. The authorized number of directors
shall be not less than two (2) nor more than the maximum authorized by law. The
exact number of directors may be fixed, from time to time to time, by the Board
or the Shareholders. The number of directors shall be two (2) until changed by
action of the Board or the Shareholders as permitted by law.
Section 3. Vacancies. Vacancies in the Board may be filled by a majority of
the remaining directors, though less than a quorum, or by the Shareholders. Each
director so elected shall hold office until his successor is elected at an
annual meeting of the Shareholders or a special meeting called for that purpose.
Section 4. Action by Directors Without a Meeting. Any action(s) which may
be taken at a meeting of the Board may be taken without a meeting if authorized
by a writing signed by all of the members of the Board, which document shall be
inserted in the Minute Book of the corporation.
ARTICLE IV
OFFICERS
--------
Section 1. Officers. The officers of the corporation shall be selected and
removed by the Board in its discretion and shall consist of a President, any
appropriate number of Vice Presidents, a Secretary, and a Chief Financial
Officer who shall hold the office of Treasurer. The corporation may also have,
at the discretion of the Board, such other officers as the corporation may
require; all such officers shall hold their respective office for such period,
have authority, and perform such duties as the Board may from time to time
determine.
Section 2. Authority of Certain Officers. Anything herein to the contrary
notwithstanding, the following described officers shall have the authority set
forth after their respective designation:
A. President. The President shall be the general manager and chief
executive officer of the corporation and shall have responsibility for, subject
to the control of the Board, general supervision, direction, and control of the
business and affairs of the corporation. The President shall preside at all
meeting of the Shareholders and at all meetings of the Board. The President
shall have the general powers and duties of management usually vested in the
office of president and general manager of a corporation and such other powers
and duties as may be prescribed by the Board.
B. Vice President. In the absence or disability of the President,
any Vice President so designated by the Board or the President shall perform all
the duties of the President and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. All Vice Presidents,
if any, shall have such powers and perform such duties as from time to time may
be prescribed by the Board or delegated by the President.
2.
<PAGE>
C. Secretary. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board may order, (i) a
book containing minutes of all meetings of the Shareholders and the Board, and
(ii) a share register or a duplicate share register. The Secretary shall give,
or cause to be given, notice of all the meetings of the Shareholders and of the
Board required by these Restated By-laws or by law to be given, shall keep the
seal of the corporation in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the Board.
D. Chief Financial Officer and Treasurer. The Chief Financial
Officer of the Corporation shall hold the office of Treasurer and shall keep and
maintain, or cause to be kept and maintained, adequate and correct accounts of
the properties and business transactions of the corporation. Such officer shall
send or cause to be sent to the Shareholders such financial statements and
reports as are by law or these Restated By-laws required to be sent to said
Shareholders. The books of account shall at all times be open to inspection by
any director. Such officer shall cause all moneys and other valuable to be
deposited in the name and to the credit of the corporation. Such officer shall
(i) disburse or cause to be disbursed the funds of the corporation as may be
ordered by the Board, (ii) render to the President and the directors, whenever
they request it, an account of all transactions and of the financial condition
of the corporation, and (iii) have such other powers and perform such other
duties as may be prescribed by the Board.
ARTICLE V
OTHER PROVISIONS
----------------
Section 1. Checks and Drafts. All checks, drafts or other orders for
payment of money, notes or other evidences of Indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board.
Section 2. Execution of Contracts. The Board may authorize any officers or
agents to enter into any contract or execute any instrument in the name of and
on behalf of the corporation. Such authority may be general or confined to
specific instances. Unless so authorized by the Board, no officers, agent,
employee or other person shall have any other person shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit, or to render it liable for any purpose or amount.
Section 3. Annual Report to Shareholders. Annual reports to the
Shareholders are expressly waived, but nothing herein shall be interpreted as
precluding the issuance of annual or other periodic reports to the
Shareholders.
ARTICLE VI
AMENDMENTS
----------
These Restated By-laws may be amended or repealed either by the
Shareholders or otherwise as authorized under the laws of the State of
California.
3.
<PAGE>
Exhibit 3.11
ARTICLES OF INCORPORATION
OF
SUMMIT CARE TEXAS EQUITY, INC.
I
The name of this corporation is Summit Care Texas Equity, Inc.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is:
Stephanie Brooks
CT CORPORATION SYSTEMS
818 W. Seventh Street
Los Angeles, California 90017
IV
This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is authorized to
issue is one million (1,000,000) shares.
V
The liability of the directors of this corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
-1-
<PAGE>
VI
This corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to this corporation and its stockholders through bylaw provisions, through
agreements with agents, by vote of shareholders or disinterested directors, or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, subject to the limits of such excess
indemnification as set forth in Section 204 of the California Corporations Code.
Dated: January 26, 1996
/s/ Frank S. Osen
-------------------------------------
Frank S. Osen
Incorporator
-2-
<PAGE>
Exhibit 3.12
BYLAWS OF
SUMMIT CARE TEXAS EQUITY, INC.
ARTICLE I
OFFICES
-------
Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal
--------------------------
executive office for the transaction of business of the above-named corporation
is hereby fixed and located in the County of Los Angeles, State of California.
The location may be changed by approval of a majority of the authorized
Directors, and additional offices may be established and maintained at such
other place or places, either within or without California, as the Board of
Directors ("Board") may from time to time designate.
Section 2. OTHER OFFICES. Branch or subordinate offices may
-------------
at any time be established by the Board of Directors at any place or places
where the Corporation is qualified to do business.
ARTICLE II
DIRECTORS - MANAGEMENT
----------------------
Section 1. PRIMARY PURPOSE OF THIS CORPORATION. Subject to
-----------------------------------
the provisions of Article II of the Articles of Incorporation of the corporation
relating to purpose, the primary purpose of this corporation is to engage in any
lawful acts or act or activity for which incorporation may be organized under
the General Corporation Law of California other than the banking business, the
trust company business, or the practice of a profession permitted to be
incorporated by the California Corporations Code.
Section 2. RESPONSIBILITY OF BOARD OF DIRECTORS. Subject to
------------------------------------
the provisions of the California General Corporation Law and to any limitations
in the Articles of Incorporation of the corporation relating to action required
to be approved by the Shareholders, as that term is defined in Section 153 of
the California Corporations Code, or by the outstanding shares, as that term is
defined in Section 152 of the California Corporations Code, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board. The Board may delegate the
management of the day-to-day operation of the business of the corporation to a
management company or other person, provided that the business and affairs of
-1-
<PAGE>
the corporation shall be managed and all corporate powers shall be exercised
under the ultimate direction of the Board.
Section 3. STANDARD OF CARE. Each Director shall perform the
----------------
duties of a Director, including the duties as a member of any committee of the
Board upon which the Director may serve, in good faith, in a manner such
Director believes to be in the best interests of the corporation, and with such
care, including reasonable inquiry, as an ordinary prudent person in a like
position would use under similar circumstances.
Section 4. NUMBER AND QUALIFICATION OF DIRECTORS. The
-------------------------------------
authorized number of Directors shall be three (3) until changed by a duly
adopted amendment to the Articles of Incorporation or by an amendment to this
Bylaw adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote, as provided in Section 212 of the
California Corporations Code.
Section 5. ELECTION AND TERM OF OFFICE OF DIRECTORS.
----------------------------------------
Directors shall be elected at each annual meeting of the Shareholders to hold
office until the next annual meeting. Each Director, including a Director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
Section 6. VACANCIES. Vacancies in the Board may be filled by
---------
a majority of the remaining Directors, though less than a quorum, or by a sole
remaining Director, except that a vacancy created by the removal of a Director
by the vote or written consent of the Shareholders or by a court order may be
filled only by the vote of a majority of the shares entitled to vote represented
at a duly held meeting at which a quorum is present, or by the written consent
of holders or a majority of the outstanding shares entitled to vote. Each
Director so elected shall hold office until the next annual meeting of the
Shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to exist
in the event of death, resignation, or removal of any Director, or if a Director
has been declared of unsound mind by an order of court or convicted of a felony,
or if the authorized number of Directors is increased, or if the Shareholders
fail at any meeting of Shareholders at which any Director or Directors are
elected, to elect a number of Directors to be voted for at that meeting.
The Shareholders may elect a Director or Directors at any
time to fill any vacancy or vacancies not filled by the Directors,
-2-
<PAGE>
but any such election by written consent shall require the consent of a majority
of the outstanding shares entitled to vote.
No reduction of the authorized number of Directors shall have
the effect of removing any Director before that Director's term of office
expires.
Section 7. REMOVAL OF DIRECTORS. The entire Board or any
--------------------
individual Director may be removed from office as provided in Sections 302, 303
and 304 of the California Corporations Code. In such case, the remaining Board
Members may elect a successor Director to fill such vacancy for the remaining
unexpired term of the Director so removed.
Section 8. PLACE AND MANNER OF MEETINGS. Meetings of the Board
----------------------------
may be called by the Chairman or any Member of the Board, or the President, or
the Secretary, and shall be held at the principal executive office of the
corporation, unless some other place is designated in the notice of the meeting.
Members of the Board may participate in a meeting through use of a conference
telephone or similar communications equipment so long as all Members
participating in such a meeting can hear one another. Accurate minutes of any
meeting of the Board or any committee thereof, shall be maintained as required
by Section 312 of the California Corporations Code by the Secretary or other
Officer designated for that purpose.
Section 9. ORGANIZATION MEETINGS. The organization meetings
---------------------
of the Board shall be held immediately following the adjournment of the annual
meetings of the Shareholders.
Section 10. NOTICE AND WAIVER OF MEETINGS. At least forty-
-----------------------------
eight (48) hours' notice of the time and place of meetings shall be delivered
personally to the Directors or personally communicated to them by a corporate
Officer by telephone or telegraph. If the notice is sent to a Director by
letter, it shall be addressed to the Director at the Director's address as it is
shown upon the records of the corporation, or if it is not so shown on such
records or is not readily ascertainable, at the place in which the meetings of
the Directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail, postage prepaid, in the place in which the
principal executive office of the corporation is located at least four (4) days
prior to the time of the holding of a meeting. Such mailing, telegraphing,
telephoning or delivery as above provided shall be due, legal and personal
notice to such Director.
When all of the Directors are present at any Directors'
meeting, however called or noticed, and either (i) sign a written
-3-
<PAGE>
consent thereto on the records of such meeting, or, (ii) sign a waiver of notice
of such meeting or a consent to holding the meeting or an approval of the
minutes thereof, whether prior to or after the holding of such meeting, which
said waiver, consent or approval shall be filed with the Secretary of the
corporation, or, (iii) if a Director attends a meeting without notice but
without protesting, prior thereto or at its commencement, the lack of notice,
then the transactions thereof are as valid as if had at a meeting regularly
called and noticed.
Section 11. SOLE DIRECTOR PROVIDED BY ARTICLES OF
-------------------------------------
INCORPORATION OR BYLAWS. In the event only one (1) Director is required by
- -----------------------
these Bylaws or Articles of Incorporation, then any reference herein to
notices, waivers, consents, meetings, or other actions by a majority or quorum
of the Directors shall be deemed to refer to such notice, waiver, etc., by such
sole Director, who shall have the rights and duties and shall be entitled to
exercise all of the powers and shall assume all the responsibilities otherwise
herein described as given to a Board.
Section 12. DIRECTORS ACTION BY UNANIMOUS WRITTEN CONSENT.
---------------------------------------------
Any action required or permitted to be taken by the Board may be taken without a
meeting and with the same force and effect as if taken by a unanimous vote of
Directors, if authorized by a writing signed individually or collectively by all
Members of the Board. Such consent shall be filed with regular minutes of the
Board.
Section 13. QUORUM. A majority of the number of Directors as
------
fixed by the Articles of Incorporation or Bylaws shall be necessary to
constitute a quorum for the transaction of business, and the action of a
majority of the Directors present at any meeting at which there is a quorum,
when duly assembled, is valid as a corporate act; provided that a majority of
the Directors, in the absence of a quorum, may adjourn from time to time, but
may not transact any business, notwithstanding the withdrawal of Directors, if
any action taken is approved by a majority of the required quorum for such
meetings.
Section 14. NOTICE OF ADJOURNMENT. Notice of the time and
---------------------
place of holding an adjourned meeting need not be given to absent Directors if
the time and place be fixed at the meeting adjourned and held within twenty-four
(24) hours, but if adjourned more than twenty-four (24) hours, notice shall be
given to all Directors not present at the time of the adjournment.
Section 15. COMPENSATION OF DIRECTORS. Directors, as such,
-------------------------
shall not receive any stated salary for their services, but by resolution of the
Board a fixed sum, and expense of attendance, if any, may be allowed for
attendance at each regular and special
-4-
<PAGE>
meeting of the Board; provided that nothing herein contained shall be construed
to preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 16. COMMITTEES. Committees of the Board may be
----------
appointed By resolution passed by a majority of the whole Board. Committees
shall be composed of two (2) or more Members of the Board, and shall have such
powers of the Board as may be expressly delegated to it by resolution of the
Board, except those powers expressly made non-delegable by Section 311 of the
California Corporations Code.
Section 17. ADVISORY DIRECTORS. The Board from time to time
------------------
may elect one or more persons to be Advisory Directors who shall not by such
appointment be a Member of the Board. Advisory Directors shall be available from
time to time to perform special assignments specified by the President, to
attend meetings of the Board upon invitation and to furnish consultation to the
Board. The period during which the title shall be held may be prescribed by the
Board. If no period is prescribed, the title shall be held at the pleasure of
the Board.
Section 18. RESIGNATIONS. Any Director may resign effective
------------
upon giving written notice to the Chairman of the Board, the President, the
Secretary or the Board of the corporation, unless the notice specifies a later
time for the effectiveness of such resignation. If the resignation is effective
at a future time, a successor may be elected to take office when the resignation
becomes effective.
ARTICLE III
OFFICERS
--------
Section 1. OFFICERS. The Officers of the corporation shall be
--------
a President, a Secretary, and a Chief Financial Officer. The corporation may
also have, at the discretion of the Board of Directors, a Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Chief Financial officers, and such other Officers as may be appointed
in accordance with the provisions of Section 3 of this Article III. Any number
of offices may be held by the same person.
Section 2. ELECTION. The Officers of the corporation, except
--------
such Officers as may be appointed in accordance with the provisions of Section 3
or Section 6 of this Article, shall be chosen annually by the Board, and each
shall hold office until the Officer shall resign or shall be removed or
otherwise disqualified to serve, or a successor shall be elected and qualified.
-5-
<PAGE>
Section 3. SUBORDINATE OFFICER, ETC. The Board may appoint such other
------------------------
Officers as the business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in these Bylaws or as the Board may form time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
-----------------------------------
rights, if any, of any Officer under any contract of employment, any Officer may
be removed, either with or without cause, upon the affirmative vote of two-
thirds (2/3) majority of the members of the Board, at regular or special meeting
of the Board, or, except in case of an Officer chosen by the Board, by any
Officer upon whom such power of removal may be conferred by the Board.
Any Officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. VACANCIES. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws regular appointments to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such
---------------------
an Officer be elected, shall, if present, beside at meetings of the Board and
exercise and perform such other powers and duties as may be from time to time
assigned by the Board or prescribed by the Bylaws. If there is no President, the
Chairman of the Board shall in addition be the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in Section 7 of this
Article III.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
---------
may be given by the Board to the Chairman of the Board, if there be an Officer,
the President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board, have general supervision, direction and
control of the business and Officers of the corporation. The President shall
preside at all meetings of the Shareholders and in the absence of the Chairman
of the Board, or it there be none, at all meetings of the Board. The President
shall be ex-officio a member of all the standing committees, including the
Executive Committee, if any and shall have the general powers and duties of
management usually vested in the office of President of a
-6-
<PAGE>
corporation, and shall have such other powers and duties as may be prescribed by
the Board or the Bylaws.
Section 8. VICE PRESIDENT. In the absence or disability of the
--------------
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board, or if not ranked, the vice President designated by the Board, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board or the Bylaws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be
---------
kept, a book of minutes at the principal office or such other place as the Board
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholder's meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the
principal office or at the office of the corporation's transfer agent, a share
register, or duplicate share register, showing the names of the Shareholders and
their addresses; the number and classes of shares held by each; the number and
date of certificates issued for the same; and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
the meetings of the Shareholders and of the Board required by the Bylaws or by
law to be given. The Secretary shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board or by the Bylaws.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial
-----------------------
Officer shall keep and maintain, or cause to be kept and maintained in
accordance with generally accepted accounting principles, adequate and correct
accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, earning (or surplus) and shares. The books of account shall at
all reasonable times be open to inspection by any Director .
This Office shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board. The Chief
-7-
<PAGE>
Financial Officer shall disburse the funds of the corporation as may be ordered
by the Board, shall render to the President and Directors, whenever they request
it, an account of all of his or her transactions and of the financial condition
of the corporation, and shall have such other powers and perform such other
duties as may be prescribed by the Board or the Bylaws.
ARTICLE IV
SHAREHOLDERS' MEETINGS
----------------------
Section 1. PLACE OF MEETINGS. All meetings of the
-----------------
Shareholders shall be held at the principal executive office of the corporation
unless some other appropriate or convenient location be designated for that
purpose from time to time by the Board.
Section 2. ANNUAL MEETINGS. The annual meetings of the
---------------
Shareholders shall be held each year on a date and at a time designated by the
Board of Directors. The date so designated shall be within five (5) months after
the end of the fiscal year of the corporation and within fifteen (15) months
after the last annual meeting.
At the annual meeting, the Shareholders shall elect a Board,
consider reports of the affairs of the corporation and transact such other
business as may be properly brought before the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the
----------------
Shareholders may be called at any time by the Board, the Chairman of the Board,
the President, a Vice President, the Secretary, or by one or more Shareholders
holding not less than one-tenth (1/10) of the voting power of the corporation.
Except as next provided, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the Chairman,
President, Vice President, or Secretary, mailed or delivered personally to such
Officer by any person (other than the Board) entitled to call a special meeting
of Shareholders, such Officer shall cause notice to be given, to the
Shareholders entitled to vote, that a meeting will be held at a time requested
by the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of such request. If such notice is
not given within twenty (20) days after receipt of such request, the persons
calling the meeting may give notice thereof in the manner provided by these
Bylaws or apply to the Superior Court as provided in Section 305(c) of the
California Corporations Code.
Section 4. NOTICE OF MEETINGS - REPORTS. Notice of meetings,
----------------------------
annual or special, shall be given in writing not less
-8-
<PAGE>
than ten (10) nor more than sixty (60) days before the date of the meeting to
Shareholders entitled to vote thereat. Such notice shall be given by the
Secretary or the Assistant Secretary, or if there be no such Officer, or in the
case of his or her neglect or refusal, by any Director or Shareholder.
Such notices or any reports shall be given personally or by
mail or other means of written communication as provided in Section 601 of the
California Corporations Code and shall be sent to the Shareholder's address
appearing on the books of the corporation, or supplied by him or her to the
corporation for the purpose of notice, and in the absence thereof, as provided
in Section 601 of the California Corporations Code.
Notice of any meeting of Shareholders shall specify the
place, the day and the hour of meeting, and (1) in case of a special meeting,
the general nature of the business to be transacted and no other business may
be transacted, or (2) in the case of an annual meeting, those matters which the
Board at date of mailing, intends to present for action by the Shareholders. At
any meetings where Directors are to be elected, notice shall include the names
of the nominees, if any, intended at date of notice to be presented by
management for election.
If a Shareholder supplies no address, notice shall be deemed
to have been given if mailed to the place where the principal executive office
of the corporation, in California, is situated, or published at least once in
some newspaper or general circulation in the County of said principal executive
office.
Notice shall be deemed given at the time it is delivered
personally or deposited in the mail or sent by other means of written
communication. The Officer giving such notice or report shall prepare and file
an affidavit or declaration thereof.
When a meeting is adjourned for forty-five (45) days or more,
notice of the adjourned meeting shall be given as in case of an original
meeting. Save, as aforesaid, it shall not be necessary to give any notice of
adjournment or of the business to be transacted at an adjourned meeting other
than by announcement at the meeting at which such adjournment is taken.
Section 5. WAIVER OF NOTICE OR CONSENT BY ABSENT
-------------------------------------
SHAREHOLDERS. The transactions of any meeting of Shareholders, however, called
- ------------
or noticed, shall be valid as though had at a meeting duly held after regular
call and notice, if a quorum, be present either in person or by proxy, and if,
either before or after the meeting, each of the Shareholders entitled to vote,
not present in person or by proxy, sign a written waiver of notice, or a consent
to the holding of such meeting or an approval of the
-9-
<PAGE>
minutes thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance shall
constitute a waiver of notice, unless objection shall be made as provided in
section 601(e) of the California Corporations Code.
Section 6. SHAREHOLDERS ACTING WITHOUT A MEETING -
----------------------------------------
DIRECTORS. Any action which may be taken at a meeting of the Shareholders, may
- ---------
be taken without a meeting or notice of meeting if authorized by a writing
signed by all of the Shareholders entitled to vote at a meeting for such
purpose, and filed with the Secretary of the corporation, provided, further,
that while ordinarily Directors can only be elected by unanimous written consent
under Section 603(d) of the California Corporations Code, if the Directors fail
to fill a vacancy, then a Director to fill that vacancy may be elected by the
written consent of persons holding a majority of shares entitled to vote for the
election of Directors.
Section 7. OTHER ACTIONS WITHOUT A MEETING. Unless otherwise
-------------------------------
provided in the California Corporations Code or the Articles, any action which
may be taken at any annual or special meeting of Shareholders may be taken
without a meeting and without prior notice, if a consent in writing, setting
forth the action so taken, signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
Unless the consents of all Shareholders entitled to vote have
been solicited in writing,
(1) Notice of any Shareholder approval pursuant to Sections
310, 317, 1201 or 2007 of the California Corporations Code
without a meeting by less than unanimous written consent
shall be given at least ten (10) days before the consummation
of the action authorized by such approval, and
(2) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting
by less than unanimous written consent, to each of those
Shareholders entitled to vote who have not consented in
writing.
Any Shareholder giving a written consent, or the
Shareholder's proxyholders, or a transferee of the shares of a personal
representative of the Shareholder or their respective
-10-
<PAGE>
proxyholders, may revoke the consent by a writing received by the corporation
prior to the time that written consents of the number of shares required to
authorize the proposed action have been filed with the Secretary of the
corporation, but may not do so thereafter. Such revocation is effective upon its
receipt by the Secretary of the corporation.
Section 8. QUORUM. The holders of a majority of the shares
------
entitled to vote thereat, present in person, or represented by proxy shall
constitute a quorum at all meetings of the Shareholders of the transaction of
business except as otherwise provided by law, by the Articles of Incorporation,
or by these Bylaws. If, however, such majority shall not be present or
represented at any meeting of the Shareholders, the Shareholders entitled to
vote thereat, present in person, or by proxy, shall have the power to adjourn
the meeting from time to time, until the requisite amount of voting shares shall
be present. At such adjourned meeting at which the requisite amount of voting
shares shall be represented, any business may be transacted which might have
been transacted at a meeting as originally notified.
If a quorum be initially present, the Shareholders may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough Shareholders to leave less than a quorum, if any action taken is
approved by a majority of the Shareholders required to initially constitute a
quorum.
Section 9. VOTING. Only persons in whose names shares
------
entitled to vote stand on the stock records of the corporation on the date of
any meeting of Shareholders, unless some other day be fixed by the Board for the
determination of Shareholders of record, and then such other day, shall be
entitled to vote at such meeting.
Provided the candidate's name has been placed in nomination
prior to the voting and one or more Shareholders has given notice at the meeting
prior to the voting of the Shareholder's intent to cumulate the Shareholder's
votes, every Shareholder entitled to vote at any election for Directors of any
corporation for profit may cumulate their votes and give one candidate a number
of votes equal to the number of Directors to be elected multiplied by the number
of votes to which his or her shares are entitled, or distribute his or her votes
on the same principle among as many candidates as he or she thinks fit.
The candidates receiving the highest number of votes up to
the number of Directors to be elected are elected.
The Board may fix a time in the future not exceeding thirty
(30) days preceding the date of any meeting of Shareholders
-11-
<PAGE>
or the date fixed for the payment of any dividend or distribution, or for the
allotment of rights, or when any change or conversion or exchange of shares
shall go into effect, as a record date for the determination of the Shareholders
entitled to notice of and to vote at any such meeting, or entitled to receive
any such dividend or distribution, or any allotment of conversion or exchange of
shares. In such case only Shareholders of record on the date so fixed shall be
entitled to notice of and to vote at such meeting, or to receive such dividends,
distribution or allotment of rights, or to exercise such rights, as the case may
be notwithstanding any transfer of any share on the books of the corporation
after any record date fixed as aforesaid. The Board may close the books of the
corporation against transfers of shares during the whole or any part of such
period.
Section 10. PROXIES. Every Shareholder entitled to vote, or
-------
to execute consents, may do so, either in person or by written proxy, executed
in accordance with the provisions of Section 604 and 705 of the California
Corporations Code and filed with the Secretary of the corporation.
Section 11. ORGANIZATION. The President, or in the absence
------------
of the President, any Vice President, shall call the meeting of the Shareholders
to order, and shall act as chairman of the meeting. In the absence of the
President and all of the Vice Presidents, Shareholders shall appoint a chairman
for such meeting. The Secretary of the corporation shall act as Secretary of all
meetings of the Shareholders, but in the absence of the Secretary at any meeting
of the Shareholders, the presiding Officer may appoint any person to act as
Secretary of the meeting.
Section 12. INSPECTORS OF ELECTION. In advance of any
----------------------
meeting of Shareholders the Board may, if they so elect, appoint inspectors of
election to act at such meeting or any adjournment thereof. If inspectors of
election be not so appointed, or if any persons so appointed fail to appear or
refuse to act, the chairman of any such meeting, may, and on the request of any
Shareholder or his or her proxy shall, make such appointment at the meeting in
which case the number of inspectors shall be either one (1) or three (3) as
determined by the majority of the Shareholders represented at the meeting.
ARTICLE V
CERTIFICATES AND TRANSFER OF SHARES
-----------------------------------
Section 1. CERTIFICATES FOR SHARES. Certificates for shares
-----------------------
shall be of such form and device as the Board may designate and shall state the
name of the record holder of the shares represented thereby; its number; the
date of issuance; the number of shares for which it is issued; a statement of
the rights,
-12-
<PAGE>
privileges, preferences and restrictions, if any; a statement as to the
redemption or conversion, if any; a statement of liens or restrictions upon
transfer or voting, if any; if the shares are assessable or, if assessments are
collectible by personal action, a plain statement of such facts.
All certificates shall be signed in the name of the
corporation by the Chairman of the Board or Vice Chairman of the Board or the
President or Vice President and by the Chief Financial Officer or an Assistant
Treasurer or the Secretary or any Assistant Secretary, certifying the number of
shares and the class or series of shares owned by the Shareholder.
Any or all of the signatures on the certificate may be
facsimile. In case any Officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed on a certificate shall have ceased to
be that Officer, transfer agent, or registrar before that certificate is issued,
it may be issued by the corporation with the same effect as if that person were
an Officer, transfer agent, or registrar at the date of issue.
Section 2. TRANSFER ON THE BOOKS. Upon surrender to the
---------------------
Secretary or transfer agent of the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 3. TRANSFER AGENTS AND REGISTRARS. The Board may
------------------------------
appoint one or more transfer agents or transfer clerks, and one or more
registrars, which shall be an incorporated bank or trust company, either
domestic or foreign, who shall be appointed at such times and places as the
requirements of the corporation may necessitate and the Board may designate.
Section 4. LOST OR DESTROYED CERTIFICATES. Any person
------------------------------
claiming a certificate of stock to be lost or destroyed shall make an affidavit
or affirmation of that fact and shall, if the Directors so require, give the
corporation a bond of indemnity, in form and with one or more sureties
satisfactory to the Board, in at least double the value of the stock represented
by said certificate, whereupon a new certificate may be issued in the same tenor
and for the same number of shares as the one alleged to be lost or destroyed.
Section 5. CLOSING STOCK TRANSFER BOOKS - RECORD DATE. In
------------------------------------------
order that the corporation may determine the Shareholders entitled to notice of
any meeting or to vote or entitled to receive payment of any dividend or other
distribution or allotment of any
-13-
<PAGE>
rights or entitled to exercise any rights in respect of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days prior to the date of such meeting nor more than
sixty (60) days prior to any other action.
If no record date is fixed; the record date for determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders shall
be at the close of business on the business day next preceding the date on which
notice is given, or if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held. The record
date for determining Shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board is necessary,
shall be the day on which the first written consent is given.
The record date for determining Shareholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereat, or the sixtieth (60th) day prior to the date of
such other action, whichever is later.
Section 6. LEGEND CONDITION. In the event any shares of this
----------------
corporation are issued pursuant to a permit or exemption therefrom requiring the
imposition of a legend condition, the person or persons issuing or transferring
said shares shall make sure said legend appears on the certificate and shall not
be required to transfer any shares free of such legend unless an amendment to
such permit or a new permit be first issued so authorizing such a deletion.
ARTICLE VI
RECORDS - REPORTS - INSPECTION
Section 1. RECORDS. The corporation shall maintain, in
-------
accordance with generally accepted accounting principles, adequate and correct
accounts, books and records of its business and properties. All of such books,
records and accounts shall be kept at its principal executive office in the
State of California, as fixed by the Board from time to time.
Section 2. INSPECTION OF BOOKS AND RECORDS. All books and
-------------------------------
records provided for in Section 1500 of the California Corporations Code shall
be open to inspection of the Directors and Shareholders from time to time and in
the manner provided in said Sections 1600 - 1602 of the California. Corporations
Code.
Section 3. CERTIFICATION AND INSPECTION OF BYLAWS.
--------------------------------------
The original or a copy of these Bylaws, as amended or otherwise
-14-
<PAGE>
altered to date, certified by the Secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the Shareholders
of the corporation at all reasonable times during office hours, as provided in
Section 213 of the California Corporations Code.
Section 4. CHECKS, DRAFTS, ETC. All checks, drafts or other
-------------------
orders for payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as shall be determined from time to time by
resolution of the Board.
Section 5. CONTRACT, ETC., -- HOW EXECUTED. The Board, except
-------------------------------
as in the Bylaws otherwise provided, may authorize any Officer or Officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the corporation. Such authority may be general or
confined to specific instances. Unless so authorized by the Board, no Officer,
agent or employee shall have any power or authority to bind the corporation by
any contract or agreement, or to pledge its credit, or to render it liable for
any purpose or to any amount, except as provided in Section 313 of the
California Corporation Code.
ARTICLE VII
REPORTS
-------
Section 1. FINANCIAL STATEMENTS. A copy of any annual
--------------------
financial statement and any income statement of the corporation for each
quarterly period of each fiscal year, and any accompanying balance sheet of the
corporation as of the end of each such period, that has been prepared by the
corporation shall be kept on file in the principal executive office of the
corporation for twelve (12) months and each such statement shall be exhibited at
all reasonable times to any shareholder demanding an examination of any such
statement or a copy shall be mailed to any such shareholder.
Section 2. WAIVER. The annual report to Shareholders referred
------
to in Section 1501 of the California Corporations Code is expressly dispensed
with so long as this corporation shall have less than one hundred (100)
Shareholders. However, nothing herein shall be interpreted as prohibiting the
Board from issuing annual or other periodic reports to the Shareholders of the
corporation as they consider appropriate.
ARTICLE VIII
AMENDMENTS TO BYLAWS
--------------------
-15-
<PAGE>
Section 1. AMENDMENT BY SHAREHOLDERS. New Bylaws may be
-------------------------
adopted or these Bylaws way be amended or repealed by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that if the Articles of Incorporation of the corporation set
forth the number of authorized Directors of the corporation, the authorized
number of Directors may be changed only by an amendment of the Articles of
Incorporation.
Section 2. POWERS OF DIRECTORS. Subject to the right of the
-------------------
Shareholders to adopt, amend or repeal Bylaws, as provided in Section 1 of this
Article VIII, the affirmative vote of two-thirds (2/3) majority of the members
of the Board may adopt, amend or repeal any of these Bylaws other than a Bylaw
or amendment thereof changing the authorized number of Directors.
Section 3. RECORDS OF AMENDMENTS. Whenever an amendment or
---------------------
new Bylaw is adopted, it shall be copied in the book of Bylaws, in the
appropriate place. If any Bylaw is repealed, the fact or repeal with the date of
the meeting at which the repeal was enacted or written assent was filed shall be
stated in said book.
ARTICLE IX
CORPORATE SEAL
--------------
The corporate seal shall be circular in form, and shall have
inscribed thereon the name of the corporation, the date of its incorporation,
and the word "California".
ARTICLE X
IDEMINFICATION OF DIRECTORS, OFFICERS,
--------------------------------------
EMPLOYEES AND OTHER AGENTS
--------------------------
Except with respect to professional malpractice, the
corporation shall to the maximum extent permitted by the California General
Corporation Law, indemnify each of its agents against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding arising by reason of the fact that any such
person is or was an agent of the corporation. For purposes of this Section, an
"agent" of the corporation includes any person who is or was a director,
officer, employee, or other agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise, or
was a director, officer, employee, or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
-16-
<PAGE>
ARTICLE XI
MISCELLANEOUS
-------------
Section 1. REPRESENTATION OF SHARES IN OTHER CORPORATIONS.
----------------------------------------------
Shares of other corporations standing in the name of this corporation may be
voted or represented and all incidents thereto may be exercised on behalf of
the corporation by the Chairman of the Board, the President or any Vice
President and the Secretary or an Assistant Secretary.
Section 2. SUBSIDIARY CORPORATIONS. Shares of this
-----------------------
corporation owned by a subsidiary shall not be entitled to vote on any matter. A
subsidiary for these purposes is defined as a corporation, the shares of which
possessing more than twenty-five percent (25%) of the total combined voting
power of all classes of shares entitled to vote, are owned directly or
indirectly through one (1) or more subsidiaries.
Section 3. ACCOUNTING YEAR. The accounting year of the
---------------
corporation shall be fixed by resolution of the Board of Directors.
-17-
<PAGE>
CERTIFICATION
-------------
I, John Farber, the Secretary of Summit Care Texas Equity,
Inc., a California corporation, do hereby certify that the Bylaws attached
hereto, comprising seventeen (17) pages, constitute the Bylaws of said
corporation which were adopted by the Board of Directors of said corporation on
the 29th day of January, 1996.
[SIGNATURE APPEARS HERE]
--------------------------------------
-18-
<PAGE>
Exhibit 3.13
ARTICLES OF INCORPORATION OF
----------------------------
SUMMIT CARE - TEXAS NO. 2, INC.
-------------------------------
The undersigned natural person of the age of eighteen (18) years or more
acting as incorporator of a corporation under the Texas Business Corporation
Act, hereby adopts the following Articles of Incorporation for the corporation.
I.
The name of the corporation is Summit Care - Texas - No. 2, Inc.
II.
The period of its duration is perpetual.
III.
The purpose for which the corporation is organized is to transact any or
all business for which corporations may be incorporated under the Texas Business
Corporation.
IV.
The aggregate number of shares that the corporation shall have authority
to issue is one thousand (1000) shares of the no par value stock.
V.
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of $1,000 consisting of
money, labor done, or property actually received.
VI.
The street address of its initial registered office is 707 West 10th
Street, Austin, Texas 78701, and the name of its initial registered agent at
such address is Carla J. Cox.
-1-
<PAGE>
VII.
The number of Directors constituting the initial Board of Directors is
three (3), and the names and addresses of the persons who are to serve as
Directors until the first annual meeting of the Shareholders or until their
successors are elected and qualified are:
William Pierpoint 1800 Avenue of the Stars, 12th Floor
Los Angeles, California 90067
William Scott 1800 Avenue of the Stars, 12th Floor
Los Angeles, California 90067
Darrel Neuenschwander 1800 Avenue of the Stars, 12th Floor
Los Angeles, California 90067
VIII.
The name and address of the Incorporator is:
Brian E. Riewe
707 West Tenth Street
Austin, Texas 78701
In witness thereof, the undersigned has executed these Articles of
Incorporation on June 30, 1986.
/s/ Brian E. Riewe
---------------------------
Brian E. Riewe
-2-
<PAGE>
STATE OF TEXAS
COUNTY OF TRAVIS
I, a Notary Public, do hereby certify that on this 30th day of June,
1986, personally appeared before me, Brian E. Riewe, being by me duly sworn,
and declared that she is the person who signed for the foregoing document as
incorporator, and that the statements therein contained are true.
Given under my hand and seal of office, this 30th day of June, 1986.
/s/ Melinda Goff
----------------------------------
Notary Public, State of Texas
/s/ Melinda Goff
----------------------------------
Printed Name of Notary
My commission expires: 11/1/89
----------------------------------
-3-
<PAGE>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
BEFORE ME, the undersigned notary public, on this 27th day of June,
1986, personally appeared Darrel Neuenschwander, Secretary of Summit Care -
Texas, Inc., a Texas corporation, and being by me duly sworn, executed the
foregoing statement in his capacity as officer of said corporation.
/s/ Rochelle Krugler
-------------------------------
Notary Public in and for
OFFICIAL SEAL The State of California
ROCHELLE KRUGLER
Notary Public-California
LOS ANGELES COUNTY
/s/ Rochelle Krugler
My Comm. Exp. May 14, 1990 -------------------------------
Printed Name of Notary Public
My commission expires: 5-14-90
BER009-7
<PAGE>
CERTIFICATE
-----------
STATE OF CALIFORNIA (S)
(S)
COUNTY OF LOS ANGELES (S)
I, Darrel Neuenschwander, Secretary of Summit Care - Texas, Inc., a Texas
corporation, do hereby certify that the following resolution was adopted by
unanimous written consent of the Board of Directors of the corporation on
June 27, 1996.
RESOLVED, that the corporation give its consent and does hereby give its
consent to Summit Care - Texas No. 2, Inc., to incorporate and to transact
business in the state of Texas under the name of Summit Care - Texas No. 2, Inc.
I do further certify that the foregoing resolution has not been modified or
rescinded and is still in full force and effect.
I further certify that the corporation is duly organized, validly existing
and in good standing under the laws of the state of Texas, and has all requisite
corporate power and requisite consent certificates of authority, licenses,
permits, qualifications and documents to own and operate its properties and to
carry on its business now being and as proposed to be conducted in the state of
Texas.
I do also certify that the officers of the corporation are as follows:
President William Pierpoint
Vice President William Scott
Secretary Darrel Neuenschwander
Treasurer Darrel Neuenschwander
<PAGE>
EXECUTED this 27th day of June, 1986.
---- ----
/s/ Darrel Neuenschwander
----------------------------------------
Darrel Neuenschwander, Secretary
STATE OF CALIFORNIA *
*
COUNTY OF LOS ANGELES *
BEFORE ME, the undersigned notary public, on this 27th day of June, 1986,
---- ----
personally appeared Darrel Neuenschwander, Secretary of Summit Care - Texas,
Inc., a Texas corporation, and being by me duly sworn, executed the foregoing
statement in his capacity as officer of said corporation.
/s/ Rochelle Krugler
----------------------------------------
Notary Public in and for
The State of California
[OFFICIAL SEAL ROCHELLE KRUGLER Rochelle Krugler
NOTARY PUBLIC-CALIFORNIA ---------------------------------------
APPEARS HERE] Printed Name of Notary Public
My commission expires: 5-14-90
-----------------
BER009-7
<PAGE>
TO THE SECRETARY *
*
THE STATE OF TEXAS *
We, the undersigned, being the duly elected and authorized President and
Secretary of Summit Care - Texas, Inc., and pursuant to a resolution passed by
the unanimous written consent of the Board of Directors of Summit Care - Texas,
Inc., a certified copy of which is attached hereto, hereby give our consent to
Summit Care - Texas No. 2, Inc., to incorporate and to transact business in the
State of Texas under the name of Summit Care - Texas No. 2, Inc.
SUMMIT CARE - TEXAS, INC.
By: /s/ William Pierpoint
-------------------------------------
William Pierpoint, President
By: /s/ Darrel Neuenschwander
-------------------------------------
Darrel Neuenschwander, Secretary
STATE OF CALIFORNIA *
*
COUNTY OF Los Angeles *
BEFORE ME, the undersigned notary public, on this 27th day of June, 1986,
personally appeared William Pierpoint, President of Summit Care - Texas, Inc., a
Texas corporation, and being by me duly sworn, executed the foregoing statement
in his capacity as officer of said corporation.
/s/ Rochelle Krugler
----------------------------------------
Notary Public in and for
The State of California
[OFFICIAL SEAL ROCHELLE KRUGLER Rochelle Krugler
NOTARY PUBLIC-CALIFORNIA ---------------------------------------
APPEARS HERE] Printed Name of Notary Public
My commission expires: 5-14-90
-----------------
BER009-7
<PAGE>
PROFIT
FILED
In the Office of the
Secretary of State of Texas
JAN 12 1987
Clerk II-G
Corporations Section
STATEMENT OF CHANGE OF REGISTERED
OFFICE OR REGISTERED AGENT, OR BOTH
BY
A DOMESTIC PROFIT CORPORATION
Pursuant to the provisions of the Texas Business Corporation Act, the
undersigned corporation, organized under the laws of the State of Texas submits
the following statement for the purpose of changing its registered office or its
registered agent, or both, in the State of Texas:
1. The name of the corporation is SUMMIT CARE-TEXAS NO. II, INC.
Charter No. 1002422-0
2. The post office address of its present registered office is 707 West 10th
Street, Austin, Texas 78701.
3. The post office address, including street and number, to which its
registered office is to be changed is c/o C T Corporation System, 1601 Elm
Street, Dallas, Texas 75201.
4. The name of its present registered agent is Carla J. Cox.
5. The name of its successor registered agent is C T CORPORATION SYSTEM.
6. The post office address of its registered office and the post office
address of the business office of its registered agent, as changed, will
be identical.
7. Such change was authorized by: (Check one)
X A. The Board of Directors
-----
B. An officer of the corporation so authorized by the Board of
----- Directors.
Dated 3 NOVEMBER, 1986.
/s/ Judd F. Osten
--------------------------------------
An Authorized Officer
Judd F. Osten, Vice President-Legal Affairs
<PAGE>
In the Office of the
Secretary of State of Texas
Oct 19 1987
Clerk I-F
Corporations Section
ASSUMED NAME CERTIFICATE
FOR AN INCORPORATED BUSINESS OR PROFESSION
1. The assumed name under which the business or professional service as or is
to be conducted or rendered is LAKESIDE CARE CENTER
_________________________________________________.
2. The name of the incorporated business or profession as stated in its
Articles of Incorporation or comparable document is SUMMIT CARE-TEXAS NO. 2,
INC. __________________________, and the charter number or certificate of
authority number, if any, is ______________.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated is Texas, and the address of its registered or similar office
in that jurisdiction is 1601 Elm St., Dallas, TX 75201 ___________________.
4. The period, not to exceed ten years, during which the assumed name will be
used is 10 Years.
5. The corporation is a (circle one) business corporation, non-profit
corporation, professional corporation, professional association or other
type of corporation (specify) ___________________________________________,
or other type of incorporated business, professional or other association or
legal entity (specify) ____________________________________________________.
6. If the corporation is required to maintain a registered office in Texas, the
address of the registered office is _______________________________, 1601
Elm St., Dallas, TX 75201, and the name of its registered agent at such
address is C T CORPORATION SYSTEM. The address of the principal office (if
not the same as the registered office) is ___________________
_______________.
7. If the corporation is not required to or does not maintain a registered
office in Texas, the office address in Texas is ___________________________
________________________; and if the corporation is not incorporated,
organized or associated under the laws of Texas, the address of its place of
business in Texas is ____________________________________________ and the
office address elsewhere is _______________________________________________
_____________________________.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "all" or "all except _______________________________"):
DALLAS
Judd F. Osten, Vice-President
/s/ Judd F. Osten
---------------------------------------
Signature of officer, representative or
attorney-in-fact of the corporation
Before me on this 23rd day of September, 1987, personally appeared JUDD F.
OSTEN, VICE PRESIDENT and acknowledged to me that he executed the foregoing
certificate for the purposes therein expressed.
/s/ Caroline R. Lienau
-------------------------------------
Notary Public Los Angeles County
(Notary seal)
- ------------------------------ NOTE: A certificate executed and
OFFICIAL SEAL acknowledged by an attorney-in-fact
CAROLINE R. LIENAU shall include a statement that the
NOTARY PUBLIC - CALIFORNIA attorney-in-fact has been duly
LOS ANGELES COUNTY authorized in writing by his principal
My comm. expires AUG 17, 1991 to execute and acknowledge the same.
- ------------------------------
<PAGE>
Filed
In the Office of the
Secretary of State of Texas
OCT. 19 1987
Clerk I-F
Corporations Section
ASSUMED NAME CERTIFICATE
FOR AN INCORPORATED BUSINESS OR PROFESSION
1. The assumed name under which the business or professional service is or
is to be conducted or rendered is CORONADO CARE CENTER.
_____________________________________________.
2. The name of the incorporated business or profession as stated in its
Articles of Incorporation or comparable document is SUMMIT CARE-TEXAS
No. 2, Inc., and the charter number or certificate of authority number,
if any, is_____________________________________.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated is Texas, and the address of its registered or similar
office in that jurisdiction is 1601 Elm St., Dallas, TX 75201.
4. The period, not to exceed ten years, during which the assumed name will
be used is 10 Years.
5. The corporation is a (circle one) business corporation, non-profit
corporation, professional corporation, professional association or other
type of corporation (specify)__________________________________________,
or other type of incorporated business, professional or other
association or legal entity (specify)__________________________________.
6. If the corporation is required to maintain a registered office in Texas,
the address of the registered office is _____________________________,
1601 Elm St., Dallas, TX 75201, and the name of its registered agent at
such address is C T CORPORATION SYSTEM. The address of the principal
office (if not the same as the registered office)
is __________________________________________________.
7. If the corporation is not required to or does not maintain a registered
office in Texas, the office address in Texas is________________________:
and if the corporation is not incorporated, organized or associated
under the laws of Texas, the address of its place of business in Texas
is_________________________________________ and the office address
elsewhere is___________________________________________________________.
8. The county or counties where business or professional services are being
or are to be conducted or rendered under such assumed name are (if
applicable, use the designation "all" except_________________________"):
DALLAS
Judd F. Osten, Vice President
/s/ Judd F. Osten
--------------------------------------
Signature of officer, representative or
attorney-in-fact of the corporation
Before me on this 23rd day of September, 1987, personally appeared Judd
F. Osten, Vice President and acknowledged to me that he executed the
foregoing certificate for the purposes therein expressed.
[SIGNATURE APPEARS HERE]
--------------------------------
(Notary Seal) Notary Public Los Angeles County
- -------------------------------
OFFICIAL SEAL NOTE: A certificate executed and acknowledged
CAROLINE R. LIENAU by an attorney-in-fact shall include
NOTARY PUBLIC-CALIFORNIA a statement that the attorney-in-fact has
LOS ANGELES COUNTY been duly authorized in writing by his
My comm. expires: Aug. 17, 1991 principal to execute and acknowledge the
- ------------------------------- same.
<PAGE>
In the Office of the
Secretary of State of Texas
OCT 19 1987
Clark I-F
Corporations Section
ASSUMED NAME CERTIFICATE
FOR AN INCORPORATED BUSINESS OR PROFESSION
1. The assumed name under which the business or professional service is or is
to be conducted or rendered is COLONIAL MANOR CARE CENTER.
--------------------------
2. The name of the incorporated business or profession as stated in its
Articles of Incorporation or comparable document is SUMMIT CARE-TEXAS NO. 2,
------------------------
INC., and the charter number or certificate of authority number, if any,
-----
is _______________________.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated is Texas, and the address of its registered or similar office
------
in that jurisdiction is 1601 Elm St., Dallas, TX 75201.
-------------------------------
4. The period, not to exceed ten years, during which the assumed name will be
used is 10 Years.
---------
5. The corporation is a (circle one) business corporation, non-profit
corporation, professional corporation, professional association or other
type of corporation (specify) _______________________________________, or
other type of incorporated business, professional or other association or
legal entity (specify) _____________________________________.
6. If the corporation is required to maintain a registered office in Texas, the
address of the registered office is _________________________, 1601 Elm St.,
-------------
Dallas, TX 75201, and the name of its registered agent at such address is CT
----------------- --
CORPORATION SYSTEM. The address of the principal office (if not the same as
------------------
the registered office) is ___________________________________________.
7. If the corporation is not required to or does not maintain a registered
office in Texas the office address in Texas is __________________________,
and if the corporation is not incorporated, organized or associated under
the laws of Texas, the address of its place of business in Texas is
_________________________________ and the office address elsewhere is
___________________________________________.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "all" or "all" except _________________________"):
DALLAS
Judd F. Osten, Vice President
/s/ Judd F. Osten
---------------------------------------------
Signature of officer, representative or
attorney-in-fact of the corporation
Before me on this 23rd day of SEPTEMBER, 1987, personally appeared JUDD F.
OSTEN, VICE PRESIDENT and acknowledged to me that _he executed the foregoing
certificate for the purposes therein expressed.
/s/ Caroline R. Lienau
---------------------------------------------
(Notary seal) Notary Public Los Angeles County
[NOTARY SEAL APPEARS HERE]
NOTE: A certificate executed and acknowledged
by an attorney-in-fact shall include a
statement that the attorney-in-fact has been
duly authorized in writing by his principal
to execute and acknowledge the same.
<PAGE>
In the Office of the
Secretary of State of Texas
Oct 19 1987
Clerk I-F
Corporations Section
ASSUMED NAME CERTIFICATE
FOR AN INCORPORATED BUSINESS OR PROFESSION
1. The assumed name under which the business or professional service as or is
to be conducted or rendered is SOUTHWOOD CARE CENTER
_________________________________________________.
2. The name of the incorporated business or profession as stated in its
Articles of Incorporation or comparable document is SUMMIT CARE-TEXAS NO. 2,
INC. __________________________, and the charter number or certificate of
authority number, if any, is ______________.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated is Texas, and the address of its registered or similar office
in that jurisdiction is 1601 Elm St., Dallas, TX 75201 ___________________.
4. The period, not to exceed ten years, during which the assumed name will be
used is 10 Years.
5. The corporation is a (circle one) business corporation, non-profit
corporation, professional corporation, professional association or other
type of corporation (specify) ___________________________________________,
or other type of incorporated business, professional or other association or
legal entity (specify) ____________________________________________________.
6. If the corporation is required to maintain a registered office in Texas, the
address of the registered office is _______________________________, 1601
Elm St., Dallas, TX 75201, and the name of its registered agent at such
address is C T CORPORATION SYSTEM. The address of the principal office (if
not the same as the registered office) is ___________________
_______________.
7. If the corporation is not required to or does not maintain a registered
office in Texas, the office address in Texas is ___________________________
________________________; and if the corporation is not incorporated,
organized or associated under the laws of Texas, the address of its place of
business in Texas is ____________________________________________ and the
office address elsewhere is _______________________________________________
_____________________________.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (if applicable,
use the designation "all" or "all except _______________________________"):
DALLAS
Judd F. Osten, Vice-President
/s/ Judd F. Osten
---------------------------------------
Signature of officer, representative or
attorney-in-fact of the corporation
Before me on this 23rd day of September, 1987, personally appeared JUDD F.
OSTEN, VICE PRESIDENT and acknowledged to me that he executed the foregoing
certificate for the purposes therein expressed.
/s/ Caroline R. Lienau
-------------------------------------
Notary Public Los Angeles County
(Notary seal)
- ------------------------------ NOTE: A certificate executed and
OFFICIAL SEAL acknowledged by an attorney-in-fact
CAROLINE R. LIENAU shall include a statement that the
NOTARY PUBLIC - CALIFORNIA attorney-in-fact has been duly
LOS ANGELES COUNTY authorized in writing by his principal
My comm. expires AUG 17, 1991 to execute and acknowledge the same.
- ------------------------------
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
JUL 13 1990
Corporations Section
To the Secretary of State
of the State of Texas:
C T Corporation System, as the registered agent for the domestic and
foreign corporations named on the attached list submits the following statement
for the purpose of changing the registered office for such corporations, in the
State of Texas:
1. The name of the corporation is See attached list
--------------------------------------------
2. The post office address of its present registered office is c/o C T
---------------
CORPORATION SYSTEM, 1601 ELM STREET, DALLAS, TEXAS 75201
---------------------------------------------------------------------------
3. The post office address to which its registered office is to be changed is
c/o C T CORPORATION SYSTEM, 350 N. ST. PAUL STREET, DALLAS, TEXAS 75201
---------------------------------------------------------------------------
4. The name of its present registered agent is C T CORPORATION SYSTEM
-------------------------------
5. The name of its successor registered agent is C T CORPORATION SYSTEM
-----------------------------
6. The post office address of its registered office and the post office
address of the business office of its registered agent, as changed, will be
identical.
7. Notice of this change of address has been given in writing to each
corporation named on the attached list 10 days prior to the date of filing
of this certificate.
Dated July 2, 1990.
C T CORPORATION SYSTEM
--------------------------------
By [SIGNATURE APPEARS HERE]
--------------------------------
Its Vice President
<PAGE>
FILED
In the Office of the
Secretary of State of Texas
OCT 23 1991
Corporations Section
ARTICLES OF MERGER
OF DOMESTIC CORPORATIONS
INTO
SUMMIT CARE-TEXAS NO. 2, INC.
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act, the undersigned corporations adopt the following Articles of
Merger for the purpose of merging them into one of such corporations.
1. The following Plan of Merger was approved by the shareholders of each
of the undersigned corporations in the manner prescribed by the Texas Business
Corporation Act:
FIRST: SUMMIT CARE-TEXAS NO. 2, INC., a corporation organized under the
laws of the State of Texas, shall merge with and assume the liabilities and
obligations of SUMMIT CARE-TEXAS, INC., a corporation organized under the laws
of the State of Texas. The name of the surviving corporation is SUMMIT
CARE-TEXAS NO. 2, INC.
SECOND: Since all of the issued and outstanding shares of SUMMIT
CARE-TEXAS NO. 2, INC., the surviving corporation, and all of the issued and
outstanding shares of SUMMIT CARE-TEXAS, INC., the merging corporation, are
owned by SUMMIT CARE CORPORATION, a California corporation, on the effective
date of the merger all of the issued and outstanding shares of SUMMIT CARE-
<PAGE>
TEXAS, INC., the merging corporation, shall be cancelled and no shares of the
surviving corporation shall be issued in exchange therefor.
THIRD: The Articles of Incorporation of SUMMIT CARE-TEXAS NO. 2, INC.,
shall be the Articles of Incorporation of the corporation surviving the merger.
No changes or amendments shall be made to the Articles of Incorporation because
of the merger.
FOURTH: The by-laws of SUMMIT CARE-TEXAS NO. 2, INC., shall be the
by-laws of the corporation surviving the merger.
FIFTH: the directors and officers of SUMMIT-CARE TEXAS NO. 2, INC., shall
be the directors and officers of the corporation surviving the merger and shall
serve until their successors are selected.
SIXTH: The officer of each corporation party to the merger shall be and
hereby are authorized to so all acts and things necessary and proper to effect
the merger.
2. As to each of the undersigned corporations, the number of shares
outstanding are as follows:
<PAGE>
NUMBER OF
SHARES
NAME OF CORPORATION OUTSTANDING
- ------------------- -----------
Summit Care-Texas No. 2, Inc. 1,000
Summit Care-Texas, Inc. 1,000
3. As to each of the undersigned corporations, the total number of shares
voted for and against such Plan, respectively, are as follows:
TOTAL TOTAL
VOTED VOTED
NAME OF CORPORATION FOR AGAINST
- ------------------- ----- -------
Summit Care-Texas No. 2, Inc. 1,000 0
Summit Care-Texas, Inc. 1,000 0
Dated September 30, 1991.
SUMMIT CARE-TEXAS NO. 2, INC.
By /s/ Donald J. Amaral
-----------------------------
Donald J. Amaral, President
SUMMIT CARE-TEXAS, INC.
By /s/ Donald J. Amaral
-----------------------------
Donald J. Amaral, President
<PAGE>
STATEMENT OF ABANDONMENT OF ASSUMED NAME
1. The name of the corporation as stated in its articles of incorporation is
Summit Care - Texas No. 2, Inc. and the charter number is 01002422-0.
2. The assumed name being abandoned is Coronado Care Center.
3. The date on which the assumed name certificate was filed in the office of
the secretary of state is October 19, 1987; an assumed name certificate has
also been filed in the county clerk's office(s) in the following county or
counties: Dallas and Taylor.
4. If the entity is required to maintain a registered office in Texas, the
address of the registered office is and the name of its registered agent at
such address is CT Corporation, 350 N. St. Paul, Dallas, Texas 75201. The
address of the principal office is 2600 W. Magnolia Blvd., Burbank, CA
91505-3130.
5. If the entity is not required to or does not maintain a registered office in
Texas, the office address in Texas is N/A, and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is 13300 Old Blanco Road, Suite 150, San
Antonio, Texas 78216, and the office address elsewhere is 2600 W. Magnolia
Blvd., Burbank, CA 91505-3130.
SUMMIT CARE-TEXAS, NO. 2, INC.,
a Texas Corporation
By: /s/ John Farber
-------------------------------
John Farber, Secretary
THE STATE OF CALIFORNIA (S)(S)
(S)(S)
COUNTY OF LOS ANGELES (S)(S)
Before me on the 15th of August, 1997, personally appeared John Farber,
Secretary of Summit Care - Texas, No. 2, Inc., a Texas corporation, and
acknowledged to me that he executed the foregoing certificate for the purposes
therein expressed.
/s/ Doris A. Spieker
----------------------------------
Notary Public, State of California
[NOTARY SEAL APPEARS HERE] Notary's Name Printed:
Doris A. Spieker
----------------------------------
My Commission Expires: 5-17-99
------------
<PAGE>
---------------------------------
FILED
In the Office of the
Secretary of State of Texas
AUG 22 1997
Corporations Section
---------------------------------
STATEMENT OF ABANDONMENT OF ASSUMED NAME
1. The name of the corporation as stated in its articles of incorporation is
Summit Care - Texas No. 2, Inc. and the charter number is 010002422-0.
2. The assumed name being abandoned is Coronado Care Center.
3. The date on which the assumed name certificate was filed in the office of
the secretary of state is October 19, 1987; an assumed name certificate has
also been filed in the county clerk's office(s) in the following county or
counties: Dallas and Taylor.
4. If the entity is required to maintain a registered office in Texas, the
address of the registered office is and the name of its registered agent at
such address is CT Corporation, 350 N. St. Paul, Dallas, Texas 75201.
The address of the principal office at 2600 W. Magnolia Blvd., Burbank, CA
91505-3130.
5. If the entity is not required to or does not maintain a registered office in
Texas, the office address in Texas is N/A, and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is 13300 Old Blanco Road, Suite 150, San
Antonio, Texas 78216, and the office address elsewhere is 2600 W. Magnolia
Blvd., Burbank, CA 91505-3130.
SUMMIT CARE - TEXAS, NO. 2, INC.,
a Texas Corporation
By: /s/ John Farber
------------------------------------
John Farber, Secretary
116695
THE STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )
Before me on the 15th of August, 1997, personally appeared John Farber,
Secretary of Summit Care - Texas, No. 2, Inc., a Texas corporation, and
acknowledged to me that he executed the foregoing certificate for the purposes
therein expressed.
/s/ Doris A. Spieker
---------------------------------------
Notary Public, State of California
Notary's Name Printed:
Doris A. Spieker
---------------------------------------
My Commission Expires: 5-17-99
- -----------------------------------
DORIS A. SPIEKER
COMM. # 1059118
Notary Public--California
LOS ANGELES COUNTY
My Comm. Expires May 17, 1999
- -----------------------------------
<PAGE>
-------------------------------
FILED
In the Office of the
Secretary of State of Texas
AUG 22 1997
Corporations Section
-------------------------------
STATEMENT OF ABANDONMENT OF ASSUMED NAME
1. The name of the corporation as stated in its articles of incorporation is
Summit Care - Texas No. 2, Inc. and the charter number is 01002422-0.
2. The assumed name being abandoned is Colonial Manor Care Center.
3. The date on which the assumed name certificate was filed in the office of
the secretary of state is October 19, 1987; an assumed name certificate has
also been filed in the county clerk's office(s) in the following county or
counties: Dallas and Comal.
4. If the entity is required to maintain a registered office in Texas, the
address of the registered office is and the name of its registered agent at
such address is CT Corporation, 350 N. St. Paul, Dallas, Texas 75201. The
address of the principal office is 2600 W. Magnolia Blvd., Burbank, CA
91505-3130.
5. If the entity is not required to or does not maintain a registered office in
Texas, the office address in Texas is N/A, and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is 13300 Old Blanco Road, Suite 150, San
Antonio, Texas 78216, and the office address elsewhere is 2600 W. Magnolia
Blvd., Burbank, CA 91505-3130.
SUMMIT CARE - TEXAS, NO. 2, INC.,
a Texas Corporation
By: /s/ John Farber
-------------------------------
John Farber, Secretary
THE STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
Before me on the 15th of August, 1997, personally appeared John Farber,
Secretary of Summit Care - Texas, No. 2, Inc., a Texas corporation, and
acknowledged to me that he executed the foregoing certificate for the purposes
therein expressed.
/s/ Doris A. Spieker
--------------------------------------
Notary Public, State of California
Notary's Name Printed:
DORIS A. SPIEKER
--------------------------------------
My Commission Expires: 5-17-99
----------------
- ---------------------------------------
DORIS A. SPIEKER
COMM.# 1059118
Notary Public -- California
LOS ANGELES COUNTY
My Comm. Expire MAY 17, 1999
- ---------------------------------------
<PAGE>
-------------------------------
FILED
In the Office of the
Secretary of State of Texas
AUG 22 1997
Corporations Section
-------------------------------
STATEMENT OF ABANDONMENT OF ASSUMED NAME
1. The name of the corporation as stated in its articles of incorporation is
Summit Care - Texas No. 2, Inc. and the charter number is 01002422-0.
2. The assumed name being abandoned is Southwood Care Center.
3. The date on which the assumed name certificate was filed in the office of
the secretary of state is October 19, 1987; an assumed name certificate has
also been filed in the county clerk's office(s) in the following county or
counties: Dallas and Travis.
4. If the entity is required to maintain a registered office in Texas, the
address of the registered office is and the name of its registered agent at
such address is CT Corporation, 350 N. St. Paul, Dallas, Texas 75201. The
address of the principal office is 2600 W. Magnolia Blvd., Burbank, CA
91505-3130.
5. If the entity is not required to or does not maintain a registered office in
Texas, the office address in Texas is N/A, and if the entity is not
incorporated, organized or associated under the laws of Texas, the address
of its place of business in Texas is 13300 Old Blanco Road, Suite 150, San
Antonio, Texas 78216, and the office address elsewhere is 2600 W. Magnolia
Blvd., Burbank, CA 91505-3130.
SUMMIT CARE - TEXAS, NO. 2, INC.,
a Texas Corporation
By: /s/ John Farber
-------------------------------
John Farber, Secretary
THE STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
Before me on the 15th of August, 1997, personally appeared John Farber,
Secretary of Summit Care - Texas, No. 2, Inc., a Texas corporation, and
acknowledged to me that he executed the foregoing certificate for the purposes
therein expressed.
/s/ Doris A. Spieker
--------------------------------------
Notary Public, State of California
Notary's Name Printed:
DORIS A. SPIEKER
--------------------------------------
My Commission Expires: 5-17-99
----------------
- ---------------------------------------
DORIS A. SPIEKER
COMM.# 1059118
Notary Public -- California
LOS ANGELES COUNTY
My Comm. Expire MAY 17, 1999
- ---------------------------------------
<PAGE>
Exhibit 3.14
BY-LAWS
OF
SUMMIT CARE - TEXAS NO. 2, INC.
a Texas corporation
ARTICLE I
OFFICES
-------
Section 1. Principle Office. The principal executive office of the
corporation is hereby fixed and located at: 1800 Avenue of the Stars, 12th
Floor, Los Angeles, California. The Board of Directors (hereinafter the "Board")
is hereby granted full power and authority to change said principal executive
office from one location to another.
Section 2. Other Offices. Branch or subordinate office may be established
at any time by the Board at any other place or places.
ARTICLE II
SHAREHOLDERS
------------
Section 1. Place of Meetings. Meetings of the Shareholders of this
corporation shall be held either at the principal executive office of the
corporation, or at any other place which may be designated either by the Board
or by the written consent of the Shareholders, given either before or after the
meeting and filed with the Secretary of the corporation.
Section 2. Annual Meetings. The annual meeting of the Shareholders shall
be held on such date and at such time as may be fixed by the Board or the
Shareholders.
Section 3. Special Meetings. Special meetings of the Shareholders, for any
purpose or purposes whatsoever, may be called at any time by the Board, the
President, or by a Shareholder.
Section 4. Action Without a Meeting. Any action(s) which may be taken at a
meeting of the Shareholders may be taken without a meeting by a written consent
to such action(s) signed by all the Shareholders, which document shall be
inserted in the Minute Book of the corporation.
ARTICLE III
DIRECTORS
---------
Section 1. Powers. Subject to limitations of the Articles, these Restated
By-laws, and the laws of the State of Texas as to action required to be approved
by the Shareholders, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the Board.
1.
<PAGE>
Section 2. Number and Qualification. The authorized number of directors
shall be not less than two (2) nor more than the maximum authorized by law. The
exact number of directors may be fixed, from time to time, by the Board or the
Shareholders. The number of directors shall be two (2) until changed by action
of the Board or the Shareholders as permitted by law.
Section 3. Vacancies. Vacancies in the Board may be filled by a majority
of the remaining directors, though less than a quorum, or by the Shareholders.
Each director so elected shall hold office until his successor is elected at an
annual meeting of the Shareholders or a special meeting called for that purpose.
Section 4. Action by Directors Without a Meeting. Any action(s) which may
be taken at a meeting of the Board may be taken without a meeting if authorized
by a writing signed by all of the members of the Board, which document shall
be inserted in the Minute Book of the corporation.
ARTICLE IV
OFFICERS
--------
Section 1. Officers. The officers of the corporation shall be selected and
removed by the Board in its discretion and shall consist of a President, any
appropriate number of Vice Presidents, a Secretary, and a Chief Financial
Officer who shall hold the office of Treasurer. The corporation may also have,
at the discretion of the Board, such other officers as the corporation may
require; all such officers shall hold their respective office for such period,
have authority, and perform such duties as the Board may from time to time
determine.
Section 2. Authority of Certain Officers. Anything herein to the contrary
notwithstanding, the following described officers shall have the authority set
forth after their respective designation:
A. President. The President shall be the general manager and chief
executive officer of the corporation and shall have responsibility for, subject
to the control of the Board, general supervision, direction, and control of the
business and affairs of the corporation. The President shall preside at all
meeting of the Shareholders and at all meetings of the Board. The President
shall have the general powers and duties of management usually vested in the
office of president and general manager of a corporation and such other powers
and duties as may be prescribed by the Board.
B. Vice President. In the absence or disability of the President,
any Vice President so designated by the Board or the President shall perform all
the duties of the President and, when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. All Vice Presidents,
if any, shall have such powers and perform such duties as from time to time may
be prescribed by the Board or delegated by the President.
2.
<PAGE>
C. Secretary. The Secretary shall keep or cause to be kept, at the
principal executive office or such other place as the Board may order, (i) a
book containing minutes of all meetings of the Shareholders and the Board, and
(ii) a share register or a duplicate share register. The Secretary shall give,
or cause to be given, notice of all the meetings of the Shareholders and of the
Board required by these Restated By-laws or by law to be given, shall keep the
seal of the corporation in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the Board.
D. Chief Financial Officer and Treasurer. The Chief Financial
Officer of the Corporation shall hold the office of Treasurer and shall keep and
maintain, or cause to be kept and maintained, adequate and correct accounts of
the properties and business transactions of the corporation. Such officer shall
send or cause to be sent to the Shareholders such financial statements and
reports as are by law or these Restated By-laws required to be sent to said
Shareholders. The books of account shall at all times be open to inspection by
any director. Such officer shall cause all moneys and other valuable to be
deposited in the name and to the credit of the corporation. Such officer shall
(i) disburse or cause to be disbursed the funds of the corporation as may be
ordered by the Board, (ii) render to the President and the directors, whenever
they request it, an account of all transactions and of the financial condition
of the corporation, and (iii) have such other powers and perform such other
duties as may be prescribed by the Board.
ARTICLE V
OTHER PROVISIONS
----------------
Section 1. Checks and Drafts. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board.
Section 2. Execution of Contracts. The Board may authorize any officers
or agents to enter into any contract or execute any instrument in the name of
and on behalf of the corporation. Such authority may be general or confined to
specific instances. Unless so authorized by the Board, no officers, agent,
employee or other person shall have any other person shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit, or to render it liable for any purpose or amount.
Section 3. Annual Report to Shareholders. Annual reports to the
Shareholders are expressly waived, but nothing herein shall be interpreted as
precluding the issuance of annual or other periodic reports to the Shareholders.
ARTICLE VI
AMENDMENTS
----------
These Restated By-laws may be amended or repealed either by the
Shareholders or otherwise as authorized under the laws of the State of Texas.
3.
<PAGE>
Exhibit 3.15
ARTICLES OF INCORPORATION
OF
SUMMIT CARE-TEXAS NO. 3, INC.
*****
We, the undersigned natural persons of the age of eighteen years or more,
acting as incorporators of a corporation under the Texas Business Corporation
Act, do hereby adopt the following Articles of Incorporation for such
corporation:
ARTICLE ONE
The name of the corporation is SUMMIT CARE-TEXAS NO. 3, INC.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose or purposes for which the corporation is organized are:
To engage in the transaction of any or all lawful business for which
corporations may be incorporated under the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall have authority
to issue is One Thousand (1,000) without par value.
<PAGE>
ARTICLE FIVE
The corporation will not commence business until it has received for the
issuance of its shares consideration of the value of One Thousand Dollars
($1,000), consisting of money, labor done or property actually received, which
sum is not less than One Thousand Dollars ($1,000).
ARTICLE SIX
The street address of its initial registered office is c/o C T Corporation
System, 350 N. St. Paul Street, Dallas, Texas 75201, and the name of its initial
registered agent at such address is:
C T CORPORATION SYSTEM.
ARTICLE SEVEN
The number of directors of the corporation may be fixed by the by-laws.
The number of directors constituting the initial board of directors is
Three (3), and the name and address of each person who is to serve as director
until the first annual meeting of the shareholders or until a successor is
elected and qualified are:
NAME ADDRESS
---- -------
Donald J. Amaral 2600 W. Magnolia Blvd.
Burbank, CA. 91507-2100
Frank S. Osen 2600 W. Magnolia Blvd.
Burbank, CA. 91507-2100
William C. Scott 2600 W. Magnolia Blvd.
Burbank, CA. 91507-2100
<PAGE>
ARTICLE EIGHT
The names and addresses of the incorporators are:
NAMES ADDRESSES
----- ---------
T. Cofer 818 W. Seventh St.
Los Angeles, CA. 90017
D. Farber 818 W. Seventh St.
Los Angeles, CA. 90117
T. Totaro 818 W. Seventh St.
Los Angeles, CA. 90017
IN WITNESS WHEREOF, we have hereunto set our hands, this 27th
day of August, 1993.
/s/ T. Cofer
------------------------------
T. Cofer Incorporator
/s/ D. Farber
------------------------------
D. Farber, Incorporator
/s/ T. Totaro
------------------------------
T. Totaro, Incorporator
STATE OF Los Angeles )
) ss:
COUNTY OF California )
I, Danilo A. Tiu, a notary public, do hereby certify that on
this 27th day of August, 1994, personally appeared before me, T. Cofer, D.
Farber, and T. Totaro, who each being by me first duly sworn, severally declared
that they are the persons who signed the foregoing documents as incorporators,
and that the statements therein contained are true.
[OFFICIAL NOTARY SEAL OF /s/ Danilo Tiu
DANILO A. TIU -------------------------------
NOTARY PUBLIC APPEARS HERE] Notary Public
<PAGE>
[LETTERHEAD OF SUMMIT CARE CORPORATION APPEARS HERE]
CONSENT TO USE OF NAME
Summit Care-Texas No. 2, Inc., a corporation organized under the laws of
the State of Texas, hereby consents to the organization of Summit Care-Texas No.
3, Inc. in the State of Texas.
IN WITNESS WHEREOF, the said Summit Care-Texas No. 2, Inc. has caused this
consent to be executed by its Vice President and attested under its corporate
seal by its secretary, this 27th day of August, 1993.
SUMMIT CARE-TEXAS NO. 2, INC.
By: /s/ Melodye Stok
---------------------------
Melodye Stok
Its: Vice President
Attest:
/s/ Frank S. Osen
- --------------------
Frank S. Osen
Its: Secretary
<PAGE>
FILED
in the Office of the
Secretary of State of Texas
FEB 28 1994
Corporations Section
ASSUMED NAME CERTIFICATE
FOR AN INCORPORATED BUSINESS
1. The assumed name under which the business or professional service is to be
conducted or rendered is The Woodlands Health Care Center.
2. The name of the incorporated business or profession as stated in its
Articles of Incorporation or comparable document is Summit Care Texas No. 3,
Inc.
3. The state, country, or other jurisdiction under the laws of which it was
incorporated is Texas, and the address of its registered or similar office in
that jurisdiction is 350 N. St. Paul Street, Dallas, Texas 75201.
4. The period, not to exceed ten years, during which the assumed name will be
used is February 28, 1994 through February 27, 2004.
********************
5. The corporation is a (circle one): [business corporation], non-profit
********************
corporation, professional corporation, professional association or other
incorporated business or professional (please specify) .
-------------------------
6. If the corporation is required to maintain a registered office in Texas, the
address of the registered office is 350 N. St. Paul Street, Dallas, Texas 75201
and the name of its registered agent at such address is C. T. Corporation
System. The address of the principal office (if not the same as the registered
office) is 2600 W. Magnolia, Burbank, California 91505.
7. If the corporation is not required to or does not maintain a registered
office in Texas, the office address in Texas is N/A and if the corporation
is not incorporated, organized or associated under the laws of Texas, the
address of its place of business in Texas is N/A and its office address
elsewhere is N/A.
8. The county or counties where business or professional services are being or
are to be conducted or rendered under such assumed name are (If applicable, you
may use the designation "ALL" or "ALL EXCEPT"): Montgomery
/s/ Frank Osen
----------------------------------------
Frank Osen, Vice President and Secretary
Before me on this 24th day of February, 1994, personally appeared Frank Osen
and acknowledged to me that he executed the foregoing certificate for the
purposes therein expressed.
(Notary Seal) /s/ Robbie Fasching
---------------------------------------
Notary Public in and for the
State of California
My Commission Expires: April 23, 1996
-----------------
[SEAL OF ROBBIE FASCHING,
NOTARY PUBLIC
APPEARS HERE]
<PAGE>
Exhibit 3.16
SUMMIT CARE-TEXAS NO. 3, INC.
*****
BY-LAWS
*****
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Dallas,
Texas.
Section 2. The corporation may also have offices at such
other places both within and without the State of Texas as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of
directors shall be held in Burbank, State of California, at such place as may be
fixed from time to time by the board of directors. Said meetings may also be
held at such other place either within or without the State of Texas as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting.
Section 2. Annual meetings of shareholders, commencing with
the year 1993, shall be held on the 1st Monday of December if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
10:00 A.M., at
<PAGE>
which they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting
stating the place, day and hour of the meeting shall be delivered not less than
ten nor more than fifty days before the date of the meeting, either personally
or by mail, by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose
other than the election of directors may be held at such time and place within
or without the State of Texas as shall be stated in the notice of the meeting or
in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the articles
of incorporation, may be called by the president, the board of directors, or the
holders of not less than one-tenth of all the shares entitled to vote at the
meeting.
Section 3. Written or printed notice of a special meeting
stating the place, day and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
fifty days before the date of the meeting, either personally or by mail, by or
at the direction
2
<PAGE>
of the president, the secretary, or the officer or persons calling the meeting,
to each shareholder of record entitled to vote at such meeting.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a
majority of the shares of stock represented at the meeting shall be the act of
the shareholders unless the vote of a greater number of shares of stock is
required by law or the articles of incorporation.
3
<PAGE>
Section 3. Each outstanding share of stock, having voting
power, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact.
In all elections for directors every shareholder entitled to
vote shall have the right to vote, in person or by proxy, the number of shares
of stock owned by him, for as many persons as there are directors to be elected,
or to cumulate the vote of said shares, and give one candidate as many votes as
the number of directors multiplied by the number of his shares of stock shall
equal, or to distribute the votes on the same principle among as many candidates
as he may see fit.
Section 4. Any action required to be taken at a meeting of
the shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be one (1).
Directors need not be residents of the State of Texas nor shareholders of the
corporation. The directors, other than the first board of directors, shall be
elected at the annual meeting of the shareholders, and each director elected
shall serve until the next succeeding annual meeting and until his successor
shall have been elected and qualified. The first board of directors shall hold
office until the first annual
4
<PAGE>
meeting of shareholders.
Section 2. Any vacancy occurring in the board of directors
may be filled by the shareholders at an annual or a special meeting or by the
affirmative vote of a majority of the remaining directors though less than a
quorum of the board of directors. A director elected to fill a vacancy shall be
elected for the unexpired portion of the term of his predecessor in office.
Any directorship to be filled by reason of an increase in the
number of directors may be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose. A director elected to
fill a newly created directorship shall serve until the next succeeding annual
meeting of shareholders and until his successor shall have been elected and
qualified. Any directorship to be filled by reason of an increase in the number
of directors may also be filled by the board of directors for a term of office
until the next election of directors by shareholders; provided no more than two
directorships may be so filled during a period between any two successive annual
meetings of shareholders.
Whenever the holders of any class or series of shares are
entitled to elect one or more directors by the provisions of the articles of
incorporation, any vacancies in such directorships and any newly created
directorships of such class or series to be filled by reason of an increase in
the number of such directors may be filled by the affirmative vote of a majority
of the directors elected by such class or series then in office or by a sole
remaining director so elected, or by the vote of the holders of the outstanding
shares of such class or series, and such directorships shall not in any case be
filled by the vote of the remaining directors or the holders of the outstanding
shares as a whole unless
5
<PAGE>
otherwise provided in the articles of incorporation.
Section 3. The business affairs of the corporation shall be
managed by its board of directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the articles of incorporation or by these by-laws directed or required to be
exercised or done by the shareholders.
Section 4. The directors may keep the books of the
corporation, except such as are required by law to be kept within the state,
outside of the State of Texas, at such place or places as they may from time to
time determine.
Section 5. The board of directors, by the affirmative vote of
a majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or
special, may be held either within or without the State of Texas.
Section 2. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
6
<PAGE>
Section 3. Regular meetings of the board of directors may be
held upon such notice, or without notice, and at such time and at such place as
shall from time to time be determined by the board.
Section 4. Special meetings of the board of directors may be
called by the president on two (2) days' notice to each director, either
personally or by mail or by telegram; special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of two directors.
Section 5. Attendance of a director at any meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a
quorum for the transaction of business unless a greater number is required by
law or by the articles of incorporation. The act of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
board of directors, unless the act of a greater number is required by statute or
by the articles of incorporation. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. Unless otherwise restricted by the articles of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
7
<PAGE>
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing which shall set forth the action taken and be signed
by all members of the board of directors or of the committee as the case may be.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. The board of directors, by resolution adopted by a
majority of the full board of directors, may designate from among its members an
executive committee and one or more other committees, each of which shall be
comprised of one or more members and, to the extent provided in the resolution,
shall have and may exercise all of the authority of the board of directors,
except that no such committee shall have the authority of the board of directors
in reference to amending the articles of incorporation, approving a plan of
merger or consolidation, recommending to the shareholders the sale, lease, or
exchange of all or substantially all of the property and assets of the
corporation otherwise than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, amending, altering, or repealing the by-laws of the
corporation or adopting new by-laws for the corporation, filling vacancies in
the board of directors or any committee, filling any directorship to be filled
by reason of an increase in the number of directors, electing or removing
officers or members of any committee, fixing the compensation of any member of a
committee, or altering or repealing any resolution of the board of directors
which by its terms
8
<PAGE>
provides that it shall not be so amendable or repealable; and, unless the
resolution expressly so provides, no committee shall have the power or authority
to declare a dividend or to authorize the issuance of shares of the corporation.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the articles of incorporation or of these by-laws, notice is required to be
given to any director or shareholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or shareholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice whatever is required to be
given under the provisions of the statutes or under the provisions of the
articles of incorporation or these by-laws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president and a secretary. The board of
direc-
9
<PAGE>
tors may also elect or appoint such other officers, including assistant officers
and agents as may be deemed necessary.
Section 2. The board of directors at its first meeting after
each annual meeting of shareholders shall choose a president and a secretary
neither of whom need be a member of the board.
Section 3. The board of directors may also appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the board of directors may be removed at any time by the affirmative vote of
a majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer
of the corporation, shall preside at all meetings of the shareholders and the
board of directors, shall have general and active management of the business of
the corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
10
<PAGE>
Section 7. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, if there is one, or if there
shall be more than one, the vice-presidents in the order determined by the board
of directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix
11
<PAGE>
the same to any instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, if there is one, or if
there be more than one, the assistant secretaries in the order determined by the
board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer, if there is one, shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the board
of directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall
give the corporation a bond in such sum and with such surety or sureties as
shall be
12
<PAGE>
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 14. The assistant treasurer, if there is one, or, if
there shall be more than one, the assistant treasurers in the order determined
by the board of directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented
by certificates signed by the president and secretary or such other officers as
may be elected or appointed, and may be sealed with the seal of the corporation
or a facsimile thereof.
When the corporation is authorized to issue shares of more
than one class there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation will
furnish to any shareholder upon request and without charge, a full statement of
the designations, preferences, limitations and relative rights of the shares of
each class authorized to be issued and, if the corporation is authorized to
issue any
13
<PAGE>
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series. When the
corporation is authorized to issue shares of more than one class, every
certificate shall also set forth upon the face or the back of such certificate a
statement that there is set forth in the articles of incorporation on file in
the office of the Secretary of State a full statement of all the designations,
preferences, limitations and relative rights, including voting rights, of the
shares of each class authorized to be issued and the corporation will furnish a
copy of such statement to the record holder of the certificate without charge on
written request to the corporation at its principal place of business or
registered office. Every certificate shall have noted thereon any information
required to be set forth by the Texas Business Corporation Act and such
information shall be set forth in the manner provided in said Act.
Section 2. The signatures of the officers of the corporation
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or an employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
14
<PAGE>
LOST CERTIFICATES
Section 3. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
corporation alleged to have been lost or destroyed. When authorizing such issue
of a new certificate, the board of directors, in its discretion and as a
condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient, and may require such indemnities as it deems
adequate, to protect the corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may provide that the stock transfer books shall be closed for a
stated
15
<PAGE>
period but not to exceed, in any case, fifty days. If the stock transfer books
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least ten days immediately preceding such meeting. In lieu of closing the stock
transfer books, the board of directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than fifty days and, in case of a meeting of shareholders, not less than
ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
16
<PAGE>
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Texas.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer
books for shares shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the address of each and the number
of shares held by each, which list, for a period of ten days prior to such
meeting, shall be kept on file at the registered office of the corporation and
shall be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original share ledger or transfer
book, or a duplicate thereof, shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer book or
to vote at any meeting of the shareholders.
ARTICLE Xl
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation
relating thereto, if any, dividends may be declared by the board of directors at
17
<PAGE>
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or in shares of the capital stock, subject to any provisions of the
articles of incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, .or for equalizing dividends, or
for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time delegate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal,
18
<PAGE>
Texas". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended, or repealed
or new by-laws may be adopted by the affirmative vote of a majority of the board
of directors at any regular or special meeting of the board subject to repeal or
change at any regular or special meeting of shareholders at which a quorum is
present or represented, by the affirmative vote of a majority of the stock
entitled to vote, provided notice of the proposed repeal or change be contained
in the notice of such meeting.
19
<PAGE>
Exhibit 3.17
---------------------------
FILED
In the Office of the
Secretary of State of Texas
JUL 03 1997
Corporations Section
---------------------------
ARTICLES OF INCORPORATION
OF
SUMMIT CARE MANAGEMENT TEXAS, INC.
ARTICLE ONE
The name of the corporation is Summit Care Management Texas, Inc.
ARTICLE TWO
The period of its duration is perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is the transaction of any or
all lawful business for which a corporation may be incorporated under the Texas
Business Corporation Act.
ARTICLE FOUR
The corporation is authorized to issue 1,000 shares of its common stock, par
value of $.01 per share. The corporation will not commence business until it has
received for the issuance of its shares consideration of the value of One
Thousand Dollars ($1,000), consisting of money paid, labor done or property
actually received.
ARTICLE FIVE
The number of directors constituting the initial Board of Directors is three and
hereafter the number of directors shall be fixed by the Bylaws. The names and
addresses of the persons who are to serve as directors until the first annual
meeting of the shareholders, or until their successors are elected and
qualified, are:
Name Address
---- -------
William C. Scott 2600 West Magnolia Blvd.
Burbank, CA 91505
Derwin Williams 2600 West Magnolia Blvd.
Burbank, CA 91505
David G. Schumacher 2600 West Magnolia Blvd.
Burbank, CA 91505
<PAGE>
ARTICLE SIX
The Board of Directors may, in its discretion, issue from time to time
authorized but unissued shares or treasury shares of the corporation to such
person or persons, and for such consideration, as the Board of Directors may
determine. Shareholders shall have no preemptive rights to subscribe for or buy
unissued or treasury shares of the corporation now or hereafter authorized.
Cumulative voting of shares in the election of directors is hereby prohibited.
The power to alter, amend or repeal the corporation's Bylaws and to adopt new
Bylaws shall be vested in the Board of Directors, subject to repeal or change by
action of the shareholders.
ARTICLE SEVEN
No director of the corporation shall be liable to the corporation or its
shareholders for monetary damages for an act or omission in such director's
capacity as a director, except for liability resulting from:
(1) a breach of the director's duty of loyalty to the corporation or its
shareholders;
(2) an act or omission not in good faith that constitutes a breach of duty
of the director to the corporation or an act or omission that involves
intentional misconduct or a knowing violation of the law;
(3) a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the
scope of the director's office; or
(4) an act or omission for which the liability of a director is expressly
provided by an applicable statute.
Any amendment, repeal or modification of the foregoing provision shall not
adversely affect any limitation on the liability of any director of the
corporation existing or prior to the time of such amendment, repeal or
modification.
ARTICLE EIGHT
The street address of the corporation's initial registered office is 13300 Old
Blanco Road, Suite 150, San Antonio, Texas 78216, and the name of its registered
agent at such address is Robert Gundling.
2
<PAGE>
ARTICLE NINE
The name and address of the incorporator is: Steven D. Moore, 100 Congress
Avenue, Suite 1100, Austin, Texas 78701.
IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of July, 1997.
/s/ Steven D. Moore, Incorporator
---------------------------------------
Steven D. Moore, Incorporator
3
<PAGE>
SECRETARY OF STATE OF TEXAS
CORPORATIONS DIVISION
P.O. BOX 13697
AUSTIN, TEXAS 78711
DEAR SECRETARY OF STATE OF TEXAS:
THE PURPOSE OF THIS LETTER IS TO CONFIRM THAT THE BUSINESS DESIRING TO FORM A
LIMITED PARTNERSHIP UNDER, AND/OR USE, THE NAME "SUMMIT CARE TEXAS, L.P." HAS
OUR CONSENT AND PERMISSION TO USE SUCH NAME FOR ITS LIMITED PARTNERSHIP AND THE
BUSINESS DESIRING TO FORM A TEXAS CORPORATION USING THE NAME "SUMMIT CARE
MANAGEMENT TEXAS, INC." HAS OUR CONSENT AND PERMISSION TO USE SUCH NAME FOR ITS
CORPORATION.
DATED: July 2, 1997
SUMMIT CARE TEXAS NO. 2, INC. SUMMIT CARE MANAGEMENT TEXAS, INC.,
A TEXAS CORPORATION A TEXAS CORPORATION
By: /s/ John Farber By: /s/ John Farber
------------------------- ---------------------------
Secretary, OFFICER Secretary, OFFICER
--------- ---------
SUMMIT, CARE TEXAS NO. 3, INC. SUMMIT CARE CORPORATION, INC.,
A TEXAS CORPORATION A CALIFORNIA CORPORATION
By: /s/ John Farber By: /s/ John Farber
------------------------- ---------------------------
Secretary, OFFICER Secretary, OFFICER
--------- ---------
<PAGE>
Exhibit 3.18
BYLAWS
OF
SUMMIT CARE MANAGEMENT TEXAS, INC.
ARTICLE I. OFFICES
The principal office of the corporation in the State of Texas shall be
located in the City of San Antonio, County of Bexar. The corporation may have
such other offices, either within or without the State of Texas, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.
ARTICLE 2. SHAREHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the shareholders shall be
---------------
held, beginning with the year 1997, upon the date and at the hour designated by
the Board of Directors by notice to the shareholders, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the election of directors shall not be held on the day
designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as such special
meeting can be conveniently scheduled.
SECTION 2. Special Meetings. Special meetings of the shareholders, for any
----------------
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than 10% of all the outstanding shares
of the corporation entitled to vote at the meeting.
SECTION 3. Place of Meetings. The Board of Directors may designate any
-----------------
place, either within or without the State of Texas, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Texas, unless
otherwise prescribed by statute, as the place for the holding of such meeting.
If no designation is made, or if a special meeting be otherwise called, the
place of meeting shall be the principal office of the corporation in the State
of Texas.
SECTION 4. Notice of Meetings. Written or printed notice stating the place,
------------------
day and hour of the meeting and, in case of special meeting, the purpose or
purposes for which the meeting is called, shall (unless otherwise prescribed by
statute) be delivered not more than 60 days and not less than 10 days before the
date of the meeting, either personally or by mail, by or at the direction of the
President, the Secretary or the persons calling the meeting, to each shareholder
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the Shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
<PAGE>
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the
---------------------------------------------------
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive a distribution by the corporation (other than a distribution involving a
purchase or redemption by the corporation of any of its own shares) or a share
dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the corporation may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in
any case, 60 days. If the stock transfer books shall be closed for the purpose
of determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least 10 days immediately
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholder, such date in any case to be not more than 60 days
and, in case of a meeting of shareholders, not less than 10 days before the date
on which the particular action, requiring such determination of shareholders, is
to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote at
a meeting of shareholder, or shareholders entitled to receive payment of a
distribution (other than a distribution involving a purchase or redemption by
the corporation of any of its own shares) or a share dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such distribution or share dividend is adopted, as the
case may be, shall be the record date for such determination of shareholder.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the stock
------------
transfer books for shares of the corporation shall make at least 10 days before
each meeting of shareholders a complete list of the shareholders entitled to
vote at each meeting, or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each, which list,
for a period of 10 days before such meeting, shall be kept on file at the
registered office of the corporation and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall be produced
and kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The original
stock transfer book shall be prima facie evidence as to who are the shareholders
entitled to examine such list or transfer books or to vote at any meeting of the
shareholders.
SECTION 7. Quorum. A majority of the outstanding shares of the corporation
------
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The shareholder present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2
<PAGE>
SECTION 8. Manner of Acting. The vote of the holders of a majority of the
----------------
shares entitled to vote and thus represented at such meeting at which a quorum
is present shall be the act of the shareholder's meeting unless the vote of a
greater number is required by law, the Articles of Incorporation or those
Bylaws.
SECTION 9. Proxies. At all meetings of shareholders, a shareholder may
-------
vote in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
11 months from the date of its execution, unless provided in the proxy. Each
proxy shall be revocable unless the proxy form conspicuously states that the
proxy is irrevocable and the proxy is coupled with an interest.
SECTION 10. Voting of Shares. Subject to the provisions of Section 13 of
----------------
this Article 2, each outstanding share entitled to vote shall be entitled to one
vote upon each matter submitted to a vote at a meeting of the shareholders.
SECTION 11. Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into the name of the trust.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
SECTION 12. Informal Action by Shareholders. Unless otherwise provided by
-------------------------------
law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if consent in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
3
<PAGE>
subject matter thereof. Meetings of shareholders by use of conference telephone
or similar communications equipment may also be held as more specifically
described in Section 9 of Article 3 of these Bylaws.
SECTION 13. Cumulative Voting Prohibited. At each election for directors,
----------------------------
every shareholder entitled to vote at such election shall have the right to
vote, in person or by proxy, the number of shares owned by him for as many
persons as there are directors to be elected and for whose election he has a
right to vote. Cumulative voting is expressly prohibited.
ARTICLE 3. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation
--------------
shall be managed by its Board of Directors. Directors need not be residents of
this state or shareholders of the corporation.
SECTION 2. Number, Tenure and Qualifications. The number of directors of
---------------------------------
the corporation shall be one or more, as determined from time to time at any
meeting of the shareholders. No change in the number of directors may reduce the
term of the then incumbent directors. Each director shall hold office until the
next annual meeting of the shareholders and until his successor shall have been
elected and qualified.
SECTION 3. Resignation. Any director may resign by giving written notice to
-----------
the President or the Secretary. The resignation shall take effect at the time
specified therein. The acceptance of such resignation shall not be necessary to
make it effective.
SECTION 4. Regular Meetings. A regular meeting of the Board of Directors
----------------
shall be held (without other notice than this Bylaw) immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place for the holding of additional
regular meetings without other notice than such resolution.
SECTION 5. Special Meetings. Special meetings of the Board of Directors may
----------------
be called by or at the request of the President or any two directors. The person
or persons authorized to call special meetings of the Board of Directors may fix
the place for holding any special meeting of the Board of Directors called by
them.
SECTION 6. Notice. Notice of any special meeting shall be given at least 1
------
day previously thereto by written notice delivered personally or mailed to each
director at his business address, or by telegram or telephone. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the
4
<PAGE>
express purpose of objecting to the transaction or any business because the
meeting is not lawfully called or convened.
SECTION 7. Quorum. A majority of the number of directors then fixed by the
------
shareholders shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 8. Manner of Acting. The act of the majority of the directors
----------------
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 9. Action Without a Meeting. Consent in Writing and Conference
-----------------------------------------------------------
Telephone Call. Any action that may be taken by the Board of Directors at a
- --------------
meeting may be taken without a meeting if consent in writing, setting forth the
action so taken, shall be signed by all of the directors. Subject to the
provisions of these Bylaws for notice of meetings, members of the Board of
Directors, members of any committee designated by the Board or shareholders may
participate in and hold a meeting of such Board, committee or shareholders by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
SECTION 10. Vacancies. Any vacancy occurring in the Board of Directors may
---------
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by election at an annual
meeting or at a special meeting of the shareholders called for that purpose.
SECTION 11. Compensation. By resolution of the Board of Directors, each
------------
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 12. Presumption of Assent. A director of the corporation who is
---------------------
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
5
<PAGE>
SECTION 13. Removal. Any director or the entire Board of Directors may be
-------
removed, with or without cause, at any meeting of the shareholders called
expressly for that purpose, by a vote of the holders of a majority of the shares
then entitled to vote at an election of directors. In the event cumulative
voting is permitted by these Bylaws at any time, if less than the entire Board
is to be removed, no one of the directors may be removed if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire Board of Directors, or if there be classes of
directors, at an election of the class of directors of which he is a part.
SECTION 14. Committees. The Board of Directors, by resolution adopted by a
----------
majority of the full Board of Directors, may designate from among its members
one or more committees, including an executive committee. Each committee shall
have and may exercise such authority of the Board of Directors as is set forth
in the resolution creating the committee, except that if an executive committee
is appointed, it shall have and may exercise all of the authority of the Board
of Directors, except as specifically prohibited in the resolution or in this
Section of the Bylaws. In no event, however, shall any such committee have the
authority of the Board of Directors in reference to amending the Articles of
Incorporation, approving a plan of merger or consolidation, recommending to the
shareholders the sale, lease or exchange of all or substantially all of the
property and assets of the corporation otherwise than in the usual and regular
course of its business, recommending to the shareholders a voluntary dissolution
of the corporation or a revocation thereof, amending, altering or repealing the
Bylaws or adopting new Bylaws, filling vacancies in or removing members of the
Board of Directors or any such committee, electing or removing officers, fixing
the compensation of any member of such committee or altering or repealing any
resolution of the Board of Directors which by its terms provides that it shall
not be so amendable or repealable; and, unless such resolution expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of shares of the corporation. Any
resignation of such committee and the delegation to such committee of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed by law.
SECTION 15. Interested Directors.
--------------------
(A) If paragraph (B) of this Section 15 is satisfied, no contract or
other transaction between the corporation and any of its directors (or any
corporation or firm in which any of them are directly or indirectly interested)
shall be invalid solely because of this relationship or because of the presence
of such director, at the meeting authorizing such contract or transaction, or
his participation in such meeting or authorization.
(B) Paragraph (A) of this Section 15 shall apply only if:
(1) The material facts of the relationship or interest of each
such director are known or disclosed:
(a) To the Board of Directors or a committee and the Board
or committee nevertheless authorizes or ratifies the contract or transaction by
a majority of the directors present,
6
<PAGE>
each such interested director to be counted in determining whether a quorum is
present but not in calculating the majority necessary to carry the vote; or
(b) To the shareholders and they nevertheless authorize or ratify
the contract or transaction by a majority of the shares present, each such
interested person to be counted for quorum and voting purposes; or
(2) The contract or transaction is fair to the corporation as of the
time it is authorized or ratified by the Board of Directors, a committee of the
Board, or the shareholders.
(C) This provision shall not be construed to invalidate a contract or
transaction which would be valid in the absence of this provision.
ARTICLE 4. OFFICERS
SECTION 1. Officers. The corporation shall have a President and a
--------
Secretary. The corporation may have a Vice-President, a Treasurer and such other
officers (including a Chairman of the Board and additional Vice-Presidents) and
assistant officers and agents, as the Board of Directors may think necessary.
Any two or more offices may be held by the same person.
SECTION 2. Election and Term of Office. The officers of the corporation to
---------------------------
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held at a special meeting as soon as such
meeting can be conveniently scheduled. Each officer shall hold office until
his successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board of
-------
Directors whenever, in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the, person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
SECTION 4. Resignation. Any officer may resign by giving written notice to
-----------
the President or the Secretary. The resignation shall take effect at the time
specified therein. The acceptance of such resignation shall not be necessary to
make it effective.
SECTION 5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 6. Chairman of the Board. The Chairman of the Board, if such an
---------------------
officer has been elected by the Board of Directors, shall, if present, preside
at all meetings of the Board of
7
<PAGE>
Directors and exercise and perform such other powers and duties as from time to
time may be assigned to him by the Board of Directors or prescribed by these
Bylaws.
SECTION 7. President. Subject to such supervisory and executive powers, if
---------
any, which may be given by the Board of Directors to the Chairman of the Board,
if the Board of Directors has elected a Chairman of the Board, the President
shall be the Chief Executive officer of the corporation and, subject to the
control of the Board of Directors, shall in general supervise and control all of
the business and affairs of the corporation. The President shall, when present,
preside at all meetings of the shareholders and the Board of Directors. The
President may sign, with the Secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation, any deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of President and such
other duties as from time to time may be assigned to him by the Board of
Directors.
SECTION 8. Vice-President. In the absence of the President or in the event
--------------
of his death, inability or refusal to act, the Vice-President (or in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated by the Board, or in the absence of any designation, then in the order
of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of, and be subject to, all the restrictions
upon the President. The Vice-Presidents shall perform such other duties as from
time to time may be assigned to them by the Board of Directors or by the
President.
SECTION 9. Secretary and Assistant Secretaries. The Secretary shall attend
-----------------------------------
all meetings of the Board and all meetings of the shareholders and shall record
all votes and the minutes of all proceedings and shall perform like duties for
the standing committees when required. He shall give or cause to be given notice
of all meetings of the shareholders and all meetings of the Board of Directors
and shall perform such other duties as may be prescribed by the Board. He shall
keep in safe custody the seal, if any, of the corporation, and when authorized
by the Board, affix the same to any instrument requiring it, and when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary. The Secretary shall perform such other duties as from time
to time may be assigned by the Board of Directors or by the President.
The Assistant Secretaries in the order of their seniority as determined by
the order of their election shall, in the absence or disability of the
Secretary, perform all the duties and exercise the powers of the Secretary, and
they shall perform such other duties as from time to time may be assigned to
them by the Board of Directors or by the President.
In the absence of the Secretary or an Assistant Secretary, the minutes of
all meetings of the Board and shareholders shall be recorded by such person as
shall be designated by the Board of Directors or by the President.
8
<PAGE>
SECTION 1O. Treasurer and Assistant Treasurers. The Treasurer shall
----------------------------------
have the custody of the corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all monies and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements. He shall keep and maintain the corporation's books of
account and shall render to the President and directors an account of all of his
transactions as Treasurer and of the financial condition of the corporation and
exhibit his books, records and accounts to the President or directors at any
time. He shall disburse funds for capital expenditures as authorized by the
Board of Directors and in accordance with the orders of the President, and
present to the President for his attention any requests for disbursing funds if
in the judgment of the Treasurer any such request is not properly authorized.
The Treasurer shall perform such other duties as from time to time may be
assigned to him by the Board of Directors or by the President.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
The Assistant Treasurers in the order of their seniority as determined by
the order of their election shall, in the absence or disability of the
Treasurer, perform all the duties and exercise the powers of the Treasurer, and
they shall perform such other duties as from time to time may be assigned to
them by the Board of Directors or by the President.
SECTION 11. Compensation. The salaries of the officers shall be determined
------------
from time to time by the Board of Directors, but no formal action of the
directors shall be required in determining such salaries. No officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the corporation.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION I. Indemnification. The corporation shall indemnify any director or
---------------
officer or former director or officer of the corporation and any person who,
while a director or officer of the corporation, is or was serving at the request
of the corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise against reasonable expenses incurred by him in
connection with any action, suit or proceeding in which he is a named defendant
or respondent if he has been wholly successful, on the merits or otherwise, in
the defense of such action, suit or proceeding. The corporation may indemnify
any director or officer or former director or officer of the corporation, and
any person who, while a director or officer of the corporation. is or was
serving at the request of the corporation
9
<PAGE>
as a director, officer, partner, venturer, proprietor, trustee, employee, agent
or similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise who was, or is, threatened to be named a defendant or respondent in
an action, suit or proceeding against judgments, penalties (including excise and
similar taxes), fines, settlements and reasonable expenses actually incurred by
him in connection with an action, suit or proceeding to the full extent
permitted by Article 2.02-1 of the Texas Business Corporation Act.
SECTION 2. Advancement of Expenses. The corporation may pay in advance any
-----------------------
reasonable expenses which may become subject to indemnification subject to the
provisions of Article 2.02-1 of the Texas Business Corporation Act.
SECTION 3. Insurance. The corporation may purchase and maintain insurance
---------
or another arrangement on behalf of any person who is or was a director or
officer or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under these Bylaws or the laws of
the State of Texas.
SECTION 4. Other Indemnification. The protection and indemnification
---------------------
provided hereunder shall not be deemed exclusive of any other rights to which
such director or officer or former director or officer may be entitled, under
any agreement, insurance policy, vote of the shareholders, or otherwise.
ARTICLE 6. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or
---------
officers or agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the corporation
-----
and no evidence of indebtedness shall be issued in its name unless authorized by
a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
SECTION 3. Checks and Orders for Payment. All checks, drafts or other
-----------------------------
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or officers or
agent or agents of the corporation and in such manner as shall from time to time
be determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
10
<PAGE>
ARTICLE 7. CERTIFICATES FOR SHARES AND THEIR TRANSFERS
SECTION 1. Certificates for Shares. Certificates representing shares of
-----------------------
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate seal if the corporation has a
corporate seal. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall be surrendered or cancelled, except that in a case of a
lost, destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the corporation
------------------
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on surrender for cancellation of the certificate or such shares. The person
in whose name shares stand on the books of the corporation shall be deemed by
the corporation to be the owner thereof for all purposes.
ARTICLE 8. BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders and Board
of Directors, and shall keep at its principal office, or at the office of its
transfer agent or registrar, a record of its shareholders giving the names and
addresses of all shareholders and the number and class of the shares held by
each.
ARTICLE 9. FISCAL YEAR
The fiscal year of the corporation shall be determined and fixed by the
Board of Directors of the corporation.
ARTICLE 10. DISTRIBUTIONS
The Board of Directors may from time to time declare, and the
corporation may pay, distributions on its outstanding shares in the manner and
upon the terms and conditions provided by law and the corporation's Articles of
Incorporation.
11
<PAGE>
ARTICLE 11. NO CORPORATE SEAL
The corporation shall not have a corporate seal, but the Board of
Directors may at any time provide for an appropriate seal, if deemed necessary
or advisable.
ARTICLE 12. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the corporation under the provisions of
these Bylaws or under the provisions of the Articles of Incorporation or under
the provisions of the Texas Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE 13. AMENDMENTS
Those Bylaws may be altered, amended or repealed, and new bylaws may be
adopted, at any meeting of the Board of Directors of the corporation by a
majority vote by the directors, subject to repeal or change by action of the
shareholders.
ARTICLE 14. GENERAL PROVISIONS
SECTION 1. Construction. Whenever the context so requires, the masculine
------------
shall include the feminine and neuter, and the singular shall include the
plural, and conversely. If any portion of these Bylaws shall be invalid or
inoperative, then, so far as is reasonable and possible:
(A) The remainder of these Bylaws shall be considered valid and
operative, and
(B) Effect shall be given to the intent manifested by the portion
held invalid or inoperative.
SECTION 2. Headings. The headings are for organization, convenience and
--------
clarity. In interpreting these Bylaws, they shall be subordinated in importance
to the other written material.
CERTIFICATE OF SECRETARY
------------------------
The undersigned, Secretary or an Assistant Secretary of Summit Care
Management Texas, Inc., does hereby certify that the foregoing Bylaws were duly
adopted by the Board of Directors on _____________________, 1996.
___________________________________
12
<PAGE>
Exhibit 3.19
----------------------------------
FILED
In the Office of the
Secretary of State of Texas
July 08 1997
Corporations Section
----------------------------------
CERTIFICATE
OF
LIMITED PARTNERSHIP
1. Name of Partnership: Summit Care Texas, L.P.
2. Address of Principal Office: 13300 Old Blanco Road
Suite 150
San Antonio, Texas 78216
3. Address if Registered Office: 13300 Old Blanco Road
Suite 150
San Antonio, Texas 78216
4. Name and Address of Robert Gundling
Registered Agent: 13300 Old Blanco Road
Suite 150
San Antonio, Texas 78216
5. General Partner:
Name: Summit Care Management Texas, Inc.
Mailing Address and Street 13300 Old Blanco Road
Address of Business: Suite 150
San Antonio, Texas 78216
EXECUTED, this 7th day of July, 1997.
GENERAL PARTNER:
Summit Care Management Texas, Inc., a
Texas corporation
By: /s/ John Farber
------------------------------------
Name: John Farber
---------------------------------
Title: Secretary
---------------------------------
<PAGE>
SECRETARY OF STATE OF TEXAS
CORPORATIONS DIVISION
P.O. BOX 13697
AUSTIN, TEXAS 78711
DEAR SECRETARY OF STATE OF TEXAS:
THE PURPOSE OF THIS LETTER IS TO CONFIRM THAT THE BUSINESS DESIRING TO FORM A
LIMITED PARTNERSHIP UNDER, AND/OR USE, THE NAME "SUMMIT CARE TEXAS, L.P." HAS
OUR CONSENT AND PERMISSION TO USE SUCH NAME FOR ITS LIMITED PARTNERSHIP, AND THE
BUSINESS DESIRING TO FORM A TEXAS CORPORATION USING THE NAME "SUMMIT CARE
MANAGEMENT TEXAS, INC." HAS OUR CONSENT AND PERMISSION TO USE SUCH NAME FOR ITS
CORPORATION.
DATED: July 2, 1997
SUMMIT CARE TEXAS NO. 2, INC. SUMMIT CARE MANAGEMENT TEXAS, INC.,
A TEXAS CORPORATION A TEXAS CORPORATION
BY: /s/ John Z. Farber BY: /s/ John Z. Farber
---------------------------- ----------------------------
Secretary, OFFICER Secretary, OFFICER
---------- ----------
SUMMIT CARE TEXAS NO. 3, INC. SUMMIT CARE CORPORATION, INC.
A TEXAS CORPORATION A CALIFORNIA CORPORATION
BY: /s/ John Z. Farber BY: /s/ John Z. Farber
---------------------------- ----------------------------
Secretary, OFFICER Secretary, OFFICER
---------- ----------
<PAGE>
SECRETARY OF STATE OF TEXAS
CORPORATIONS DIVISION
P.O. BOX 13697
AUSTIN, TEXAS 78711
DEAR SECRETARY OF STATE OF TEXAS:
THE PURPOSE OF THIS LETTER IS TO CONFIRM THAT THE BUSINESS DESIRING TO FORM A
LIMITED PARTNERSHIP UNDER, AND/OR USE, THE NAME "SUMMIT CARE TEXAS, L.P." HAS
OUR CONSENT AND PERMISSION TO USE SUCH NAME FOR ITS LIMITED PARTNERSHIP, AND THE
BUSINESS DESIRING TO FORM A TEXAS CORPORATION USING THE NAME "SUMMIT CARE
MANAGEMENT TEXAS, INC." HAS OUR CONSENT AND PERMISSION TO USE SUCH NAME FOR ITS
CORPORATION.
DATED: July 2, 1997
SUMMIT CARE TEXAS NO. 2, INC. SUMMIT CARE MANAGEMENT TEXAS, INC.,
A TEXAS CORPORATION A TEXAS CORPORATION
BY: /s/ John Z Farber BY: /s/ John Z Farber
---------------------------- ----------------------------
Secretary, OFFICER Secretary, OFFICER
---------- ----------
SUMMIT CARE TEXAS NO. 3, INC. SUMMIT CARE CORPORATION, INC.
A TEXAS CORPORATION A CALIFORNIA CORPORATION
BY: /s/ John Z Farber BY: /s/ John Z Farber
---------------------------- ----------------------------
Secretary, OFFICER Secretary, OFFICER
---------- ----------
<PAGE>
EXHIBIT 3.21
CERTIFICATION OF INCORPORATION
OF
Fountain View Holdings, Inc.
----------------------------
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the
provisions of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: The name of the Corporation is Fountain View Holdings, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the Corporation's registered agent at such address is The Prentice Hall
Corporation System, Inc.
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 3,000 shares of Class A Common Stock, $.01 par value.
FIFTH: The name and the mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Kathleen M. Sablone Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
SIXTH: The Directors shall have power to adopt, amend, or repeal the By-
Laws of the Corporation.
SEVENTH: Election of Directors need not be by written ballot unless the
By-Laws of the Corporation so provide.
EIGHTH: The Corporation shall indemnify and hold harmless any director,
officer employee or agent of the Corporation from and against any and all
expenses and liabilities that may be imposed upon or incurred in connection
with, or as a result of, any proceeding in which he or she may become involved,
as a party or otherwise, by reason of the fact that
<PAGE>
he or she is or was such a director, officer, employee or agent, whether or not
he or she continues to be such at the time such expenses and liabilities shall
have been imposed or incurred, to the fullest extent permitted by the laws of
the State of Delaware as they may be amended from time to time.
NINTH: No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title 8 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The undersigned incorporator hereinbefore named, for the purpose of forming
a corporation pursuant to the General Corporation Law of the State of Delaware,
does make this certificate, hereby declaring and certifying that this is her act
and deed and the facts stated herein are true and accordingly has hereunto set
her hand this 8th day of July, 1997.
/s/ Kathleen M. Sablone
-----------------------------------------------
Kathleen M. Sablone, Incorporator
<PAGE>
EXHIBIT 3.22
BY - LAWS
---------
OF
--
FOUNTAIN VIEW HOLDINGS, INC.
----------------------------
(A Delaware Corporation)
----------------
ARTICLE I
---------
STOCKHOLDERS
------------
l. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
-------------------------------
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation certifying the number of shares owned by him in the corporation. Any
and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than
one class of stock or more than one series of any class of stock, and whenever
the corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not
--------------------------
be required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (l) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions
<PAGE>
are determined, or (3) issue scrip or warrants in registered or bearer form
which shall entitle the holder to receive a certificate for a full share upon
the surrender of such scrip or warrants aggregating a full share. A certificate
for a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
---------------
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
----------------------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. For the purpose of
determining the stockholders entitled to express consent to corporate action in
writing without a meeting, the directors may fix a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted by
the board of directors, and which shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at any meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
-2-
<PAGE>
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right
------------------------
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such right
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation.
6. STOCKHOLDER MEETINGS.
--------------------
- TIME. The annual meeting shall be held on the date and at the time
----
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
- PLACE. Annual meetings and special meetings shall be held at such
-----
place, within or without the State of Delaware, as the directors may, from time
to time fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
----
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
--------------------------
given, stating the place, date and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual
meeting shall state that the meeting is called for the election of directors and
for the transaction of other business which may properly come before the
meeting, and shall, (if any other action which could be taken at a special
meeting is to be taken at such annual meeting) state the purpose or purposes.
The notice of a special meeting shall in all instances state the purpose or
purposes for which the meeting is called. The notice of any meeting shall also
include, or be accompanied by, any additional statements, information, or
documents prescribed by the General Corporation Law. Except as otherwise
provided by the General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten days nor more than
sixty days before the date of the meeting, unless the
-3-
<PAGE>
lapse of the prescribed period of time shall have been waived, and directed to
each stockholder at his record address or at such other address which he may
have furnished by request in writing to the Secretary of the corporation. Notice
by mail shall be deemed to be given when deposited, with postage thereon
prepaid, in the United States mail. If a meeting is adjourned to another time,
not more than thirty days hence, and/or to another place, and if an announcement
of the adjourned time and/or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice need not be
given to any stockholder who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
----------------
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
------------------
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another
--------------------
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in
-4-
<PAGE>
law to support an irrevocable power. A proxy may be made irrevocable regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
----------
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of
------
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one
------
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by a majority of the votes cast except
where the General Corporation Law prescribes a different percentage of votes
and/or a different exercise of voting power, and except as may be otherwise
prescribed by the provisions of the certificate of incorporation and these By-
Laws. In the election of directors, and for any other action, voting need not
be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
-----------------------------------
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meetings
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
-5-
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
l. FUNCTIONS AND DEFINITION. The business and affairs of the
------------------------
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
-------------------------
a citizen of the United States, or a resident of the State of Delaware. The
property, affairs and business of the corporation shall be managed by its Board
of Directors. The number of directors may be fixed from time to time by action
of the stockholders or of the directors and may be increased or decreased by
action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
-----------------
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. In the
interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of directors and/or for the removal of one
or more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
--------
- TIME. Meetings shall be held at such time as the Board shall fix,
----
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
-----
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
----
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
-6-
<PAGE>
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
---------------------------------------
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
-----------------
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these By-Laws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
-----------------------
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
--------------------
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. Whenever its number consists of three or more, the
----------
Board of Directors may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two or more of
the directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees, the member
or
-7-
<PAGE>
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board, shall have and may exercise the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation with the exception of any authority the delegation of
which is prohibited by Section l4l of the General Corporation Law, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at
--------------
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting, without prior notice and without a vote if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
ARTICLE III
-----------
OFFICERS
--------
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board
of Directors choosing him, no officer other than the Chairman or Vice-Chairman
of the Board, if any, need be a director. Any number of officers may be held by
the same person, as the directors may determine, except that no person may hold
the offices of President and Secretary simultaneously.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may
-8-
<PAGE>
be removed, with or without cause, by the Board of Directors. Any vacancy in any
office may be filled by the Board of Directors.
ARTICLE IV
----------
CORPORATE SEAL
--------------
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
---------
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VI
----------
CONTROL OVER BY-LAWS
--------------------
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter or repeal
these By-Laws and to adopt new By-Laws may be exercised by the Board of
Directors or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy
of the By-Laws of Fountain View Holdings, Inc., a Delaware corporation, as in
effect on the date hereof.
IN WITNESS WHEREOF, I set my hand this 8th day of July, 1997.
/s/ Sheila Snukal
-------------------------------------------
Secretary of Fountain View Holdings, Inc.
-9-
<PAGE>
Exhibit 3.23
ARTICLES OF INCORPORATION
OF
AIB CORP.
FIRST: The name of the corporation is:
AIB Corp.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
THIRD: The name and address in this state of the corporation's initial
agent for service of process is Andrew Gardner, 333 North June Street, Los
Angeles, California 90004.
FOURTH: The corporation is authorized to issue 100,000 shares of common
stock.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation this 26th day of January, 1984.
/s/ Dennis A. Kahan
----------------------------
Dennis A. Kahan
I, Dennis A. Kahan, hereby declare that I am the person who executed the
foregoing Articles of Incorporation and that said Articles of Incorporation are
my own act and deed.
Executed at Los Angeles, California, this 26th day of January, 1984.
/s/ Dennis A. Kahan
----------------------------
Dennis A. Kahan
<PAGE>
Exhibit 3.24
BYLAWS OF
AIB CORP
A California Corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL EXECUTIVE OFFICE. The board of directors shall fix
the location of the principal executive office of the corporation at any place
within or without the State of California. If the principal executive office is
located outside the State of California, and the corporation has one or more
business offices in the State of California, the board of directors shall fix
and designate a principal business office in the State of California.
Section 2. OTHER OFFICES. Other business offices may be established at
any time by the board of directors at any place or places where the corporation
is qualified to do business.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1. PLACE OF MEETING. All meetings of shareholders shall be held
at the principal executive office of the corporation, or at any other place
within or without the State of California which may be designated either by the
board of directors or by the written consent of all persons entitled to vote at
such meeting who are not present thereat. Such consent may be given either
before or after the meeting and shall be filed with the secretary of the
corporation.
Section 2. ANNUAL MEETINGS.
(a) Annual meetings of shareholders shall be held on the 30th day of
January, each year, at 10:00 o'clock A.M.; provided, however, that when such day
falls upon a legal holiday, then the annual meeting shall be held at the same
time and place on the next day thereafter ensuing which is a full business day.
At such meetings directors shall be elected, reports of the affairs of the
corporation shall be considered, and any other business may be transacted which
is within the powers of the shareholders.
<PAGE>
(b) Written notice of each annual meeting shall be given to each
shareholder entitled to vote, either personally or by mail or other means of
written communication, charges prepaid, addressed to such shareholder at his
address appearing on the books of the corporation or given by him to the
corporation for the purpose of notice.
(c) If any notice or report addressed to the shareholder at the
address of such shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
or report to the shareholder at such address, all future notices or reports
shall be deemed to have been duly given without further mailing if the same
shall be available for the shareholder upon written demand of the shareholder at
the principal executive office of the corporation for a period of one year from
the date of the giving of the notice or report to all other shareholders.
(d) If a shareholder gives no address, notice shall be deemed to have
been given him if sent by mail or other means of written communication addressed
to the place where the principal executive office of the corporation is
situated, or if published at least once in a newspaper of general circulation in
the county in which said principal executive office is located.
(e) Any notice of an annual meeting shall be given to each shareholder
entitled thereto not less than ten days nor more than sixty days before such
meeting. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation shall be prima facie evidence of the giving of
----- -----
the notice.
(f) Notice of an annual meeting shall specify:
(1) the place, the date, and the hour of such meeting;
(2) those matters which the board, at the time of the mailing of
the notice, intends to present for action by the shareholders;
(3) if directors are to be elected, the names of nominees
intended at the time of the notice to be presented by management for election;
(4) the general nature of any proposal to approve (i) a contract
or other transaction with an interested director, as described in Section 310 of
the Corporations Code, (ii) an amendment to the articles of incorporation
pursuant to Section
2.
<PAGE>
902 thereof, (iii) a reorganization pursuant to Section 1201 thereof, (iv) a
voluntary dissolution pursuant to Section 1900 thereof, or (v) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 thereof, and
(5) such other matters, if any, as may be expressly required
by a statute.
Section 3. SPECIAL MEETINGS.
(a) Special meetings of the shareholders may be called at any time by
the chairman of the board or the president, or by the board of directors, or by
one or more shareholders holding not less than ten percent of the votes at the
meeting.
(b) Upon receipt of a request in writing delivered personally or sent
by registered mail or by telegraphic or other facsimile transmission to the
chairman of the board, president, any vice president or secretary by any person
(other than the board) entitled to call a special meeting of shareholders that a
special meeting of shareholders be called at the specified time for any proper
purpose set forth in such request, the officer shall forthwith cause notice to
be given to shareholders entitled to vote that a meeting will be held at the
times requested by the person or persons calling the meeting, not less than
thirty-five nor more than sixty days after receipt of the request.
(c) If such notice shall not be given within twenty days after the
date of receipt of such request, the person or persons entitled to call the
meeting may give notice of the meeting. Except where other express provisions
are made by statute, notice of such special meetings shall be given in the
manner provided for in Sections 2(b), (c), (d) and (e) for annual meetings of
shareholders. In addition to the requirements of items f(1) and, if applicable,
f(3) of Section 2, notice of any special meeting shall specify the general
nature of the business to be transacted.
Section 4. QUORUM. Subject to the articles of incorporation, the
presence in person or by proxy of the persons entitled to vote a majority of the
voting shares at any meeting shall constitute a quorum for the transaction of
business. The shareholders present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, but only if
any action taken (other than adjournment) is approved by at least a majority of
the shares required to constitute a quorum.
Section 5. ADJOURNED MEETING AND NOTICE THEREOF.
(a) Any shareholders' meeting may be adjourned from time to time by
the vote of a majority of the shares whose holders are either present in person
or represented by proxy thereat.
3.
<PAGE>
(b) When any shareholders' meeting is adjourned for more than forty-
five days, or if after adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given as in the case of an
original meeting. Except as provided above, it shall not be necessary to give
any notice of the time and place of the adjourned meeting or of the business to
be transacted thereat, other than by announcement of the time and place thereof
at the meeting at which such adjournment is taken.
Section 6. VOTING.
(a) Unless a record date for voting purposes is filed as provided in
Section 1 of Article V of these bylaws then, subject to the provisions of
Sections 702, 703 and 704 of the Corporations Code relating to voting of shares
held by a fiduciary, in the name of a corporation, or in joint ownership, only
persons in whose names shares entitled to vote stand on the stock records of the
corporation at the close of business on the business day next preceding the day
on which notice of the meeting is given or, if such notice is waived, at the
close of business on the business day next preceding the day on which the
meeting of shareholders is held, shall be entitled to vote at such meeting.
Except with respect to the election of directors, each shareholder shall be
entitled to one vote for each full share entitled to be voted by such
shareholder and any fractional share held by such shareholder shall not be
entitled to any voting rights whatsoever. On any matter other than the election
of directors, any shareholder may vote part of the shares in favor of the
proposal and refrain from voting the remaining shares or vote them against the
proposal, but, if the shareholder fails to specify it will be conclusively
presumed that the shareholder's approving vote is with respect to all shares
that the shareholder is entitled to vote.
(b) Voting may be by voice or by ballot; provided, however, that all
elections for directors must be by ballot if a shareholder so demands before the
voting begins.
(c) Except as provided in Subsection (d) or as required by the
Corporations Code or the articles of incorporation, if a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter shall be the act of the shareholders.
(d) Every shareholder entitled to vote at any election for directors
shall have the right to cumulate his votes and give one candidate a number of
votes equal to the number of directors to be elected multiplied by the number of
votes to which his shares are entitled, or to distribute his votes on the same
principal among as many candidates as he shall think fit, provided that no
shareholder shall be entitled to cumulate votes unless the name of the
candidate or candidates for whom such votes would be cast has been placed in
nomination prior to the voting and a shareholder has given notice at the meeting
prior to the voting of his intention
4.
<PAGE>
to cumulate his votes. The candidates receiving the highest number of votes of
shares entitled to be voted for them, up to the number of directors to be
elected, shall be elected.
Section 7. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of shareholders, The transactions of any meeting of
shareholders, however called and noticed, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum is present either
in person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote not present in person or by proxy or who, though
present, has, at the beginning of the meeting, properly objected to the
transaction of any business because the meeting was not lawfully called or
convened or because of the exclusion of particular matters of business legally
required to be included in the notice, signs a written waiver of notice, or a
consent to the holding of such meeting, or an approval of the minutes thereof.
The waiver of notice or consent need not specify either the business to be
transacted or the purpose of any meeting of shareholders, except that if action
is taken or proposed to be taken for approval of any of those matters specified
in Section 2(f)(4) of this Article II, the waiver of notice or consent shall
state the general nature of the action taken or proposed to be taken. All such
waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 8. ACTION WITHOUT A MEETING.
(a) Directors may be elected without a meeting by a written consent,
signed by all of the persons who would be entitled to vote for the election of
directors, provided that a director may be elected without notice at any time to
fill a vacancy other than one created by removal, not filled by the directors by
the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors.
(b) Any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting, and, except as provided in
Subsection (c), without notice, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted,
(c) If the consents of all shareholders entitled to vote have not been
solicited in writing, shareholders entitled to vote who have not given written
consent shall be given the following:
(1) Notice of any proposed shareholder approval of, (i) a
contract or other transaction with an interested director as described in
Section 310 of the Corporations Code, (ii) indemnification of an agent of the
corporation as authorized by
5.
<PAGE>
Section 11 of Article V of these bylaws, (iii) a reorganization of the
corporation pursuant to Section 1201 of the Corporations Code, or (iv) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 thereof, at least ten
days before the consummation of the action authorized by such approval; and
(2) Prompt notice of the taking of any other corporate action
approved by shareholders without a meeting by less than unanimous written
consent.
(d) Notices given pursuant to Subsection (c) of this Section shall be
given in the manner provided in Section 2 of this Article.
(e) Unless the board of directors has fixed a record date for the
determination of shareholders entitled to receive such notice and to give such
written consent pursuant to Section 1 of Article V hereof; the record date for
such determination shall be the day on which the first written consent is given.
All such written consents shall be filed with the secretary of the corporation.
(f) Any shareholder, proxyholder, or a transferee of shares, personal
representative of the shareholder or their respective proxyholders, giving a
written consent, may revoke the consent by a writing received by the corporation
prior to the time that written consents of the number of shares required to
authorize the proposed action have been filed with the secretary of the
corporation, but may not do so thereafter. Such revocation is effective upon its
receipt by the secretary of the corporation.
Section 9. PROXIES.
(a) Every person entitled to vote or execute consents shall have the
right to do so either in person or by one or more agents authorized by a written
proxy executed by such person or his duly authorized agent and filed with the
secretary of the corporation. A proxy shall be deemed executed if the
shareholder's name is placed on the proxy (either by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney in fact. A duly executed proxy which does not state that
it is irrevocable shall continue in full force and effect until, (i) an
instrument revoking it or a duly executed proxy bearing a later date is filed
with the secretary of the corporation prior to the vote pursuant thereto, (ii)
the person executing the proxy attends the meeting and votes in person, or (iii)
written notice of the death or incapacity of the maker of such proxy is received
by the corporation before the counting of the vote in which such proxy has been
cast; provided that no such proxy shall be valid after the expiration of eleven
months from the date of its execution, unless the person executing it specifies
therein the length of time for which such proxy is to continue in force.
6.
<PAGE>
(b) The revocability of a proxy that states on its face that it
is irrevocable shall be governed by the provisions of Subsections 705(e) and
705(f) of the Corporations Code.
(c) Executors, administrators, guardians, trustees or any
fiduciary, may give proxies, waive notice of and consent to any meeting of
shareholders, or authorize by a writing, any action which could be taken by
shareholders. The manner of execution, revocation and use of proxies shall be
governed by the provisions of the Corporations Code except that the board of
directors may, in advance of any meeting of the shareholders, prescribe
additional regulations concerning the manner of execution, filing and validation
of proxies which are intended to be voted at any such meeting.
(d) If any instrument of proxy designates two or more persons to
act as proxy, in the absence of any provision in the proxy to the contrary, the
persons designated may represent and vote the shares in accordance with the vote
or consent of the majority of the persons named as such proxies. If only one
such proxy is present, he may vote all the shares, and all the shares standing
in the name of the principal or principals for whom such proxy acts shall be
deemed represented for the purpose of obtaining a quorum. The foregoing
provisions shall apply to the voting of shares by proxies for any two or more
administrators, executors, trustees or other fiduciaries, unless an instrument
or order of court appointing them otherwise directs.
Section 10. INSPECTORS OF ELECTION.
(a) In advance of any meeting of shareholders, the board of
directors may appoint any persons other than nominees for office as inspectors
of election to act at such meeting or any adjournment thereof. If inspectors of
election are not so appointed, the chairman of any such meeting may, and on the
request of any shareholder or his proxy shall, make such appointment at the
meeting. The number of inspectors shall be either one or three. If appointed at
a meeting on the request of one or more shareholders or proxies, the majority of
shares represented in person or by proxy shall determine whether one or three
inspectors are to be appointed. In case any person appointed as inspector fails
to appear or fails or refuses to act, the vacancy may, and on the request of any
shareholder or his proxy shall, be filled by appointment by the board of
directors in advance of the meeting, or at the meeting by the chairman of the
meeting.
(b) Such inspectors shall (1) determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies;
(2) receive votes, ballots or consents; (3) hear and determine all challenges
and questions in any way arising in connection with the right to vote; (4) count
and tabulate all votes or consents; (5) determine when the
7.
<PAGE>
polls shall close; (6) determine the result; and (7) perform such acts as may be
proper to conduct the election or vote with fairness to all shareholders. In
determining the validity and effect of proxies, the dates contained on the forms
of proxy shall presumptively determine the order of execution of the proxies,
regardless of the postmark dates on the envelope in which they are mailed.
(c) If there are three inspectors of election, the decision, act,
or certificate of a majority is effective in all respects as the decision, act
or certificate of all. Any report or certificate made by the inspectors of
election is prima facie evidence of the facts stated therein.
----- -----
Section 11. ORGANIZATION. At every meeting of the shareholders, the
president, or in his absence any vice president designated by the president or
the board of directors or a chairman chosen by a majority in interest of the
shareholders of the corporation present in person or by proxy and entitled to
vote, shall act as chairman. The secretary of the corporation, or in his absence
an assistant secretary, shall act as secretary of all meetings of the
shareholders. In the absence of the secretary and assistant secretary, the
chairman may appoint another person to act as secretary of the meeting.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to limitations of the articles of incorporation
and of the Corporations Code pertaining to action to be authorized or approved
by the shareholders, and subject to the duties of directors as prescribed by
the bylaws, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be controlled by, the
board of directors. Without prejudice to such general powers, but subject to the
same limitations, it is hereby expressly declared that the directors shall have
the following powers:
(a) To select and remove all the officers, agents and employees
of the corporation, prescribe powers and duties for them not inconsistent with
law, with the articles of incorporation or the bylaws, to fix their
compensation, and to require from them security for faithful service;
(b) To conduct, manage and control the affairs and business of
the corporation, and to make such rules and regulations therefor not
inconsistent with law, or with the articles of incorporation or the bylaws;
8.
<PAGE>
(c) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of the law;
(d) To authorize, the issuance of shares of stock of the
corporation from time to time, upon such terms as are lawful;
(e) To borrow money and incur indebtedness for the purposes of
the corporation, and to cause to be executed and delivered therefor in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities;
(f) By resolution adopted by a majority of the authorized number
of directors, to designate an executive committee or other committees, each
consisting of two or more directors to serve at the pleasure of the board, and
to prescribe the manner in which proceedings of such committees shall be
conducted. Unless the board of directors shall prescribe a different manner for
such proceedings, meetings of such committees may be regularly scheduled in
advance or may be called at any time by any two members thereof; otherwise, the
provisions of these bylaws with respect to notice and conduct of meetings of the
board shall govern. Any such committee, to the extent provided in a resolution
of the board, shall have all of the authority of the board, except with respect
to:
(1) the approval of any action for which the Corporations
Code or the articles of incorporation also requires shareholder approval;
(2) the filling of vacancies on the board or in any
committee;
(3) the fixing of compensation of the directors for serving
on the board or on any committee;
(4) the adoption, amendment or repeal of bylaws;
(5) the amendment or repeal of any resolution of the board
which by its express terms is not so amendable or repealable;
(6) any distribution to the shareholders, except at a rate
or in a periodic amount or within a price range determined by the board; and
(7) the appointment of other committees of the board or the
members thereof.
9.
<PAGE>
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS.
(a) The number of directors of the corporation shall be not
less than 3 nor more than 5 until changed by amendment of the articles of
incorporation or by a bylaw amending this Section 2 duly adopted by the vote or
written consent of holders of a majority of the outstanding shares entitled to
vote, provided that a proposal to reduce the authorized number or the minimum
number of directors below five cannot be adopted if the votes cast against its
adoption at a meeting or the shares not consenting in the case of action by
written consent, are equal to more than 16-2/3 percent of the outstanding
shares entitled to vote.
(b) The exact number of directors shall be fixed from time
to time, within the limits specified in the articles of incorporation or in
this Section 2, by a bylaw or amendment thereof duly adopted by the vote of a
majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of a
majority of the outstanding shares entitled to vote, or by the board of
directors. The exact number of directors of this corporation shall be 3 until
changed in compliance with this Subsection. No director need be a shareholder.
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each annual meeting of shareholders to hold office until the next annual
meeting but, if any such annual meeting is not held or the directors are not
elected thereat, the directors may be elected at any duly noticed special
meeting of shareholders. All directors shall hold office until their respective
successors are elected and qualified, subject to the provisions of the
Corporations Code and of these bylaws with respect to vacancies on the board.
Section 4. VACANCIES.
(a) A vacancy on the board of directors shall be deemed to
exist if a director has died, resigned or been removed, or if the authorized
number of directors is increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting. The board of directors may also declare vacant the office of a director
who has been declared of unsound mind by an order of court or has been convicted
of a felony.
(b) Vacancies on the board of directors, except for a
vacancy created by the removal of a director, may be filled by a majority of the
remaining directors, though less than quorum, or by a sole remaining director,
and each director so elected shall hold office until his successor is elected at
an annual or a special meeting of the shareholders. A vacancy on the board
created by the removal of a director may only be filled by the vote of a
majority of
10.
<PAGE>
the shares entitled to vote represented at a duly held meeting at which a quorum
is present, or by the written consent of the holders of a majority of the
outstanding shares.
(c) The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors. Any such election by
written consent shall require the consent of holders of a majority of the
outstanding shares entitled to vote.
(d) Any director may resign effective upon giving written notice to the
chairman of the board, the president, or the secretary of the board of directors
of the corporation unless the notice specifies a later time for the
effectiveness of such resignation. If the board of directors accepts the
resignation of a director tendered to take effect at a future time, the board or
the shareholders shall have power to elect a successor to take office when the
resignation is to become effective.
(e) No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 5. PLACE OF MEETING. Regular meetings of the board of directors
shall be held at any place within or without the State of California which has
been designated from time to time by resolution of the board or by written
consent of all members of the board. In the absence of such designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held either at a place designated by
resolution of the board or in the notice of meeting, or if not so designated, at
the principal, executive office.
Section 6. ORGANIZATION MEETING. Immediately following each annual meeting
of shareholders, the board of directors shall hold a regular meeting at the
place of said annual meeting or at such other place as shall be fixed by the
board of directors, for the purpose of organization, election of officers, and
the transaction of other business. Call and notice of such meetings are hereby
dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of
directors shall be held without notice if the date and place of such meetings
are fixed by the board. Should said date fall upon a legal holiday, then said
meeting shall be held at the same time on the next day thereafter ensuing which
is a full business day.
Section 8. SPECIAL MEETINGS.
(a) Special meetings of the board of directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or by any two directors.
11.
<PAGE>
(b) Special meetings of the board of directors shall be held upon at
least four days' notice by mail or upon forty-eight hours' notice delivered
personally or by telephone or telegraph.
(c) Notice by mail shall be deemed given at the time a written notice
is deposited in the United States mail, first class postage prepaid, addressed
to the recipient at his address as it is shown upon the records of the
corporation, or, if it is not so shown on such records and is not readily
ascertainable, at the principal executive office of the corporation. Notice by
telegraph shall be deemed given when it is actually transmitted by the telegraph
company. Notice by telephone shall be deemed given when it is communicated by
telephone to the recipient or to a person at the office of the recipient, if the
person giving the notice has reason to believe it will promptly be communicated
to the recipient.
(d) Any notice of a special meeting shall state the date, place and
hour of the meeting. A notice need not specify the purpose of the meeting.
Section 9. ACTION WITHOUT MEETING. Any action by the board of directors
may be taken without a meeting if all members of the board shall individually or
collectively consent in writing to such action. Such written consent or consents
shall be filed with the minutes of the proceedings of the board and shall have
the same force and effect as a unanimous vote of the directors.
Section 10. ACTION AT A MEETING: QUORUM AND REQUIRED VOTE.
(a) Presence of a majority of the authorized number of directors at a
meeting of the board of directors constitutes a quorum for the transaction of
business, except as hereinafter provided. Members of the board may participate
in a meeting through use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear one
another. Participation in a meeting as permitted in the preceding sentence
constitutes presence in person at such meeting.
(b) Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the board of directors, subject to the articles of incorporation and
the provisions of Section 310 of the Corporations Code regarding transactions
with interested directors, Section 311 thereof regarding the appointment of
committees, and of Subsection 317(e) thereof regarding indemnification of
corporate officers, directors and other agents. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, provided that any action taken is approved by at least
a majority of the required quorum for such meeting.
12.
<PAGE>
Section 11. WAIVER OF NOTICE. The transactions of any meeting of the board
of directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors who
was not present or who, though present, had prior to the meeting or at its
commencement, protested the lack of proper notice to him, signs a written waiver
of notice or a consent to holding such meeting or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 12. ADJOURNMENT. A majority of the directors present, whether or
not constituting a quorum, may adjourn any directors' meeting to another time
and place.
Section 13. NOTICE OF ADJOURNMENT. If the meeting is adjourned for more
than twenty-four hours, notice of any adjournment to another time or place shall
be given prior to the time of the adjourned meeting to the directors who were
not present at the time of adjournment. Otherwise notice of the time and place
of holding an adjourned meeting need not be given to absent directors if the
time and place be fixed at the original meeting.
Section 14. CONDUCT OF MEETINGS. At every meeting of the board of directors
the chairman of the board of directors, if there shall be such an officer, shall
preside. If not, a chairman chosen by a majority of the directors present shall
preside. The secretary of the corporation shall act as secretary of the board of
directors. In case the secretary shall be absent from any meeting of the board,
an assistant secretary shall perform the duties of the secretary at such
meeting. In the absence from any such meetings of both the secretary and the
assistant secretary, the chairman may appoint any person to act as secretary of
the meeting.
Section 15. FEES AND COMPENSATION. Directors and members of committees may
receive such compensation for their services, and such reimbursement for
expenses, as may be fixed or determined by resolution of the board. This Section
shall not be construed as precluding any director from serving the corporation
in any other capacity as an officer, agent, employee, or otherwise, and
receiving compensation for those services.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The corporation shall have a chairman of the board or
a president, or both of such officers, a secretary, a chief financial officer
and, if the board of directors
13.
<PAGE>
so determines, may have one or more vice presidents, assistant secretaries and
assistant financial officers. The board of directors may from time to time also
elect such other officers as it shall deem necessary and shall determine the
terms of office, powers and duties of such officers. Any number of offices may
be held by the same person.
Section 2. ELECTION. The officers of the corporation except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be chosen annually by the board of directors,
and each shall hold his office at the pleasure of the board, or until he shall
resign or shall be removed or otherwise disqualified to serve, or his successor
shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS. The board of directors may
appoint, and may empower the president to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in the
bylaws or as the board of directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION.
(a) Any officer may be removed either with or without cause
by a majority of the directors at the time in office, at any regular or special
meeting of the board, or, except in case of an officer chosen by the board of
directors, by any officer upon whom such power of removal may be conferred by
the board of directors. The corporation's right to remove any officer shall be
subject to such officer's rights under any contract of employment.
(b) Any officer may resign at any time by giving written
notice to the board of directors or to the president, or to the secretary of the
corporation, without prejudice, however, to any right which the corporation may
have under any contract to which such officer is a party. Any such resignation
shall take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the bylaws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if
there shall be such an officer, shall, if present, preside at all meetings of
the board of directors and exercise and perform such other powers and duties as
may be assigned to him from time to time by the board of directors or prescribed
by the bylaws.
14
<PAGE>
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the board of directors to the chairman of the board, if
there is such an officer, the president shall be the chief executive officer of
the corporation and shall, subject to the control of the board of directors,
have general supervision, direction and control of the business and officers of
the corporation. He shall preside at all meetings of the shareholders and in the
absence of the chairman of the board, or if there is none, at all meetings of
the board of directors. He shall be ex-officio a member of all the standing
----------
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the board of directors or the bylaws.
Section 8. VICE PRESIDENT. In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors or the bylaws or by the chairman of the board or the
president.
Section 9. SECRETARY.
(a) The secretary shall record or cause to be recorded, and
shall keep or cause to be kept, written minutes of the proceedings of the
shareholders, board of directors, and committees of the board.
(b) The secretary shall keep, or cause to kept, at the
principal executive efface or at the office of the corporation's transfer agent
a record of its shareholders showing the names and addresses of shareholders and
the number and all classes of shares held by each.
(c) The secretary shall give, or cause to be given, notice of
all meetings of the shareholders and of the board of directors required by the
bylaws or by law to be given, and he shall keep the seal of the corporation in
safe custody and shall affix it to stock certificates prior to issuance and to
such other instruments as the board of directors shall prescribe. He shall
perform all other duties incident to the office of secretary and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or by the bylaws.
Section 10. ASSISTANT SECRETARY. At the request of the
secretary, or in his absence or disability, the assistant secretary, designated
by him shall perform all the duties of the secretary, and when so acting, he
shall have all the powers of, and be subject to
15
<PAGE>
all the restrictions upon, the secretary. The assistant secretary shall perform
such other duties as from time to time may be assigned to him by the board of
directors or the secretary.
Section 11. CHIEF FINANCIAL OFFICER.
(a) The chief financial officer of the corporation shall keep
and maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and of the business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital and shares.
(b) The chief financial officer shall have charge and custody
of, and be responsible for, all funds and securities of the corporation and
shall open accounts at, and deposit all monies and other valuables in the name
and to the credit of the corporation with, such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation. He shall perform all other duties incident to the office of chief
financial officer and have such other powers and perform such other duties as
may be prescribed by the board of directors or the bylaws.
Section 12. SALARIES. The salaries of the officers shall be
fixed from time to time by the board of directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the corporation.
ARTICLE V
MISCELLANEOUS
Section 1. RECORD DATE. The board of directors may fix, in
advance, a record date not more than sixty days nor less than ten days prior to
the date of any meeting, nor more than sixty days prior to any other action for
which it is fixed. Only shareholders of record on a record date so fixed are
entitled to notice of and to vote at any such meeting, to give consent without a
meeting, to receive any report, to receive a dividend or distribution or any
allotment of rights or to exercise any other rights of shareholders, as the ease
may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the articles
of incorporation or bylaws.
16
<PAGE>
Section 2. INSPECTION OF CORPORATE RECORDS.
(a) The accounting books and records, the record of
shareholders, and minutes of proceedings of the shareholders and the board and
committees of the board of the corporation and any subsidiary of the corporation
shall be open to inspection upon the written demand on the corporation of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours, for a purpose reasonably related to such holder's
interests as a shareholder or as the holder of such voting trust certificate.
Such inspection by a shareholder or holder of a voting trust certificate may be
made in person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
(b) A shareholder or shareholders holding at least five
percent in the aggregate of the outstanding voting shares of the corporation or
who hold at least one percent of such voting shares and have filed a Schedule
14B with the United States Securities and Exchange Commission relating to the
election of directors of the corporation shall have the absolute right (in
person, or by agent or attorney) to inspect and copy the record of shareholders'
names and addresses and shareholdings during usual business hours upon five
business days' prior written demand upon the corporation and to obtain from the
transfer agent for the corporation, upon written demand and upon the tender of
its usual charges, a list of names and addresses of the shareholders who are
entitled to vote for the election of directors, and their shareholdings, as of
the most recent record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. The list shall be
made available on or before the later of five business days after the date the
demand is received or the date specified therein as the date of which the list
is to be compiled.
(c) Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents of every
kind and to inspect the physical properties of the corporation and any
subsidiary corporation. Such inspection by a director may be made in person or
by agent or attorney.
Section 3. CHECKS, DRAFTS, ETC.
(a) All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness issued in the name of or payable to the
corporation shall be signed or endorsed by such person or persons and in such
manner as, from time to time, shall be determined by resolution of the board of
directors.
(b) Endorsements for deposit to the credit of the corporation
in any of its duly authorized depositories may be made without countersignature
by the president or any vice president or the chief financial officer or by any
other officer or agent of the
17.
<PAGE>
corporation to whom the board of directors, by resolution, shall have delegated
such power, or by hand-stamped impression in the name of the corporation.
Section 4. ANNUAL AND OTHER REPORTS.
(a) The corporation shall not be required to send to its
shareholders the annual report described in Section 1501 of the Corporations
Code.
(b) A shareholder or shareholders holding at least five
percent of the outstanding shares of any class of the corporation may make a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the current fiscal year
ended more than thirty days prior to the date of the request and a balance
sheet of the corporation as of the end of such period. The statement shall be
delivered or mailed to the person making the request within thirty days
thereafter. A copy of the statements shall be kept on file in the principal
executive office of the corporation for twelve months and they shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to such shareholder.
(c) The corporation shall, upon the written request of any
shareholder, mail to the shareholder a copy of the last annual, semi-annual or
quarterly income statement which it has prepared and a balance sheet as of the
end of the period. The quarterly income statements and balance sheets shall be
accompanied by the report thereon; if any, of any independent accountants
engaged by the corporation or by the certificate of an authorized officer of the
corporation or by the certificate of an authorized officer of the corporation
that such financial statements were prepared without audit from the books and
records of the corporation.
Section 5. CONTRACTS. Except as otherwise provided in the
bylaws, the board of directors may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances; and, unless so authorized by the board of directors, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or to any amount, except as otherwise provided by law.
Section 6. STOCK CERTIFICATES.
(a) Every holder of shares in the corporation shall be
entitled to have a certificate signed in the name of the corporation by the
chairman or vice chairman of the board or the president or a vice president and
by the chief financial officer or
18
<PAGE>
the secretary or assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any of the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, it may be issued by the corporation with
the same effect as if such person were an officer, transfer agent or registrar
at the date of issue.
(b) Any such certificate shall also contain any legend or other
statement required by Sections 417 or 418 of the Corporations Code, by the
Corporate Securities Law of 1968, and by the federal securities laws. This shall
include, without limitation, any statement required by the existence of any
agreement between the corporation and the proposed issuee of a certificate.
(c) Certificates for shares may be issued prior to full payment under
such restrictions and for such purposes as the board of directors or the bylaws
may provide; provided, however, that any such certificate so issued prior to
full payment shall state on the face thereof the amount remaining unpaid and the
terms of payment thereof.
Section 7. TRANSFER ON THE BOOKS.
(a) Upon surrender to the secretary or transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the secretary or
transfer agent shall issue a new certificate to the person entitled thereto. A
person in whose name shares of stock stand on the books of the corporation shall
be deemed the owner thereof as regards the corporation; provided that whenever
any transfer of shares shall be made for collateral security, and not
absolutely, and written notice thereof shall be given to the secretary of the
corporation or its transfer agent, such fact shall be stated in the entry of the
transfer.
(b) When a transfer of shares is requested and there is reasonable
doubt as to the right of the person seeking the transfer, the corporation or its
transfer agent, before recording the transfer of the shares on its books or
issuing any certificate therefor, may require from the person seeking the
transfer reasonable proof of his right to the transfer, or may require adequate
security or a bond of indemnity executed by a corporate surety or by two
individual sureties satisfactory to the corporation as to form, amount, and
responsibility of sureties. The bond shall be conditioned to protect the
corporation, its officers, transfer agents, and registrars, or any of them,
against any loss, damage, expense, or other liability to the owner of the shares
by reason of the recordation of the transfer or the issuance of a new
certificate for shares.
19
<PAGE>
Section 8. LOST, STOLEN AND DESTROYED CERTIFICATES. The holder
of any certificate for shares of the corporation shall immediately notify the
corporation of any loss, theft or destruction of such certificate, and the
corporation may issue a new certificate to replace such certificate alleged to
have been lost, stolen or destroyed. The board of directors may, in its
discretion, require the owner of the lost, stolen or destroyed certificate or
his legal representative to give the corporation a bond in such sum and with
such surety or sureties, as it may direct, to indemnify the corporation, its
transfer agent and registrar against any claim that may be made against it on
account of or arising out of the alleged loss, theft or destruction of any such
certificate or the issuance of the new certificate.
Section 9. COMPULSORY EXCHANGE OF CERTIFICATES. When the
articles of incorporation are amended in any way affecting the statement
contained in the certificates for outstanding shares, or when, in the discretion
of the board of directors, it becomes desirable for any reason to cancel any
outstanding certificate for shares and issue a new certificate therefor
conforming to the rights of the holder, the board of directors may order any
holder of outstanding certificates for shares to surrender and exchange them for
new certificates within a reasonable time to be fixed by the board of directors.
Such order may provide that a holder of any certificate so ordered to be
surrendered is not entitled to vote or to receive dividends or to exercise any
of the other rights of shareholders of record until he has complied with the
order, but such order shall operate to suspend such rights only after notice and
until compliance.
Section 10. INSPECTION OF BY-LAWS. The secretary shall keep at
the principal executive office in California, or if the principal executive
office is not in California, then at the principal business office in
California, the original or a copy of the bylaws as amended to date, certified
by the secretary, which shall be available for inspection by the shareholders at
all reasonable times during office hours. If the corporation has neither a
principal executive office nor a principal business office in California, it
shall furnish a copy of the bylaws as amended to date to any shareholder who
makes a written request for such bylaws.
Section 11. INDEMNIFICATION. The corporation shall indemnify any
officer, director or other agent of the corporation who has been successful on
the merits in defense of any proceeding referred to in Subsections 317(b) or (c)
of the Corporations Code, or in defense of any claim, issue or matter in such
proceeding, against expenses actually and reasonably incurred by the agent in
connection therewith. The corporation may also indemnify, or purchase and
maintain insurance for, any officer, director, or other agent, to the extent
permitted by Section 317 of the Corporations Code.
20
<PAGE>
Section 12. CONSTRUCTIONS AND DEFINITIONS. Unless the content otherwise
requires, the general provisions, rules of construction and definitions
contained in the California Corporations Code shall govern the construction of
these bylaws.
ARTICLE VI
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or
these bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the corporation's articles of incorporation set forth the
number of its authorized directors, the authorized number of directors may be
changed only by an amendment of the articles of incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 1 of this Article VI, new bylaws may be
adopted or these bylaws amended or repealed by the board of directors, provided
that no such bylaw may change the authorized number of directors of the
corporation except that, if the corporation has a variable board of directors,
such bylaw may fix the exact number of directors within the limits specified in
the articles of incorporation or in Section 2 of Article III of the bylaws.
CERTIFICATE OF SECRETARY
THE UNDERSIGNED DOES HEREBY CERTIFY:
That I am the duly elected, qualified and acting Secretary of AIB CORP., a
California corporation, and that the above and foregoing Bylaws were adopted as
the Bylaws of said corporation on April 15, 1984 by the directors of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of April, 1984.
Fradelle Rosenberg
---------------------------------------
Fradelle Rosenberg, Secretary
21.
<PAGE>
Exhibit 3.25
FILED
in the office of the Secretary of State
of the State of California
OCT 15 1992
/s/ March Fong Eu
MARCH FONG EU Secretary of State
ARTICLES OF INCORPORATION
OF
ALEXANDRIA CONVALESCENT HOSPITAL, INC.
I
The name of this corporation is ALEXANDRIA CONVALESCENT HOSPITAL, INC.
II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the general corporation law of
California other than the banking business, the trust business or the practice
of a profession permitted to be incorporated by the California Corporations
Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is: Robert Snukal, c/o Fountain View
Management, 4801 Wilshire Boulevard, Mezzanine Floor, Los Angeles, California
90010.
IV
This corporation is authorized to issue only one class of shares of stock;
and the total number of shares which this corporation is authorized to issue is
500,000.
DATED: October 15, 1992
/s/ David B. Bloom
------------------------------
DAVID B. BLOOM
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my act and deed.
/s/ David B. Bloom
------------------------------
DAVID B. BLOOM
[SEAL OF THE OFFICE OF THE SECRETARY OF STATE APPEARS HERE]
<PAGE>
Exhibit 3.26
BY-LAWS OF
ALEXANDRIA CONVALESCENT HOSPITAL, INC.
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
SECTION 1. TIME. An annual meeting for the election of directors and for the
- ----------
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Time of Meeting: 10 o'clock A.M.
Date of Meeting: The l5th day october.
SECTION 2. PLACE. Annual meetings and special meetings shall be held at such
- ----------
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
SECTION 3. CALL. Annual meetings may be called by the Directors, by the
- ----------
Chairman of the Board, if any, Vice Chairman of the Board, if any, the
President, if any, the Secretary, or by any officer instructed by the Directors
to call the meeting. Special meetings may be called in like manner and by the
holders of shares entitled to cast not less than ten percent of the votes at the
meeting being called.
SECTION 4. NOTICE. Written notice stating the place, day and hour of each
- ----------
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall by given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located.
- 1 -
<PAGE>
Such notice shall be deemed to be delivered when deposited in the United States
mail with first class postage therein prepaid, or sent by other means of written
communication addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at the
time of notice to be presented by management for election. At an annual meeting
of shareholders, any matter relating to the affairs of the corporation, whether
or not stated in the notice of the meeting, may be brought up for action except
matters which the General Corporation Law requires to be stated in the notice of
the meeting. The notice of any annual or special meeting shall also include, or
be accompanied by, any additional statements, information, or documents
prescribed by the General Corporation Law. When a meeting is adjourned to
another time or place, notice of the adjourned meeting need not be given if the
time and place thereof are announced at the meeting at which the adjournment is
taken; provided that, if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
SECTION 5. CONSENT. The transaction of any meeting, however called and noticed,
- ----------
and wherever held, shall be as valid as though had a meeting duly held after
regular call and notice, if a quorum is present and if, either before, or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
SECTION 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
- ----------
over by one of the following officers in the order of seniority and if present
and acting -- the Chairman of the Board, if any, the Vice-chairman of the Board,
if any, the President, if any, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but, if neither the
Secretary nor an Assistant Secretary is present, the Chairman of the meeting
shall appoint a secretary of the meeting.
- 2 -
<PAGE>
SECTION 7. PROXY REPRESENTATION. Every shareholder may authorize another
- ----------
person or persons to act as his proxy at a meeting or by written action. No
proxy shall be valid after the expiration of eleven months from the date of its
execution unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the person executing it prior to the vote or written action
pursuant thereto, except as otherwise provided by the General Corporation Law.
As used herein, a "proxy" shall be deemed to mean a written authorization signed
by a shareholder or a shareholder's attorney in fact giving another person or
persons power to vote or consent in writing with respect to the shares of such
shareholder, and "Signed" as used herein shall be deemed to me an the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
SECTION 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
- ----------
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election, or persons to replace
any of those who so -fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
SECTION 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
- ----------
subsidiary shall not be entitled to Vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
- 3 -
<PAGE>
SECTION 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
- -----------
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from tine to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall elect. No
shareholder shall be entitled to exercise the right of cumulative voting at a
meeting for the election of directors unless the candidate's name or the
candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the Articles
of Incorporation or these By-Laws, any action required or permitted to be taken
at a meeting at which a quorum is present shall be authorized by the affirmative
vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented in writing.
SECTION 11. BALLOT. Elections of directors at a meeting need not be by ballot
- -----------
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
SECTION 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
- -----------
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by
- 4 -
<PAGE>
them shall be voted as provided therein or in Section 706, and may otherwise
modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
- ----------
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors.
The Board of Directors shall have authority to fix the compensation of directors
for services in any lawful capacity.
Each director shall exercise such powers and otherwise perform such duties
in good faith, in the manner such director believes to be in the best interests
of the corporation, and with care, including reasonable inquiry, using ordinary
prudence, as a person in a like position would use under similar circumstances.
(Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
- ----------
Section 1, in the event that this corporation shall elect to become a lose
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
- ----------
the corporation, a citizen, of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be 4. Thereafter, the authorized number
-
of directors constituting the Board shall be at least three provided that,
whenever the corporation shall have only two shareholders, the number of
directors may be at least two, and, whenever the corporation shall have only one
shareholder, the number of directors may be at least one. Subject to the
foregoing provisions, the number of directors may be changed from time to time
by an amendment of these By-Laws adopted by the shareholders. Any such amendment
reducing the number of directors to fewer than five cannot be adopted if the
votes cast against its adoption at a meeting or the shares not consenting in
writing in the case of action by written consent are equal to more than sixteen
and two-thirds percent of the outstanding
- 5 -
<PAGE>
shares. No decrease in the authorized number of directors shall have the effect
of shortening the term of any incumbent director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
- ----------
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a majority of the directors then in office or of
the sole remaining director, although less than a quorum exists. Any director
may resign effective upon giving written notice to the Chairman of the Board, if
any, the President, the Secretary or the Board of Directors, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to the
office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy which
the directors are entitled to fill, but which they have not filled. Any such
election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
- ----------
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
Section 6. MEETINGS.
- ----------
TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State of
California, which has been designated in any notice of the meeting, or, if not
stated in said notice, or, if there is
- 6 -
<PAGE>
no notice given, at the place designated by resolution of the Board of
Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular meetings
for which the time and place have been fixed by the Board of Directors. Special
meetings shall be held upon at least four days' notice by mail or upon at least
forty-eight hours' notice delivered personally or by telephone or telegraph.
Notice of a meeting need not be given to any director who signs a waiver of
notice, whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to such
director. A notice or waiver of notice need not specify the purpose of any
regular or special meeting of the Board of Directors.
SECTION 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION.
- ----------
In the event only one director is required by the By-Laws or Articles of
Incorporation, then any reference herein to notices, waivers, consents, meetings
or other actions by a majority or quorum of the directors shall be deemed to
refer to such notice, waiver, etc., by such sole director, who shall have all
the rights and duties and shall be entitled to exercise all of the powers and
shall assume all the responsibilities otherwise herein described as given to a
Board of Directors.
SECTION 8. QUORUM AND ACTION. A majority of the authorized number of directors
- ----------
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of the
authorized number of directors or at least two directors, whichever is larger,
or unless the authorized number of directors is only one. A majority of the
directors present, whether or not a quorum is present, may adjourned any meeting
to another time and place. If the meeting is adjourned for more than twenty-four
hours, notice of any adjournment to another time or place shall be given prior
to the time of the adjourned meeting to the directors, if any, who were not
present at the time of the adjournment. Except as the Articles of Incorporation,
these By-Laws and the General Corporation Law may otherwise provide, the act or
decision done or made by a majority of the Directors present at a meeting duly
held at which a quorum is present shall be the act of the Board of Directors.
Members of the Board of Directors may participate in a meeting through use of
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another, and participation by such
use shall be deemed to constitute presence in person at any such meeting.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, provided that any action
which may be taken is
- 7 -
<PAGE>
approved by at least a majority of the required quorum for such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
- ----------
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
- -----------
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such action
is taken by written consent, in lieu of a meeting, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. If any or all directors
are so removed, new directors may be elected at the same meeting or by such
written consent. The Board of Directors may declare vacant the office of any
director who has been declared of unsound mind by an order of court or convicted
of a felony.
Section 11. Committees. The Board of Directors, by resolution adopted by a
- -----------
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
SECTION 12. INFORMAL ACTION. The transactions of any meeting of the Board of
- -----------
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
SECTION 13. WRITTEN ACTION. Any action required or permitted to be taken may be
- -----------
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
- 8 -
<PAGE>
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
- ---------
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
- ----------
may be appointed in accordance with the provisions of Section 3 or Sextion 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
- ----------
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors, or to the President, or to the Secretary of the corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ----------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there s all be
- ----------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the By-
Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ----------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
- 9 -
<PAGE>
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the
- ----------
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
- ----------
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to by given, notice of all the meetings
of the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and he shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
- -----------
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, shall render to the President and directors,
whenever they request it, an account of all his
- 10 -
<PAGE>
transactions and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
- ---------
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, it any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
In the event that the corporation shall issue the whole or any part of its
shares as partly paid and subject to call for the remainder of the consideration
to be paid therefor, any such certificate for shares shall set forth thereon the
statements prescribed by Section 409 of the General Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue
- ---------
a new certificate for shares or for any other security in the place of any other
certificate theretofore issued by it, which is alleged to have been lost,
stolen or destroyed. As a condition to such issuance, the corporation may
require any such owner of the allegedly lost, stolen or destroyed certificate or
any such owner's legal representative to give the corporation a bond, or other
adequate security, sufficient to indemnify it against any claim that may be made
against it, including any expense or liability, on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
- ---------
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the
- 11 -
<PAGE>
corporation or with a transfer agent or a registrar, if any, and on surrender of
the certificate or certificates for such shares properly endorsed and the
payment of all taxes, if any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
- ---------
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as aforesaid,
the record date for determining shareholders entitled to notice of or to vote at
a meeting of shareholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held: the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given: and the record date for determining shareholders for
any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth day
prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
- ---------
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors,
Section 6. MEANING OF CERTAIN TERMS. As used in these by-laws in respect of the
- ---------
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or "
shareholder" or "shareholders" refers to an outstanding share or shares and to a
holder or holders record or outstanding shares when the
- 12 -
<PAGE>
corporation is authorized to issue only one class of shares, and said reference
is also intended to include any outstanding share or shares and any holder or
holders of record of outstanding shares of any class upon which or upon whom the
Articles of Incorporation confer such rights here there are two or more classes
or series of shares or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the Articles of Incorporation may
provide for more than one class or series of shares, one or more of which are
limited or denied such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
- ---------
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418(c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300(b) shall only be effective
to modify the terms of these By-Laws if this corporation elects to become a
close corporation with appropriate filing of or amendment to its Articles as
required by Section 202 and shall terminate when this corporation ceases to be a
close corporation. Such an agreement cannot waive or alter Sections 158
(defining close corporations), 202 (requirements of Articles of Incorporation),
500 and 501 relative to distributions, ill (merger), 1201(e) (reorganization) or
Chapters 15 (Records and Reports, 16 (Rights of Inspection), 18 (Involuntary
Dissolution) or 2 (Crimes and Penalties). Any other provisions of the Code or
these By-laws may be altered or waived thereby, but to the extent they are not
so altered or waived, these By-Laws shall be applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purposes or any amount, except as
provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Law say be amended or
repealed or new By-Laws may be adopted by the share-holders entitled to exercise
a majority of the voting power or by the Board of Directors; provided, however,
that the Board of Directors shall have no control over
- 13 -
<PAGE>
any By-Law which fixes or changes the authorized number of directors of the
corporation; provided, further, than any control over the By-Laws herein vested
in the Board of Directors shall be subject to the authority of the aforesaid
shareholders to amend or repeal the By-Laws or to adopt new By-Laws; and
provided further that any By-Law amendment or new By-Law which changes the
minimum number of directors to fewer than five shall require authorization by
the greater proportion of voting power of the shareholders as hereinbefore set
forth.
ARTICLE VIII
BOOKS AND RECORDS
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
- ----------
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders or payment of
- ----------
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
- ----------
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
- 14 -
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of Incorporation to
act as the Incorporator(s) or First Director(s) of the above-named corporation
hereby adopt the same as the By-Laws of said corporation.
Executed this 21 day of October, 1992.
[SIGNATURE APPEARS HERE]
--------------------------------------
Name
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the above-
named corporation; that the foregoing By-Laws were adopted as the By-Laws of
said corporation on the date set forth above by the person(s) appointed in the
Articles of Incorporation to act as the Incorporator(s) or First Director(s) of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal this 21 day of October, 1992.
/s/ Claire Palama
----------------------------------------
Secretary
(SEAL)
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE.
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the above-
named corporation and that the above and foregoing Code of By-Laws was
submitted to the shareholders at their first meeting held on the date set forth
in the By-Laws and recorded in the minutes thereof, was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 21 day of October,
1992.
/s/ Claire Palama
--------------------------------------
Secretary
<PAGE>
Exhibit 3.27
ARTICLES OF INCORPORATION
OF
BIA HOTEL CORP.
FIRST: The name of the corporation is:
BIA HOTEL CORP.
SECOND: The purpose of the corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust company
business or the practice of a profession permitted to be incorporated by the
California Corporations Code.
THIRD: The name and address in this state of the corporation's
initial agent for service of process is Andrew Gardner, 333 North June Street,
Los Angeles, California 90004.
FOURTH: The corporation is authorized to issue 100,000 shares of
common stock.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation this 26th day of January, 1984.
/s/ Dennis A. Kahan
------------------------------
Dennis A. Kahan
I, Dennis A. Kahan, hereby declare that I am the person who
executed the foregoing Articles of Incorporation and that said Articles of
Incorporation are my own act and deed.
Executed at Los Angeles, California, this 26th day of January,
1984.
/s/ Dennis A. Kahan
------------------------------
Dennis A. Kahan
[SEAL OF OFFICE OF THE SECRETARY OF STATE APPEARS HERE]
<PAGE>
Exhibit 3.28
Bylaws OF
BIA HOTEL CORP.
A California Corporation
ARTICLE I
OFFICES
Section 1. PRINCIPAL EXECUTIVE OFFICE. The board of directors shall fix the
location of the principal executive office of the corporation at any place
within or without the State of California. If the principal executive office is
located outside the State of California, and the corporation has one or more
business offices in the State of California, the board of directors shall fix
and designate a principal business office in the State of California.
Section 2. OTHER OFFICES. Other business offices may be established at any
time by the board of directors at any place or places where the corporation is
qualified to do business.
ARTICLE II
MEETING OF SHAREHOLDERS
Section. 1. PLACE OF MEETING. All meetings of shareholders shall be held
at the principal executive office of the corporation, or at any other place
within or without the State of California which may be designated either by the
board of directors or by the written consent of all persons entitled to vote at
such meeting who are not present thereat. Such consent may be given either
before or after the meeting and shall be filed with the secretary of the
corporation.
Section 2. ANNUAL MEETINGS.
(a) Annual meetings of shareholders shall be held on the 30th day of
January, each year, at 10 o'clock a.m.; provided, however, that when such day
falls upon a legal holiday, then the annual meeting shall be held at the same
time and place on the next day thereafter ensuing which is a full business day.
At such meetings directors shall be elected, reports of the affairs of the
corporation shall be considered, and any other business may be transacted which
is within the powers of the shareholders.
<PAGE>
(b) Written notice of each annual meeting shall be given to each
shareholder entitled to vote, either personally or by mail or other means of
written communication, charges prepaid, addressed to such shareholder at his
address appearing on the books of the corporation or given by him to the
corporation for the purpose of notice.
(c) If any notice or report addressed to the shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one year from the date of
the giving of the notice or report to all other shareholders.
(d) If a shareholder gives no address, notice shall be deemed to have been
given him if sent by mail or other means of written communication addressed to
the place where the principal executive office of the corporation is situated,
or if published at least once in a newspaper of general circulation in the
county in which said principal executive office is located.
(e) Any notice of an annual meeting shall be given to each shareholder
entitled thereto not less than ten days nor more than sixty days before such
meeting. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation shall be prima facie evidence of the giving of
----- -----
the notice.
(f) Notice of an annual meeting shall specify:
(1) the place, the date, and the hour of such meeting;
(2) those matters which the board, at the time of the mailing of the
notice, intends to present for action by the shareholders;
(3) if directors are to be elected, the names of nominees intended at
the time of the notice to be presented by management for election;
(4) the general nature of any proposal to approve (i) a contract or
other transaction with an interested director, as described in Section 310 of
the Corporations Code, (ii) an amendment to the articles of incorporation
pursuant to Section
2
<PAGE>
902 thereof, (iii) a reorganization pursuant to Section 1201 thereof, (iv) a
voluntary dissolution pursuant to Section 1900 thereof, or (v) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, pursuant to Section 2007 thereof, and
(5) such other matters, if any, as may be expressly required by a
statute.
Section 3. SPECIAL MEETINGS.
(a) Special meetings of the shareholders may be called at any time by
the chairman of the board or the president, or by the board of directors, or by
one or more shareholders holding not less than ten percent of the votes at the
meeting.
(b) Upon receipt of a request in writing delivered personally or sent
by registered mail or by telegraphic or other facsimile transmission to the
chairman of the board, president, any vice president or secretary by any person
(other than the board) entitled to call a special meeting of shareholders that a
special meeting of shareholders be called at the specified time for any proper
purpose set forth in such request, the officer shall forthwith cause notice to
be given to shareholders entitled to vote that a meeting will be held at the
times requested by the person or persons calling the meeting, not less than
thirty-five nor more than sixty days after receipt of the request.
(c) If such notice shall not be given within twenty days after the date
of receipt of such request, the person or persons entitled to call the meeting
may give notice of the meeting. Except where other express provisions are made
by statute, notice of such special meetings shall be given in the manner
provided for in Sections 2(b), (c), (d) and (e) for annual meetings of
shareholders. In addition to the requirements of items f(1) and, if applicable,
f(3) of Section 2, notice of any special meeting shall specify the general
nature of the business to be transacted.
Section 4. QUORUM. Subject to the articles of incorporation, the presence
in person or by proxy of the persons entitled to vote a majority of the voting
shares at any meeting shall constitute a quorum for the transaction of business.
The shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, but only if any
action taken (other than adjournment) is approved by at least a majority of the
shares required to constitute a quorum.
Section 5. ADJOURNED MEETING AND NOTICE THEREOF.
(a) Any shareholders' meeting may be adjourned from time to time by the
vote of a majority of the shares whose holders are either present in person or
represented by proxy thereat.
3
<PAGE>
(b) When any shareholders' meeting is adjourned for more than forty-
five days, or if after adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given as in the case of an
original meeting. Except as provided above, it shall not be necessary to give
any notice of the time and place of the adjourned meeting or of the business to
be transacted thereat, other than by announcement of the time and place thereof
at the meeting at which such adjournment is taken.
Section 6. VOTING.
(a) Unless a record date for voting purposes is filed as provided in
Section 1 of Article V of these bylaws then, subject to the provisions of
Sections 702, 703 and 704 of the Corporations Code relating to voting of shares
held by a fiduciary, in the name of a corporation, or in joint ownership, only
persons in whose names shares entitled to vote stand on the stock records of the
corporation at the close of business on the business day next preceding the day
on which notice of the meeting is given or, if such notice is waived, at the
close of business on the business day next preceding the day on which the
meeting of shareholders is held, shall be entitled to vote at such meeting.
Except with respect to the election of directors, each shareholder shall be
entitled to one vote for each full share entitled to be voted by such
shareholder and any fractional share held by such shareholder shall not be
entitled to any voting rights whatsoever. On any matter other than the election
of directors, any shareholder may vote part of the shares in favor of the
proposal and refrain from voting the remaining shares or vote them against the
proposal, but, if the shareholder fails to specify it will be conclusively
presumed that the shareholder's approving vote is with respect to all shares
that the shareholder is entitled to vote.
(b) Voting may be by voice or by ballot; provided, however, that all
elections for directors must be by ballot if a shareholder so demands before the
voting begins.
(c) Except as provided in Subsection (d) or as required by the
Corporations Code or the articles of incorporation, if a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter shall be the act of the shareholders.
(d) Every shareholder entitled to vote at any election for directors
shall have the right to cumulate his votes and give one candidate a number of
votes equal to the number of directors to be elected multiplied by the number of
votes to which his shares are entitled, or to distribute his votes on the same
principal among as many candidates as he shall think fit, provided that no
shareholder shall be entitled to cumulate votes unless the name of the candidate
or candidates for whom such votes would be cast has been placed in nomination
prior to the voting and a shareholder has given notice at the meeting prior to
the voting of his intention
4
<PAGE>
to cumulate his votes. The candidates receiving the highest number of votes of
shares entitled to be voted for them, up to the number of directors to be
elected, shall be elected.
Section 7. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The
transactions of any meeting of shareholders, however called and noticed, shall
be as valid as though had at a meeting duly held after regular call and notice,
if a quorum is present either in person or by proxy, and if, either before or
after the meeting, each of the persons entitled to vote not present in person or
by proxy or who, though present, has, at the beginning of the meeting, properly
objected to the transaction of any business because the meeting was not lawfully
called or convened or because of the exclusion of particular matters of business
legally required to be included in the notice, signs a written waiver of notice,
or a consent to the holding of such meeting, or an approval of the minutes
thereof. The waiver of notice or consent need not specify either the business to
be transacted or the purpose of any meeting of shareholders, except that if
action is taken or proposed to be taken for approval of any of those matters
specified in Section 2(f)(4) of this Article II, the waiver of notice or consent
shall state the general nature of the action taken or proposed to be taken. All
such waivers, consents or approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 8. ACTION WITHOUT A MEETING.
(a) Directors may be elected without a meeting by a written consent,
signed by all of the persons who would be entitled to vote for the election of
directors, provided that a director may be elected without notice at any time to
fill a vacancy other than one created by removal, not filled by the directors by
the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors.
(b) Any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting, and, except as provided in
Subsection (c), without notice, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
(c) If the consents of all shareholders entitled to vote have not been
solicited in writing, shareholders entitled to vote who have not given written
consent shall be given the following:
(1) Notice of any proposed shareholder approval of, (i) a contract
or other transaction with an interested director as described in Section 310 of
the Corporations Code, (ii) indemnification of an agent of the corporation as
authorized by
5
<PAGE>
Section 11 of Article V of these bylaws, (iii) a reorganization of the
corporation pursuant to Section 1201 of the Corporations Code, or (iv) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 thereof, at least ten
days before the consummation of the action authorized by such approval; and
(2) Prompt notice of the taking of any other corporate action
approved by shareholders without a meeting by Less than unanimous written
consent.
(d) Notices given pursuant to Subsection (c) of this Section shall be
given in the manner provided in. Section 2 of this Article.
(e) Unless the board of directors has fixed a record date for the
determination of shareholders entitled to receive such notice and to give such
written consent pursuant to Section 1. of Article V hereof, the record date for
such determination shall be the day on which the first written consent is given.
All such written consents shall be filed with the secretary of the corporation.
(f) Any shareholder, proxyholder, or a transferee of shares, personal
representative of the shareholder or their respective proxyholders, giving a
written consent, may revoke the consent by a writing received by the corporation
prior to the time that written consents of the number of shares required to
authorize the proposed action have been filed with the secretary of the
corporation, but may not do so thereafter. Such revocation is effective upon its
receipt by the secretary of the corporation.
Section 9. PROXIES.
(a) Every person entitled to vote or execute consents shall have the
right to do so either in person or by one or more agents authorized by a written
proxy executed by such person or his duly authorized agent and filed with the
secretary of the corporation. A proxy shall be deemed executed if the
shareholder's name is placed on the proxy (either by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney in fact. A duly executed proxy which does not state that
it is irrevocable shall continue in full force and effect until, (i) an
instrument revoking it or a duly executed proxy bearing a later date is filed
with the secretary of the corporation prior to the vote pursuant thereto, (ii)
the person executing the proxy attends the meeting and votes in person, or (iii)
written notice of the death or incapacity of the maker of such proxy is received
by the corporation before the counting of the vote in which such proxy has been
cast; provided that no such proxy shall be valid after the expiration of eleven
months from the date of its execution, unless the person executing it specifies
therein the length of time for which such proxy is to continue in force.
6
<PAGE>
(b) The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Subsections 703(e) and 705(f)
of the Corporations Code.
(c) Executors, administrators, guardians, trustees or any fiduciary,
may give proxies, waive notice of and consent to any meeting of shareholders, or
authorize by a writing, any action which could be taken by shareholders. The
manner of execution, revocation and use of proxies shall be governed by the
provisions of the Corporations Code except that the board of directors may, in
advance of any meeting of the shareholders, prescribe additional regulations
concerning the manner of execution, filing and validation of proxies which are
intended to be voted at any such meeting.
(d) If any instrument of proxy designates two or more persons to act as
proxy, in the absence of any provision in the proxy to the contrary, the persons
designated may represent and vote the shares in accordance with the vote or
consent of the majority of the persons named as such proxies. If only one such
proxy is present, he may vote all the shares, and all the shares standing in the
name of the principal or principals for whom such proxy acts shall be deemed
represented for the purpose of obtaining a quorum. The foregoing provisions
shall apply to the voting of shares by proxies for any two or more
administrators, executors, trustees or other fiduciaries, unless an instrument
or order of court appointing them otherwise directs.
Section 10. INSPECTORS OF ELECTION.
(a) In advance of any meeting of shareholders, the board of directors
may appoint any persons other than nominees for office as inspectors of election
to act at such meeting or any adjournment thereof. If inspectors of election are
not so appointed, the chairman of any such meeting may, and on the request of
any shareholder or his proxy shall, make such appointment at the meeting. The
number of inspectors shall be either one or three. If appointed at a meeting on
the request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed. In case any person appointed as inspector fails
to appear or fails or refuses to act, the vacancy may, and on the request of any
shareholder or his proxy shall, be filled by appointment by the board of
directors in advance of the meeting, or at the meeting by the chairman of the
meeting.
(b) Such inspectors shall (1) determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies;
(2) receive votes, ballots or consents; (3) hear and determine all challenges
and questions in any way arising in connection with the right to vote; (4) count
and tabulate all votes or consents; (5) determine when the
7
<PAGE>
polls shall close; (6) determine the result; and (7) perform such acts as may be
proper to conduct the election or vote with fairness to all shareholders. In
determining the validity and effect of proxies, the dates contained on the forms
of proxy shall presumptively determine the order of execution of the proxies,
regardless of the postmark dates on the envelope in which they are mailed.
(c) If there are three inspectors of election, the decision, act, or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. Any report or certificate made by the inspectors of election
is prima facie evidence of the facts stated therein.
----- -----
Section 11. ORGANIZATION. At every meeting of the shareholders, the
president, or in his absence any vice president designated by the president or
the board of directors or a chairman chosen by a majority in interest of the
shareholders of the corporation present in person or by proxy and entitled to
vote, shall act as chairman. The secretary of the corporation, or in his absence
an assistant secretary, shall act as secretary of all meetings of the
shareholders. In the absence of the secretary and assistant secretary, the
chairman may appoint another person to act as secretary of the meeting.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to limitations of the articles of incorporation
and of the Corporations Code pertaining to action to be authorized or approved
by the shareholders, and subject to the duties of directors as prescribed by the
bylaws, all corporate powers shall be exercised by or under the authority of,
and the business and affairs of the corporation shall be controlled by, the
board of directors. Without prejudice to such general powers, but subject to the
same limitations, it is hereby expressly declared that the directors shall have
the following powers:
(a) To select and remove all the officers, agents and employees of the
corporation, prescribe powers and duties for them not inconsistent with law,
with the articles of incorporation or the bylaws, to fix their compensation, and
to require from them security for faithful service;
(b) To conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the articles of incorporation or the bylaws;
8
<PAGE>
(c) To adopt, make and use a corporate seal, and to prescribe the forms of
certificates of stock, and to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of the law;
(d) To authorize the issuance of shares of stock of the corporation from
time to time, upon such terms as are lawful;
(e) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor in the corporate
name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidences of debt and securities;
(f) By resolution adopted by a majority of the authorized number of
directors, to designate an executive committee or other committees, each
consisting of two or more directors to serve at the pleasure of the board, and
to prescribe the manner in which proceedings of such committees shall be
conducted. Unless the board of directors shall prescribe a different manner for
such proceedings, meetings of such committees may be regularly scheduled in
advance or may be called at any time by any two members thereof; otherwise, the
provisions of these bylaws with respect to notice and conduct of meetings of the
board shall govern. Any such committee, to the extent provided in a resolution
of the board, shall have all of the authority of the board, except with respect
to:
(1) the approval of any action for which the Corporations Code or the
articles of incorporation also requires shareholder approval;
(2) the filling of vacancies on the board or in any committee;
(3) the fixing of compensation of the directors for serving on the
board or on any committee;
(4) the adoption, amendment or repeal of bylaws;
(5) the amendment or repeal of any resolution of the board which by
its express terms is not so amendable or repealable;
(6) any distribution to the shareholders, except at a rate or in a
periodic amount or within a price range determined by the board; and
(7) the appointment of other committees of the board or the members
thereof.
9
<PAGE>
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS.
(a) The number of directors of the corporation shall be not less than 3
nor more than 5 until changed by amendment of the articles of incorporation or
by a bylaw amending this Section 2 duly adopted by the vote or written consent
of holders of a majority of the outstanding shares entitled to vote, provided
that a proposal to reduce the authorized number or the minimum number of
directors below five cannot be adopted if the votes cast against its adoption at
a meeting or the shares not consenting in the case of action by written consent,
are equal to more than 16-2/3 percent of the outstanding shares entitled to
vote.
(b) The exact number of directors shall be fixed from time to time,
within the limits specified in the articles of incorporation or in this Section
2, by a bylaw or amendment thereof duly adopted by the vote of a majority of the
shares entitled to vote represented at a duly held meeting at which a quorum is
present, or by the written consent of the holders of a majority of the
outstanding shares entitled to vote, or by the board of directors. The exact
number of directors of this corporation shall be 3 until changed in compliance
with this Subsection. No director need be a shareholder.
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be elected at
each annual meeting of shareholders to hold office until the next annual meeting
but, if any such annual meeting is not held or the directors are not elected
thereat, the directors may be elected at any duly noticed special meeting of
shareholders. All directors shall hold office until their respective successors
are elected and qualified, subject to the provisions of the Corporations Code
and of these bylaws with respect to vacancies on the board.
Section 4. VACANCIES.
(a) A vacancy on the board of directors shall be deemed to exist if a
director has died, resigned or been removed, or if the authorized number of
directors is increased, or if the shareholders fail, at any annual or special
meeting of shareholders at which any director or directors are elected, to elect
the full authorized number of directors to be voted for at that meeting. The
board of directors may also declare vacant the office of a director who has been
declared of unsound mind by an order of court or has been convicted of a felony.
(b) Vacancies on the board of directors, except for a vacancy created
by the removal of a director, may be filled by a majority of the remaining
directors, though less than quorum, or by a sole remaining director, and each
director so elected shall hold office until his successor is elected at an
annual or a special meeting of the shareholders. A vacancy on the board created
by the removal of a director may only be filled by the vote of a majority of
10
<PAGE>
the shares entitled to vote represented at a duly held meeting at which a quorum
is present, or by the written consent of the holders of a majority of the
outstanding shares.
(C) The shareholders may elect a director or directors at any
time to fill any vacancy or vacancies not filled by the directors. Any such
election by written consent shall require the consent of holders of a majority
of the outstanding shares entitled to vote.
(d) Any director may resign effective upon giving written notice
to the chairman of the board, the president, or the secretary of the board of
directors of the corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the board of directors accepts the
resignation of a director tendered to take effect at a future time, the board or
the shareholders shall have power to elect a successor to take office when the
resignation is to become effective.
(e) No reduction of the authorized number of directors shall have
the effect of removing any director prior to the expiration of his term of
office.
Section 5. PLACE OF MEETING. Regular meetings of the board of
directors shall be held at any place within or without the State of California
which has been designated from time to time by resolution of the board or by
written consent of all members of the board. In the absence of such designation,
regular meetings shall be held at the principal executive office of the
corporation. Special meetings of the board may be held either at a place
designated by resolution of the board or in the notice of meeting, or if not so
designated, at the principal executive office.
Section 6. ORGANIZATION MEETING. Immediately following each annual
meeting of shareholders, the board of directors shall hold a regular meeting at
the place of said annual meeting or at such other place as shall be fixed by the
board of directors, for the purpose of organization, election of officers, and
the transaction of other business. Call and notice of such meetings are hereby
dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the
board of directors shall be held without notice if the date and place of such
meetings are fixed by the board. Should said date fall upon a legal holiday,
then said meeting shall be held at the same time on the next day thereafter
ensuing which is a full business day.
Section 8. SPECIAL MEETINGS.
(a) Special meetings of the board of directors for any
purpose or purposes may be called at any time by the chairman of the board, the
president, any vice president, the secretary or by any two directors.
11.
<PAGE>
(b) Special meetings of the board of directors shall be
held upon at least four days' notice by mail or upon forty-eight hours' notice
delivered personally or by telephone or telegraph.
(c) Notice by mail shall be deemed given at the time a
written notice is deposited in the United States mail, first class postage
prepaid, addressed to the recipient at his address as it is shown upon the
records of the corporation, or, if it is not so shown on such records and is not
readily ascertainable, at the principal executive office of the corporation.
Notice by telegraph shall be deemed given when it is actually transmitted by the
telegraph company. Notice by telephone shall be deemed given when it is
communicated by telephone to the recipient or to a person at the office of the
recipient, if the person giving the notice has reason to believe it will
promptly be communicated to the recipient.
(d) Any notice of a special meeting shall state the date,
place and hour of the meeting. A notice need not specify the purpose of the
meeting.
Section 9. ACTION WITHOUT MEETING. Any action by the board of
directors may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board and shall have the same force and effect as a unanimous vote of the
directors.
Section 10. ACTION AT A MEETING: QUORUM AND REQUIRED VOTE.
(a) Presence of a majority of the authorized number of
directors at a meeting of the board of directors constitutes a quorum for the
transaction of business, except as hereinafter provided. Members of the board
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting as permitted in the preceding
sentence constitutes presence in person at such meeting.
(b) Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the board of directors, subject to the articles of
incorporation and the provisions of Section 310 of the Corporations Code
regarding transactions with interested directors, Section 311 thereof regarding
the appointment of committees, and of Subsection 317(e) thereof regarding
indemnification of corporate officers, directors and other agents. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided that any action taken is
approved by at least a majority of the required quorum for such meeting.
12.
<PAGE>
Section 11. WAIVER OF NOTICE. The transactions of any meeting of
the board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum is present and if, either before or after the meeting, each of the
directors who was not present or who, though present, had prior to the meeting
or at its commencement, protested the lack of proper notice to him, signs a
written waiver of notice or a consent to holding such meeting or an approval of
the minutes thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Section 12. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any directors' meeting to another time
and place.
Section 13. NOTICE OF ADJOURNMENT. If the meeting is adjourned
for more than twenty-four hours, notice of any adjournment to another time or
place shall be given prior to the time of the adjourned meeting to the directors
who were not present at the time of adjournment. Otherwise notice of the time
and place of holding an adjourned meeting need not be given to absent directors
if the time and place be fixed at the original meeting.
Section 14. CONDUCT OF MEETINGS. At every meeting of the board of
directors the chairman of the board of directors, if there shall be such an
officer, shall preside. If not, a chairman chosen by a majority of the directors
present shall preside. The secretary of the corporation shall act as secretary
of the board of directors. In case the secretary shall be absent from any
meeting of the board, an assistant secretary shall perform the duties of the
secretary at such meeting. In the absence from any such meetings of both the
secretary and the assistant secretary, the chairman may appoint any person to
act as secretary of the meeting.
Section 15. FEES AND COMPENSATION. Directors and members of committees
may receive such compensation for their services, and such reimbursement for
expenses, as may be fixed or determined by resolution of the board. This Section
shall not be construed as precluding any director from serving the corporation
in any other capacity as an officer, agent, employee, or otherwise, and
receiving compensation for those services.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The corporation shall have a chairman of the board
or a president, or both of such officers, a secretary, a chief financial officer
and, if the board of directors
13.
<PAGE>
so determines, may have one or more vice presidents, assistant secretaries and
assistant financial officers. The board of directors may from time to time also
elect such other officers as it shall deem necessary and shall determine the
terms of office, powers and duties of such officers. Any number of offices may
be held by the same person.
Section 2. ELECTION. The officers of the corporation except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article, shall be chosen annually by the board of directors,
and each shall hold his office at the pleasure of the board, or until he shall
resign or shall be removed or otherwise disqualified to serve, or his successor
shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS. The board of directors may appoint,
and may empower the president to appoint, such other officers as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in the bylaws or as
the board of directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION.
(a) Any officer may be removed either with or without cause by a
majority of the directors at the time in office, at any regular or special
meeting of the board, or, except in case of an officer chosen by the board of
directors, by any officer upon whom such power of removal may be conferred by
the board of directors. The corporation's right to remove any officer shall be
subject to such officer's rights under any contract of employment.
(b) Any officer may resign at any time by giving written notice
to the board of directors or to the president, or to the secretary of the
corporation, without prejudice, however, to any right which the corporation may
have under any contract to which such officer is a party. Any such resignation
shall take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the bylaws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if
there shall be such an officer, shall, if present, preside at all meetings of
the board of directors and exercise and perform such other powers and duties as
may be assigned to him from time to time by the board of directors or prescribed
by the bylaws.
14.
<PAGE>
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the board of directors to the chairman of the board, if there is
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the chairman of the board, or if there is none, at all meetings of
the board of directors. He shall be ex-officio a member of all the standing
----------
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the board of directors or the bylaws.
Section 8. VICE PRESIDENT. In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors or the bylaws or by the chairman of the board or the
president.
Section 9. SECRETARY.
(a) The secretary shall record or cause to be recorded, and shall
keep or cause to be kept, written minutes of the proceedings of the
shareholders, board of directors, and committees of the board.
(b) The secretary shall keep, or cause to kept, at the
principal executive office or at the office of the corporation's transfer agent
a record of its shareholders showing the names and addresses of shareholders and
the number and all classes of shares held by each.
(c) The secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the board of directors required by the
bylaws or by law to be given, and he shall keep the seal of the corporation in
safe custody and shall affix it to stock certificates prior to issuance and to
such other instruments as the board of directors shall prescribe. He shall
perform all other duties incident to the office of secretary and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or by the bylaws.
Section 10. ASSISTANT SECRETARY. At the request of the secretary, or in
his absence or disability, the assistant secretary, designated by him shall
perform all the duties of the secretary, and when so acting, he shall have all
the powers of, and be subject to
15.
<PAGE>
all the restrictions upon, the secretary. The assistant secretary shall perform
such other duties as from time to time may be assigned to him by the board of
directors or the secretary.
Section 11. CHIEF FINANCIAL OFFICER.
(a) The chief financial officer of the corporation shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and of the business transactions
of the corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital and shares.
(b) The chief financial officer shall have charge and
custody of, and be responsible for, all funds and securities of the corporation
and shall open accounts at, and deposit all monies and other valuables in the
name and to the credit of the corporation with, such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation. He shall perform all other duties incident to the office of chief
financial officer and have such other powers and perform such other duties as
may be prescribed by the board of directors or the bylaws.
Section 12. SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
MISCELLANEOUS
Section 1. RECORD DATE. The board of directors may fix, in advance, a
record date not more than sixty days nor less than ten days prior to the date of
any meeting, nor more than sixty days prior to any other action for which it is
fixed. Only shareholders of record on a record date so fixed are entitled to
notice of and to vote at any such meeting, to give consent without a meeting, to
receive any report, to receive a dividend or distribution or any allotment of
rights or to exercise any other rights of shareholders, as the case may be
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the articles of incorporation
or bylaws.
16.
<PAGE>
Section 2. INSPECTION OF CORPORATE RECORDS.
(a) The accounting books and records, the record of
shareholders, and minutes of proceedings of the shareholders and the board and
committees of the board of the corporation and any subsidiary of the corporation
shall be open to inspection upon the written demand on the corporation of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours, for a purpose reasonably related to such holder's
interests as a shareholder or as the holder of such voting trust certificate.
Such inspection by a shareholder or holder of a voting trust certificate may be
made in person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
(b) A shareholder or shareholders holding at least five
percent in the aggregate of the outstanding voting shares of the corporation or
who hold at least one percent of such voting shares and have filed a Schedule
14B with the United States Securities and Exchange Commission relating to the
election of directors of the corporation shall have the absolute right (in
person, or by agent or attorney) to inspect and copy the record of shareholders'
names and addresses and shareholdings during usual business hours upon five
business days' prior written demand upon the corporation and to obtain from the
transfer agent for the corporation, upon written demand and upon the render of
its usual charges, a list of names and addresses of the shareholders who are
entitled to vote for the election of directors, and their shareholdings, as of
the most recent record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. The list shall be
made available on or before the later of five business days after the date the
demand is received or the date specified therein as the date of which the list
is to be compiled.
(c) Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents of every
kind and to inspect the physical properties of the corporation and any
subsidiary corporation. Such inspection by a director may be made in person or
by agent or attorney.
Section 3. CHECKS, DRAFTS, ETC.
(a) All checks, drafts or other orders for payment of
money, notes or other evidences of indebtedness issued in the name of or payable
to the corporation shall be signed or endorsed by such person or persons and in
such manner as, from time to time, shall be determined by resolution of the
board of directors.
(b) Endorsements for deposit to the credit of the corporation in
any of its duly authorized depositories may be made without countersignature by
the president or any vice president or the chief financial officer or by any
other officer or agent of the
17.
<PAGE>
corporation to whom the board of directors, by resolution, shall have delegated
such power, or by hand-stamped impression in the name of the corporation.
Section 4. ANNUAL AND OTHER REPORTS.
(a) The corporation shall not be required to send to its
shareholders the annual report described in Section 1501 of the Corporations
Code.
(b) A shareholder or shareholders holding at least five
percent of the outstanding shares of any class of the corporation may make a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the current fiscal year
ended more than thirty days prior to the date of the request and a balance sheet
of the corporation as of the end of such period. The statement shall be
delivered or mailed to the person making the request within thirty days
thereafter. A copy of the statements shall be kept on file in the principal
executive office of the corporation for twelve months and they shall be
exhibited at all reasonable times to any shareholder demanding an examination of
them or a copy shall be mailed to such shareholder.
(c) The corporation shall; upon the written request of
any shareholder, mail to the shareholder a copy of the last annual, semi-annual
or quarterly income statement which it has prepared and a balance sheet as of
the end of the period. The quarterly income statements and balance sheets shall
be accompanied by the report thereon, if any, of any independent accountants
engaged by the corporation or by the certificate of an authorized officer of the
corporation or by the certificate of an authorized officer of the corporation
that such financial statements were prepared without audit from the books and
records of the corporation.
Section 5. CONTRACTS. Except as otherwise provided in the
bylaws, the board of directors may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances; and, unless so authorized by the board of directors, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or to any amount, except as otherwise provided by law.
Section 6. STOCK CERTIFICATES.
(a) Every holder of shares in the corporation shall be
entitled to have a certificate signed in the name of the corporation by the
chairman or vice chairman of the board or the president or a vice president and
by the chief financial officer or
18.
<PAGE>
the secretary or assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any of the signatures on the
certificate may be facsimile. in case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, it may be issued by the corporation with
the same effect as if such person were an officer, transfer agent or registrar
at the date of issue.
(b) Any such certificate shall also contain any legend or
other statement required by Sections 417 or 418 of the Corporations Code, by the
Corporate Securities Law of 1968, and by the federal securities laws. This shall
include, without limitation any statement required by the existence of any
agreement between the corporation and the proposed issues of a certificate.
(c) Certificates for shares may be issued prior to full
payment under such restrictions and for such purposes as the board of directors
or the bylaws may provide; provided, however, that any such certificate so
issued prior to full payment shall state on the face thereof the amount
remaining unpaid and the terms of payment thereof.
Section 7. TRANSFER ON THE BOOKS.
(a) Upon surrender to the secretary or transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
secretary or transfer agent shall issue a new certificate to the person entitled
thereto. A person in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof as regards the corporation;
provided that whenever any transfer of shares shall be made for collateral
security, and not absolutely, and written notice thereof shall be given to the
secretary of the corporation or its transfer agent, such fact shall be stated in
the entry of the transfer.
(b) when a transfer of shares is requested and there is
reasonable doubt as to the right of the person seeking the transfer, the
corporation or its transfer agent, before recording the transfer of the shares
on its books or issuing any certificate therefor, may require from the person
seeking the transfer reasonable proof of his right to the transfer, or may
require adequate security or a bond of indemnity executed by a corporate surety
or by two individual sureties satisfactory to the corporation as to form,
amount, and responsibility of sureties. The bond shall be conditioned to protect
the corporation, its officers, transfer agents, and registrars, or any of them,
against any loss, damage, expense, or other liability to the owner of the shares
by reason of the recordation of the transfer or the issuance of a new
certificate for shares.
19.
<PAGE>
Section 8. LOST, STOLEN AND DESTROYED CERTIFICATES. The holder
of any certificate for shares of the corporation shall immediately notify the
corporation of any loss, theft or destruction of such certificate, and the
corporation may issue a new certificate to replace such certificate alleged to
have been lost, stolen or destroyed. The board of directors may, in its
discretion, require the owner of the lost, stolen or destroyed certificate or
his legal representative to give the corporation a bond in such sum and with
such surety or sureties, as it may direct, to indemnify the corporation, its
transfer agent and registrar against any claim that may be made against it on
account of or arising out of the alleged loss, theft or destruction of any such
certificate or the issuance of the new certificate.
Section 9. COMPULSORY EXCHANGE OF CERTIFICATES. When the articles of
incorporation are amended in any way affecting the statement contained in the
certificates for outstanding shares, or when, in the discretion of the board of
directors, it becomes desirable for any reason to cancel any outstanding
certificate for shares and issue a new certificate therefor conforming to the
rights of the holder, the board of directors may order any holder of outstanding
certificates for shares to surrender and exchange them for new certificates
within a reasonable time to be fixed by the board of directors. Such order may
provide that a holder of any certificate so ordered to be surrendered is not
entitled to vote or to receive dividends or to exercise any of the other rights
of shareholders of record until he has complied with the order, but such order
shall operate to suspend such rights only after notice and until compliance.
Section 10. INSPECTION OF BY-LAWS. The secretary shall keep at
the principal executive office in California, or if the principal executive
office is not in California, then at the principal business office in
California, the original or a copy of the bylaws as amended to date, certified
by the secretary, which shall be available for inspection by the shareholders at
all reasonable times during office hours. If the corporation has neither a
principal executive office nor a principal business office in California, it
shall furnish a copy of the bylaws as amended to date to any shareholder who
makes a written request for such bylaws.
Section 11. INDEMNIFICATION. The corporation shall indemnify any
officer, director or other agent of the corporation who has been successful on
the merits in defense of any proceeding referred to in Subsections 317(b) or (c)
of the Corporations Code, or in defense of any claim, issue or matter in such
proceeding, against expenses actually and reasonably incurred by the agent in
connection therewith. The corporation may also indemnify, or purchase and
maintain insurance for, any officer, director, or other agent, to the extent
permitted by Section 317 of the Corporations Code.
20.
<PAGE>
Section 12. CONSTRUCTIONS AND DEFINITIONS. Unless the content otherwise
requires the general provisions, rules of construction and definitions contained
in the California Corporations Code shall govern the construction of these
bylaws.
ARTICLE VI
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted
or these bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the corporation's articles of incorporation set forth the
number of its authorized directors, the authorized number of directors may be
changed only by an amendment of the articles of incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 1 of this Article VI, new bylaws may be
adopted or these bylaws amended or repealed by the board of directors, provided
that no such bylaw may change the authorized number of directors of the
corporation except that, if the corporation has a variable board of directors,
such bylaw may fix the exact number of directors within the limits specified in
the articles of incorporation or in Section 2 of Article III of the bylaws.
CERTIFICATE OF SECRETARY
THE UNDERSIGNED DOES HEREBY CERTIFY:
That I am the duly elected, qualified and acting Secretary of
BIA HOTEL CORP., a California corporation, and that the above and foregoing
Bylaws were adopted as the Bylaws of said corporation on April 15, 1984, by the
directors of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of April, 1984.
/s/ Robert Snukal
----------------------------
Robert Snukal, Secretary
21.
<PAGE>
Exhibit 3.29
1459020
ARTICLES OF INCORPORATION FILED
in the office of the
OF Secretary of State of
the State of California
BRIER OAK CONVALESCENT, INC. MAR 30, 1989
/s/ March Fong Eu
March Fong Eu
Secretary of State
I
The name of this corporation is Brier Oak Convalescent, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's initial
agent for service of process is: Robert Snukal, 4311 Wilshire Boulevard, Suite
206, Los Angeles, California 90010.
IV
This corporation's is authorized to issue only one class of shares of stock; and
the total number of shares which this corporation is authorized to issue is
500,000.
DATED: March 30, 1989. /s/ David B. Bloom
-------------------------------------
DAVID B. BLOOM
I hereby declare that I am the person who executed the foregoing Articles of
Incorporation, which execution is my act and deed.
/s/ David B. Bloom
-------------------------------------
DAVID B. BLOOM
[SEAL OF THE OFFICE
OF THE SECRETARY OF
STATE APPEARS HERE]
<PAGE>
Exhibit 3.30
BY-LAWS OF
BRIER OAK CONVALESCENT, INC.
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and or the
- ----------
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Time of Meeting: 5:30 O'clock A.M. Date of Meeting: The 27th day of
April of each year.
Section 2. PLACE. Annual meetings and special meetings shall be held at such
- ----------
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the Chairman
- ----------
of the Board, if any, Vice Chairman of the Board, if any, the President, if any,
the Secretary, or by any officer instructed by the Directors to call the
meeting. Special meetings may be called in like manner and by the holders of
shares entitled to cast not less than ten percent of the votes at the meeting
being called.
Section 4. NOTICE. Written notice stating the place, day and hour of each
- ----------
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located. Such notice shall be deemed to be delivered when
deposited in the United States mail with first class postage therein prepaid, or
sent by other means of written communication addressed to the shareholder at his
address as it appears on the stock transfer
1
<PAGE>
books of the corporation. The notice of any meeting at which directors are to be
elected shall include the names of nominees intended at the time of notice to be
presented by management for election. At an annual meeting of shareholders, any
matter relating to the affairs of the corporation, whether or not stated in the
notice of the meeting, may be brought up for action except matters which the
General Corporation Law requires to be stated in the notice of the meeting. The
notice of any annual or special meeting shall also include, or be accompanied
by, any additional statements, information, or documents prescribed by the
General Corporation Law. When a meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; provided that,
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
- ----------
and wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
- ----------
over by one of the following officers in the order of seniority and if present
and acting the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, if any, a Vice President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the share-holders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present, the Chairman of the meeting shall appoint a
secretary of the meeting.
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person
- ----------
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless
2
<PAGE>
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the person executing it prior to the vote or written action pursuant thereto,
except as otherwise provided by the General Corporation Law. As used herein, a
"proxy" shall be deemed to mean a written authorization signed by a shareholder
or a shareholder's attorney in fact giving another person or persons power to
vote or consent in writing with respect to the shares of such shareholder, and
"Signed" as used herein shall be deemed to mean the placing of such
shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
- ----------
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
- ----------
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
- -----------
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
3
<PAGE>
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken
at any annual or special meeting may be taken without a meeting and without
prior notice, if a consent in writing, setting forth the action so taken, shall
be signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by ballot
- -----------
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
- -----------
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by them shall be voted as provided therein or in section 706 and may
otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
- ----------
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
4
<PAGE>
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
- ---------
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
- ---------
the corporation, a citizen of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be 4. Thereafter, the authorized number of
directors constituting the Board shall be at least three provided that, whenever
the corporation shall have only two shareholders, the number of directors may be
at least two, and, whenever the corporation shall have only one shareholder, the
number of directors may be at least one. Subject to the foregoing provisions,
the number of directors may be changed from time to time by an amendment of
these By-Laws adopted by the shareholders. Any such amendment reducing the
number of directors to fewer than five cannot be adopted if the votes cast
against its adoption at a meeting or the shares not consenting in writing in the
case of action by written consent are equal to more than sixteen and two-thirds
percent of the outstanding shares. No decrease in the authorized number of
directors shall have the effect of shortening the term of any incumbent
director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
- ---------
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and
5
<PAGE>
qualified, or until their earlier resignation, removal from office, or death. In
the interim between annual meetings of shareholders or of special meetings of
shareholders called for the election of directors, any vacancies in the Board of
Directors, including vacancies resulting from an increase in the authorized
number of directors which have not been filled by the shareholders, including
any other vacancies which the General Corporation Law authorizes directors to
fill, and including vacancies resulting from the removal of directors which are
not filled at the meeting of shareholders at which any such removal has been
effected, if the Articles of Incorporation or a By-Law adopted by the
shareholders so provides, may be filled by the vote of a majority of the
directors then in office or of the sole remaining director, although less than a
quorum exists. Any director may resign effective upon giving written notice to
the Chairman of the Board, if any, the President, the Secretary or the Board of
Directors, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation is effective at a future time, a successor
may be elected to the office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
- ---------
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
Section 6. MEETINGS.
- ---------
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State
of California, which has been designated in any notice of the meeting, or, if
not stated in said notice, or, if there is no notice given, at the place
designated by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who
6
<PAGE>
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. A notice or waiver of notice need not
specify the purpose of any regular or special meeting of the Board of Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
- ---------
only one director is required by the By-Laws or Articles of Incorporation, then
any reference herein to notices, waivers, consents, meetings or other actions by
a majority or quorum of the directors shall be deemed to refer to such notice,
waiver, etc., by such sole director, who shall have all the rights and duties
and shall be entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to a Board of Directors.
Section 8. QUORUM AND ACTION. A majority of the authorized number of directors
- ---------
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors present
at a meeting duly held at which a quorum is present shall be the act of the
Board of Directors. Members of the Board of Directors may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another, and
participation by such use shall be deemed to constitute presence in person at
any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action which may be taken is approved by at least a majority of the required
quorum for such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
- ---------
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
- ----------
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total
7
<PAGE>
number of votes were cast, or, if such action is taken by written consent, in
lieu of a meeting, all shares entitled to vote were voted, and the entire number
of directors authorized at the time of the director's most recent election were
then being elected. If any or all directors are so removed, new directors may be
elected at the same meeting or by such written consent. The Board of Directors
may declare vacant the office of any director who has been declared of unsound
mind by an order of court or convicted of a felony.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a
- ----------
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
- ----------
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
- ----------
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
ARTICLE III.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
- ---------
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
- ---------
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and
8
<PAGE>
qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
- ---------
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
- ---------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ---------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as nay
be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the
- ---------
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed
9
<PAGE>
for them respectively by the Board of Directors or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
- ---------
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
- ----------
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
- ---------
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or
10
<PAGE>
the Vice Chairman of the Board of Directors, if any, the President, if any, or a
Vice President, if any, and by the Chief Financial Officer or an Assistant
Treasurer or the Secretary or an Assistant Secretary. Any or all of the
signatures on a certificate for shares may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate for shares shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if such person were an officer,
transfer agent or registrar at the date of issue.
In the event that the corporation shall issue the whole or any part of
its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue
- ---------
a new certificate for shares or for any other security in the place of any other
certificate theretofore issued by it, which is alleged to have been lost, stolen
or destroyed. As a condition to such issuance, the corporation may require any
such owner of the allegedly lost, stolen or destroyed certificate or any such
owner's legal representative to give the corporation a bond, or other adequate
security, sufficient to indemnify it against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
- ---------
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
- ---------
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; the record date
11
<PAGE>
for determining shareholders entitled to give consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors has
been taken, shall be the day on which the first written consent is given; and
the record date for determining shareholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto, or the sixtieth day prior to the day of such other
action, whichever is later.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
- ---------
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the
- ---------
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders of record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights where there are two or more classes or
series of shares or upon which or upon whom the General Corporation Law confers
such rights notwithstanding that the Articles of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
- ---------
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418 (c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate
12
<PAGE>
filing of or amendment to its Articles as required by Section 202 and shall
terminate when this corporation ceases to be a close corporation. Such an
agreement cannot waive or alter Sections 158 (defining close corporations), 202
(requirements of Articles of Incorporation), 500 and 501 relative to
distributions, 111 (merger), 1201(e) (reorganization) or Chapters 15 (Records
and Reports), 16 (Rights of Inspection), 18 (Involuntary Dissolution) or 22
(Crimes and Penalties). Any other provisions of the Code or these By-Laws may
be altered or waived thereby, but to the extent they are not so altered or
waived, these By-Laws shall be applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purposes or any amount, except as
provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended
or repealed or new By-Laws may be adopted by the shareholders entitled to
exercise a majority of the voting power or by the Board of Directors; provided,
however, that the Board of Directors shall have no control over any By-Law which
fixes or changes the authorized number of directors of the corporation;
provided, further, than any control over the By-Laws herein vested in the Board
of Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of director.
to fewer than five shall require authorization by the greater proportion of
voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS-STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
- ---------
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to
13
<PAGE>
date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders
- ---------
for payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
- ---------
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of process
- ---------
within the State of California is Robert Snukal.
14
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE. THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the
above-named corporation and that the above and foregoing Code of By-Laws was
submitted to the shareholders at their first meeting held on the date set forth
in the By-Laws and recorded in the minutes thereof, was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of April,
1989.
/s/ Sheila Snukal
------------------------
Secretary, Sheila Snukal
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of
Incorporation to act as the Incorporator(s) or First Director(s) of the above
named corporation hereby adopt the same as the By-Laws of said corporation.
Executed this 27th day of April 1989.
/s/ Robert Snukal
-----------------------------
Name
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of
the above-named corporation; that the foregoing By-Laws were adopted as the By-
Laws of said corporation on the date set forth above by the person(s) appointed
in the Articles of Incorporation to act as the Incorporator(s) or First
Director(s) of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 27th day of april, 1989.
/s/ Sheila Snukal
------------------------
Secretary, Sheila Snukal
(SEAL)
<PAGE>
Exhibit 3.31
1477539
FILED
In the office of the Secretary of State
of the State of California
FEB 26 1990
/s/ March Fong EU
MARCH FONG EU, Secretary of State
ARTICLES OF INCORPORATION
OF
WILSHIRE CARE CENTER, INC.
I
The name of this corporation is Wilshire Care Center, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's initial
agent for service of process is:
Robert Snukal, 4311 Wilshire Boulevard, Suite 206, Los Angeles, California
90010.
IV
This corporation is authorized to issue only one class of shares of stock; and
the total number of shares which this corporation is authorized to issue is
500,000.
Dated: February 26, 1990 /s/ David B. Bloom
--------------------------
DAVID B. BLOOM
I hereby declare that I an the person who executed the foregoing Articles of
Incorporation, which execution is my act and deed.
/S/ David B. Bloom
--------------------------
DAVID B. BLOOM
<PAGE>
A387225
FILED
In the office of the Secretary of State
of the State of California
MAY 11 1990
/s/ March Fong EU
March Fong EU. Secretary of State
CERTIFICATE OF AMENDMENT
-----------------------
OF
--
ARTICLES OF INCORPORATION
-------------------------
ROBERT SNUKAL, SHEILA SNUKAL, MANUEL PADAMA AND CLAIRE PADAMA certify
that:
1. They are the directors of Wilshire Care Center, Inc., a California
corporation.
2. They hereby adopt the following amendment of the Articles of
Incorporation of said corporation:
Article I is amended to read as follows:
"The name of this corporation is Elmcrest Convalescent Hospital."
3. The corporation has issued no shares.
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of my own knowledge.
Dated: May 2, 1990 /s/ Robert Snukal
-----------------------
Robert Snukal, Director
/s/ Sneila Snukal
-----------------------
Sneila Snukal,Director
/s/ Manuel Padama
------------------------
Manuel Padama, Director
/s/ Claire Padama
------------------------
Claire Padama, Director
(SEAL)
<PAGE>
Exhibit 3.32
BY-LAWS OF
WILSHIRE CARE CENTER, INC. [Elmcrest Convalescent Hospital]
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and or the
- ---------
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Time of Meeting: 10 O'Clock A.M. Date of Meeting:
The 1st day of March of each year.
Section 2. PLACE. Annual meetings and special meetings shall be held at such
- ---------
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the Chairman
- ---------
of the Board, if any, Vice Chairman of the Board, if any, the President, if any,
the Secretary, or by any officer instructed by the Directors to call the
meeting. Special meetings may be called in like manner and by the holders of
shares entitled to cast not less than ten percent of the votes at the meeting
being called.
Section 4. NOTICE. Written notice stating the place, day and hour of each
- ---------
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located. Such notice shall be deemed to be delivered when
deposited in the United States mail with first class postage therein prepaid, or
sent by other means of written communication addressed to the
1
<PAGE>
shareholder at his address as it appears on the stock transfer books of the
corporation. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of notice to be
presented by management for election. At an annual meeting of shareholders, any
matter relating to the affairs of the corporation, whether or not stated in the
notice of the meeting, may be brought up for action except matters which the
General Corporation Law requires to be stated in the notice of the meeting. The
notice of any annual or special meeting shall also include, or be accompanied
by, any additional statements, information, or documents prescribed by the
General Corporation Law. When a meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; provided that,
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
- ---------
and wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
- ---------
over by one of the following officers in the order of seniority and if present
and acting the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, if any, a Vice President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the share-holders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present, the Chairman of the meeting shall appoint a
secretary of the meeting.
2
<PAGE>
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person
- ---------
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it prior to the vote or written action pursuant
thereto, except as otherwise provided by the General Corporation Law. As used
herein, a "proxy" shall be deemed to mean a written authorization signed by a
shareholder or a shareholder's attorney in fact giving another person or persons
power to vote or consent in writing with respect to the shares of such
shareholder, and "Signed" as used herein shall be deemed to mean the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
- ---------
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
- ---------
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
- ----------
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The
3
<PAGE>
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum if any action
taken, other than adjournment, is approved by at least a majority of the shares
required to constitute a quorum. In the absence of a quorum, any meeting of
shareholders may be adjourned from time to time by the vote of a majority of the
shares represented thereat, but no other business may be transacted except as
hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by ballot
- ----------
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
- ----------
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders
4
<PAGE>
thereof, if in writing and signed by the parties thereof, may provide that in
exercising any voting rights the shares held by them shall be voted as provided
therein or in Section 706 and may otherwise modify these provisions as to
shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
- ---------
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
- ---------
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300(d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
- ---------
the corporation, a citizen of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be 4. Thereafter, the authorized number of
directors constituting the Board shall be at least three provided that, whenever
the corporation shall have only two shareholders, the number of directors may be
at least two, and, whenever the corporation shall have only one shareholder, the
number of directors may be at least one. Subject to the foregoing provisions,
the number of directors may be changed from time to time by an amendment of
these By-Laws adopted by the shareholders. Any such amendment reducing the
number of
5
<PAGE>
directors to fewer than five cannot be adopted if the votes cast against its
adoption at a meeting or the shares not consenting in writing in the case of
action by written consent are equal to more than sixteen and two-thirds percent
of the outstanding shares. No decrease in the authorized number of directors
shall have the effect of shortening the term of any incumbent director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
- ---------
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a majority of the directors then in office or of
the sole remaining director, although less than a quorum exists. Any director
may resign effective upon giving written notice to the Chairman of the Board, if
any, the President, the Secretary or the Board of Directors, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to the
office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
- ---------
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
6
<PAGE>
Section 6. MEETINGS.
- ---------
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State
of California, which has been designated in any notice of the meeting, or, if
not stated in said notice, or, if there is no notice given, at the place
designated by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice need not specify the
purpose of any regular or special meeting of the Board of Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION.
- ---------
In the event only one director is required by the By-Laws or Articles of
Incorporation, then any reference herein to notices, waivers, consents, meetings
or other actions by a majority or quorum of the directors shall be deemed to
refer to such notice, waiver, etc., by such sole director, who shall have all
the rights and duties and shall be entitled to exercise all of the powers and
shall assume all the responsibilities otherwise herein described as given to a
Board of Directors.
Section 8. QUORUM AND ACTION. A majority of the authorized number of directors
- ---------
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors
7
<PAGE>
present at a meeting duly held at which a quorum is present shall be the act of
the Board of Directors. Members of the Board of Directors may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another, and
participation by such use shall be deemed to constitute presence in person at
any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action which may be taken is approved by at least a majority of the required
quorum for such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
- ---------
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
- ----------
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such
action is taken by written consent, in lieu of a meeting, all shares entitled to
vote were voted, and the entire number of directors authorized at the time of
the director's most recent election were then being elected. If any or all
directors are so removed, new directors may be elected at the same meeting or by
such written consent. The Board of Directors may declare vacant the office of
any director who has been declared of unsound mind by an order of court or
convicted of a felony.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a
- ----------
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
- ----------
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
8
<PAGE>
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
- ----------
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
ARTICLE III.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
- ---------
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
- ---------
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
- ---------
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
9
<PAGE>
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
- ---------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ---------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the president, the
- ---------
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
- ---------
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
10
<PAGE>
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the By-
Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
- -----------
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
----------
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
11
<PAGE>
In the event that the corporation shall issue the whole or any part of
its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation
----------
may issue a new certificate for shares or for any other security in the place
of any other certificate theretofore issued by it, which is alleged to have been
lost, stolen or destroyed. As a condition to such issuance, the corporation may
require any such owner of the allegedly lost, stolen or destroyed certificate or
any such owner's legal representative to give the corporation a bond, or other
adequate security, sufficient to indemnify it against any claim that may be made
against it, including any expense or liability, on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
- ----------
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
- ----------
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors has been taken, shall be the day on
which the first written consent is given; and the record date for determining
shareholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto, or the
sixtieth day prior to the day of such other action, whichever is later.
12
<PAGE>
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, any transfer of any shares on the books of the
corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
- ----------
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the
- ----------
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders of record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights where there are two or more classes or
series of shares or upon which or upon whom the General Corporation Law confers
such rights notwithstanding that the Articles of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
- ----------
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418 (c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the tens of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles
13
<PAGE>
of Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports), 16 (Rights of
Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived thereby,
but to the extent they are not so altered or waived, these By-Laws shall be
applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or agreement, or
to pledge its credit, or to render it liable for any purposes or any amount,
except as provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended or
repealed or new By-Laws may be adopted by the shareholders entitled to exercise
a majority of the voting power or by the Board of Directors; provided, however,
that the Board of Directors shall have no control over any By-Law which fixes or
changes the authorized number of directors of the corporation; provided,
further, that any control over the By-Laws herein vested in the Board of
Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of directors
to fewer than five shall require authorization by the greater proportion of
voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS -STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
- ----------
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
14
<PAGE>
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Hoard of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for payment of
- ----------
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
- ----------
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of process
- ----------
within the State of California is Robert Snukal.
15
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of Incorporation
to act as the Incorporator(s) or First Director(s) of the above named
corporation hereby adopt the same as the By-Laws of said corporation.
Executed this 1st day of March, 1990.
/s/ David B. Bloom
-----------------------------------------
David B. Bloom
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the
above-named corporation; that the foregoing By-Laws were adopted as the By-Laws
of said corporation on the date set forth above by the person(s) appointed in
the Articles of Incorporation to act as the Incorporator(s) or First Director(s)
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 1st day of March, 1990.
/s/ Sheila Snukal
---------------------------------
Secretary, Sheila Snukal
(SEAL)
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE. THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting secretary of the above-
named corporation and that the above and foregoing Code of By-Laws was submitted
to the shareholders at their first meeting held on the date set forth in the By-
Laws and recorded in the minutes thereof, was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of March, 1990.
/s/ Sheila Snukal
---------------------------------
Secretary, Sheila Snukal
<PAGE>
Restriction of right
to amend articles
yes no
--
Exhibit 3.33
FILED
In the office of the Secretary of State
of the State of California
JUNE 29 1967
FRANK M. JORDAN, Secretary of State
By [SIGNATURE APPEARS HERE]
------------------------
Deputy
ARTICLES OF INCORPORATION
OF
FOUNTAINVIEW CONVALESCENT HOSPITAL
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned have this day voluntarily associated
ourselves together for the purpose of forming a corporation under and pursuant
to the laws of the State of California, and we do hereby certify:
I
The name of the corporation is FOUNTAINVIEW CONVALESCENT HOSPITAL.
II
The purposes for which this corporation is formed are:
(a) The specific business in which this corporation is primarily to
engage is the managing, operating, maintaining and conducting of convalescent
homes, nursing homes, rest homes, sanitariums, hospitals and related facilities.
(b) To engage in any and all other lawful business, acts, and
enterprises; and to perform such services and operations in connection with the
said business as may be necessary, customary and/or advisable.
(c) To enter into, make, perform, and carry out contracts of every
kind and for any lawful purpose, without limit as to amount, with any person,
firm, association, corporation, municipality, state or government, territory, or
any other subdivision, district or department thereof.
-1-
<PAGE>
(d) To carry on any business whatsoever which this corporation may
deem proper or convenient in connection with any of the foregoing purposes or
otherwise, or which may be calculated directly or indirectly to promote the
interest of this corporation, or to enhance the value of its property or
business.
(e) To borrow money, to lend money, to own real property, to own
personal property, to deal in real property, to deal in personal property, to
have and to exercise all the powers conferred by the laws of the State of
California upon corporations formed under the laws pursuant to and under which
this corporation is formed, as such laws are now in effect or may at any time
hereafter be enacted or amended.
The foregoing statement of purposes shall be construed as a
statement of both purposes and powers, and the purposes and powers stated in
each clause, shall, except where otherwise expressed, be in nowise limited or
restricted by reference to or inference from the terms or provisions of any
other clause, but shall he regarded as independent purposes.
III
This corporation is authorized to issue only one class of shares;
the total number of such shares is Seven Hundred Fifty (750) with a par value of
One Hundred Dollars ($100.00) per share. The aggregate par value of the capital
stock is Seventy-Five Thousand Dollars ($75,000.00).
IV
The principal office for the transaction of the business of this
corporation is to be located in the County of Los Angeles, State of California.
-2-
<PAGE>
V
The number of directors is three (3) and the names and addresses of
the parties who are appointed to act as the first directors are as follows:
1. Julian Robinson
1291 Woodruff
Westwood, California
2. Alan B. Bodley
5854 San Vicente Boulevard
Los Angeles, California 90019
3. Alan L. Belinkoff
3240 Barbydell
Los Angeles, California 90064
DATED: June 27, 1966.
/s/ Julian Robinson
------------------------------------
JULIAN ROBINSON
/s/ Alan B. Bodley
------------------------------------
ALAN B. BODLEY
/s/ Alan L. Belinkoff
------------------------------------
ALAN L. BELINKOFF
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On June 27, 1966, before the undersigned, a Notary Public in and for said
County and State, personally appeared JULIAN ROBINSON, ALAN B. BODLEY AND ALAN
L. BELINKOFF, known to me to be the persons whose names are subscribed to the
foregoing Articles of Incorporation, and acknowledged to me that they executed
the same.
OFFICIAL SEAL /s/ Alice Moriarty
ALICE MORIARTY ----------------------------- [SEAL OF THE
NOTARY PUBLIC CALIFORNIA Notary Public in and for said SECRETARY OF
PRINCIPAL OFFICE IN County and State. STATE APPEARS
LOS ANGELES COUNTY HERE]
-3-
<PAGE>
Exhibit 3.34
BY-LAWS OF
FOUNTAINVIEW CONVALESCENT HOSPITAL
ARTICLE I
PLACE OF BUSINESS
The principal office for the transaction of the business of the corporation
shall be located at such place or places within the County of Los Angeles State
of California, as the Board of Directors shall from time to time determine.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section l. PLACE. All meetings of the shareholders shall be held at the
- ---------
principal office of the corporation in the State of California.
Section 2. ANNUAL. The annual meeting of the shareholders shall be held on the
- ---------
2nd Monday of September , in each year, if not a legal holiday, and if a legal
holiday, then on the next succeeding business day, at the hour of 10:00 o'clock
A.M., at which time the shareholders shall elect by plurality vote a Board of
Directors, consider reports of the affairs of the Corporation, and transact such
other business as may properly be brought before the meeting.
Section 3. SPECIAL. Special meetings of the shareholders, for any purpose or
- ---------
purposes whatsoever, may be called at any time by the President, or by the Board
of Directors, or by any two or more members thereof, or by one or more
shareholders holding not less than one-fifth of the voting power of the
corporation.
Section 4. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Notices of meetings,
- ---------
annual or special, shall be given in writing to shareholders entitled to vote by
the Secretary or the Assistant Secretary, or if there be no such officer, or in
case of his neglect or refusal, by any director or shareholder.
Such notices shall be sent to the shareholder's address appearing on
the books of the corporation, or supplied by him to the corporation for the
purpose of notice, not less than seven days before such meeting.
Notice of any meeting of shareholders shall specify the place, the day
and the hour of meeting, and in case of special meeting, as provided by the
Corporations Code of California, the general nature of the business to be
transacted.
When a meeting is adjourned for thirty days or more, notice of the
adjourned meeting shall be given as in case of an original meeting. Save, as
aforesaid, it shall not be necessary to give any notice of the adjournment or of
the business to be transacted at an adjourned meeting other than by announcement
at the meeting at which such adjournment is taken.
Section 5. ENTRY OF NOTICE, Whenever any shareholder entitled to vote has been
- ---------
absent from any meeting of shareholders, whether annual or special, an entry in
the minutes to the effect that notice has been duly given shall be sufficient
evidence that due notice of such meeting was given to such shareholder, as
required by law and the by-laws of the corporation.
Section 6. CONSENT TO SHAREHOLDERS' MEETINGS, The transactions of any meeting of
- ---------
shareholders, however called and noticed, shall be valid as
<PAGE>
though had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each of the shareholders entitled to vote, not present in person or by
proxy, sign a written waiver of notice, or a consent to the holding of such
meeting, or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Any action which may be taken at a meeting of the shareholders may be
taken without a meeting if authorized by a writing signed by all of the holders
of shares who would be entitled to vote at a meeting for such purpose, and filed
with the Secretary of the corporation.
Section 7. QUORUM. The holders of a majority of the shares entitled to vote
- ---------
thereat, present in person, or represented by proxy, shall be requisite and
shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by law, by the Articles of
Incorporation, or by these By-Laws. If, however, such majority shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person, or by proxy, shall have power to
adjourn the meeting from time to time, until the requisite amount of voting
shares shall be present. At such adjourned meeting at which the requisite amount
of voting shares shall be represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
Section 8. VOTING. Only persons in whose names shares entitled to vote stand on
- ---------
the stock records of the corporation on the day of any meeting of shareholders,
unless some other day be fixed by the Board of Directors for the determination
of shareholders of record, then on such other day, shall be entitled to vote at
such meeting.
Every shareholder entitled to vote shall be entitled to one vote for
each of said shares and shall have the right to accumulate his votes as provided
in Section 2235 Corporations Code of California.
Section 9. PROXIES. Every person entitled to vote or execute consents may do so
- ---------
either in person or by one or more agents authorized by a written proxy executed
by the person or his duly authorized agent and filed with the secretary of the
corporation.
ARTICLE III
DIRECTORS - MANAGEMENT
Section l. POWERS. Subject to the limitation of the Articles of Incorporation,
- ---------
of the By-Laws and of the Laws of the State of California as to actions to be
authorized or approved by the shareholders, all corporate powers shall be
exercised by or under authority of, and the business and affairs of this
corporation shall be controlled by, a Board of Directors.
Section 2. NUMBER OF DIRECTORS AND QUALIFICATIONS. The authorized number of
- ---------
directors of the corporation shall be three (3), until changed by amendment to
the Articles of Incorporation or by an amendment to this Section 2, Article III
of these By-Laws, adopted by the vote or written assent of the shareholders
entitled to exercise the majority of the voting power of the corporation.
2.
<PAGE>
Section 3. ELECTION AND TENURE or OFFICE. The directors shall be elected by
- ---------
ballot at the annual meeting of the shareholders, to serve for one year and
until their successors are elected and have qualified. Their term of office
shall begin immediately after election.
Section 4. VACANCIES. Vacancies in the Board of Directors may be filled by a
- ---------
majority of the remaining directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall hold office until his
successor is elected at an annual meeting of shareholders or at a special
meeting called for that purpose.
The Shareholders may at any time elect a director to fill any vacancy
not filled by the directors, and may elect the additional directors at the
meeting at which an amendment of the By-Laws is voted authorizing an increase in
the number of directors.
A vacancy or vacancies shall be deemed to exist in case of the death,
resignation or removal of any director, or if the shareholders shall increase
the authorized number of directors but shall fail at the meeting at which such
increase is authorized, or at an adjournment thereof, to elect the additional
director so provided for, or in case the shareholders fail at any time to elect
the full number of authorized directors.
If the Board of Directors accepts the resignation of a Director
tendered to take effect at a future time, The Board, or the shareholders, shall
have power to elect a successor to take office when the resignation shall become
effective.
No reduction of the number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
The entire Board of Directors or any individual director may be removed
from office as provided by Section 810 of the Corporations Code of the State of
California.
Section 5. PLACE OF MEETINGS. Meetings of the Board of Directors shall be held
- ---------
at the office of the corporation in the State of California, as designated for
this purpose, from time to time, by resolution of the Board of Directors or
written consent of all of the Members of the Board. Any meeting shall be valid,
wherever held, if held by the written consent of all Members of the Board of
Directors, given either before or after the meeting and filed with the Secretary
of the corporation.
Section 6. ORGANIZATION MEETINGS. The organization meetings of the Board of
- ---------
Directors shall be held immediately following the adjournment of the annual
meetings of the shareholders.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of
- ---------
Directors shall be held on none If said day shall fall upon a holiday, such
meetings shall be held on the next succeeding business day thereafter.
No notice need be given of such regular meetings.
Section 8. SPECIAL MEETINGS and NOTICE THEREOF. Special meetings of the Board of
- ---------
Directors for any purpose or purposes shall be called at any time by the
President or if he is absent or unable or refuses to act, by any Vice-President
or by any two directors.
Written notice of the time and place of special meetings shall be
delivered personally to the directors or sent to each director by letter or by
telegram, charges prepaid, addressed to him at his address as it is shown upon
the records
3.
<PAGE>
on the corporation, or it is not so Shown on such records or is not readily
ascertainable, at the place in which the meetings of the directors are regularly
held. In case such notice is mailed or telegraphed, it shall be deposited in the
United States mail or delivered to the telegraph company in the place in which
the principal office of the corporation is located at least forty-eight (48)
hours prior to the time of the holding of the meeting. In case such notice is
delivered as above provided; it shall be so delivered at least twenty-four (24)
hours prior to the time of the holding of the meeting. Such mailing,
telegraphing or delivery as above provided shall be due, legal and personal
notice to such director.
Section 9. WAIVER OF NOTICE. When all the directors are present at any
- ---------
directors' meeting, however called or noticed, and sign a written consent
thereto on the records of such meeting, or, if a majority of the directors are
present, and if those not present sign in writing a waiver of notice of such
meeting, whether prior to or after the holding of such meeting, which said
waiver shall be filed with the Secretary of the corporation, the transactions
thereof are as valid as if had at a meeting regularly called and noticed.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an
- ----------
adjourned meeting need not be given to absent directors if the time and place be
fixed at the meeting adjourned.
Section 11. QUORUM. A majority of the number of directors as fixed by the
- ----------
articles or By-Laws shall be necessary to constitute a quorum for the
transaction of business, and the action of a majority of the directors present
at any meeting at which there is a quorum, when duly assembled, is valid as a
corporate act; provided that a minority of the directors, in the absence of a
quorum, may adjourn from time to time, but may not transact any business.
Section 12. DIRECTORS ACTING WITHOUT A MEETING, Any action required or permitted
- ----------
to be taken by the Board of Directors under any provision of this Article may be
taken without a meeting, if all members of the Board shall individually or
collectively consent in writing to such action. Such written consent or consents
shall be filed with the minutes of the proceedings of the Board. Such action by
written consent shall have the same force and effect as a unanimous vote of such
directors. Any certificate or other document filed under any provision of this
Article which relates to action so taken shall state that the action was taken
by unanimous written consent of the Board of Directors without a meeting, and
that the By-Laws, authorize the directors to so act, and such statement shall be
prima facie evidence of such authority.
ARTICLE IV
OFFICERS
Section l. OFFICERS. The officers of the corporation shall be
- ---------
l. President
2. Vice-President
3. Secretary
4. Treasurer
The corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one or more additional vice-presidents, one
or more assistant-secretaries, one or more assistant-treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article.
4.
<PAGE>
Officers other than the president and chairman of the board need not be
directors. One person may hold two or more offices, except those of president
and secretary.
Section 2. ELECTIONS. The Officers of the corporation, except such officers as
- ---------
may be appointed in accordance with the provisions of Section 3 or 5 of this
Article, shall be chosen annually by the Board of Directors, and each shall hold
his or her office at the pleasure of the Board of Directors, who may, either at
a regular or special meeting, remove any such officer and appoint his or her
successor.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. RESIGNATION AND REMOVAL. Any officer may be removed, either with or
- ---------
without cause, by a majority of the directors at the time in office at a regular
or special meeting of the board, or, except in case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors or to the president, or to the secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
- ---------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him or her by the Board of Directors as prescribed by
the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ---------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and affairs of the
corporation. He shall: (1) Preside at all meetings of the shareholders, and in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors;
(2) Be a member of all the standing committees, including the executive
committee, if any, and shall have the general powers and duties of management
usually vested in the office of president of a corporation.
(3) Have such other powers and duties as may be prescribed by the Board
of Directors or the By-Laws.
Section 8. VICE-PRESIDENTS In the absence or disability of the president, the
- ---------
vice-presidents in order of their rank as fixed by the Board of Directors, or if
not ranked, the vice-president designated by the Board of Directors, shall
perform all the duties of the president, and when so acting shall have all the
5.
<PAGE>
powers of, and be subject to all the restrictions upon, the president. The
vice-presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them by the Board of Directors or the
By-Laws.
Section 9. SECRETARY. The secretary shall: (1) Keep, or cause to be kept, a book
- ---------
of minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of directors and shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those directors and shareholders present,
the names of those present at the directors' meeting, the number of shares
present or represented at shareholders' meetings and the proceedings thereof;
(2) Keep, or cause to be kept, at the principal office or at the office
of the corporation's transfer agent, a share register, or a duplicate share
register, showing the names of the shareholders and their addresses; the number
and classes of shares held by each; the number and date of certificates issued
for the same; the number and date of cancellation of every certificate
surrendered for cancellation;
(3) Give or cause to be given, notice of all meetings of shareholders
and the Board of Directors, as required by the By-Laws or By-Law to be given;
(4) Keep the seal of the corporation in safe custody, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws.
Section 10. TREASURER. The treasurer shall: (1) Keep and maintain, or cause to
- ----------
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
surplus shares. Any surplus, including earned surplus, paid-in surplus and
surplus arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account. The books of account shall
at all times be open for inspection by any director;
(2) Shall deposit all monies and other valuables in the name and to the
credit of the corporation with such depositories as may be designated by the
Board of Directors;
(3) Disburse the funds of the corporation as may be ordered by the
Board of Directors;
(4) Render to the president and directors, when they request it, an
account of all of his or her transactions as treasurer and of the financial
condition of the corporation;
(5) Have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the By-Laws.
ARTICLE V
RECORDS - REPORTS - INSPECTION
Section l. RECORDS. The corporation shall maintain adequate and correct
- ---------
accounts, books and records of its business and properties. All of such books,
records and accounts shall be kept at its principal place of business in the
State of California, as fixed by the Board of Directors from time to time.
Section 2. INSPECTION. The share register or duplicate share register, the books
- ---------
of account, and minutes of proceedings of the shareholders and directors shall
be open to inspection upon the written demand of any shareholder or the
6.
<PAGE>
holder or a voting trust certificate at any reasonable time, and for a purpose
reasonably related to his or her interests as a shareholder, and shall be
exhibited at any time when required by the demand of ten percent of the shares
represented at any shareholders' meeting. Such inspection may be made in person
or by an agent or attorney, and shall include the right to make extracts. Demand
of inspection other than at a shareholders' meeting shall be made in writing
upon the president, secretary or assistant-secretary of the corporation.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
- ---------
of money, notes or other evidences of indebtedness issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 4. ANNUAL REPORT. The Board of Directors of the corporation shall cause
- ---------
to be sent to the shareholders not later than 75 days after the close of the
fiscal or calendar year an annual report in compliance with the provisions of
Section 3006 of the California Corporation Code, unless the By-Laws expressly
dispense with such report.
Section 5. CONTRACTS, ETC. The Board of Directors, except as the By-Laws or
- ---------
Articles of Incorporation otherwise provide, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the corporation, and such authority may be
general or confined to specific instances; and unless so authorized by the Board
of Directors, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or agreement or to pledge its credit to
render it liable for any purpose or to any amount.
Section 6. INSPECTION OF BY-LAWS. The corporation shall keep in its principal
- ---------
office for the transaction of business the original or a copy of the By-Laws as
amended or otherwise altered to date, certified by the secretary, which shall be
open to inspection by the shareholders at all reasonable times during business
hours.
ARTICLE VI
CERTIFICATES OF STOCK
Section l. CERTIFICATES OF STOCK. Certificates for shares shall be of such form
- ---------
and device as the Board of Directors may designate and shall state the name of
the record holder of the shares represented thereby; its number; date of
issuance; the number of shares for which it is issued; the par value, if any, or
a statement that such shares are without par value; a statement of the rights,
privileges, preferences and restrictions, if any; a statement as to the
redemption or conversion, if any; a statement of liens or restrictions upon
transfer or voting, if any; if the shares be assessable, or, if assessments are
collectible by personal action, a plain statement of such facts.
Every certificate for shares must be signed by the President or a
Vice-President and the Secretary or an Assistant Secretary or must be
authenticated by facsimiles of the signature of the President and Secretary or
by a facsimile of the signature of its President and the written signature of
its Secretary or an Assistant Secretary. Before it became effective every
certificate for shares authenticated by a facsimile of a signature must be
countersigned by a transfer agent or transfer clerk and must be registered by an
incorporated bank or trust company, either domestic or foreign as registrar of
transfers.
7.
<PAGE>
Section 2. TRANSFER. Upon surrender to the Secretary or transfer agent of the
- ---------
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES. Any person claiming a certificate of
- ---------
stock to be lost or destroyed shall make an affidavit or affirmation of that
fact and advertise the same in such manner as the Board of Directors may
require, and shall if the directors so require give the corporation a bond of
indemnity, in form and with one or more sureties satisfactory to the Board, in
at least double the value of the stack represented by said certificate,
whereupon a new certificate may be issued of the same tenor and for the same
number of shares as the one alleged to be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint
- ---------
one or more transfer agents or transfer clerks, and one or more registrars,
which shall be an incorporated bank or trust company, either domestic or
foreign, who shall be appointed at such times and places as the requirements of
the corporation may necessitate and the Board of Directors may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS. The Board of Directors may close the
- ---------
transfer books in their discretion for a period not exceeding thirty days
preceding any meeting, annual or special, of the shareholders, or the day
appointed for the payment of a dividend.
ARTICLE VII
AMENDMENTS
Section 1. POWER OF SHAREHOLDERS. These By-Laws may be repealed or amended, or
- ---------
new By-Laws may be adopted at such annual meeting, or at any other meeting of
the shareholders, called for the purpose by the Board of Directors, by a vote
representing a majority of the shares entitled to vote, or by the written assent
of such shareholders.
Section 2. POWER OF DIRECTORS. Subject to the right of shareholders as provided
- ---------
in Section 1 of this Article VII to adopt, amend or repeal By-Laws, By-Laws
other than a By-Law or amendment thereof changing the authorized number of
directors may be adopted, amended or repealed by the Board of Directors.
Section 3. RECORD OF AMENDMENTS. Whenever an amendment or new By-Law is adopted,
- ---------
it shall be copied in the Book of By-Laws with the original By-Laws, in the
appropriate place. If any By-Law is repealed, the fact of repeal with the date
of the meeting at which the repeal was enacted or written assent was filed shall
be stated in said book.
ARTICLE VIII
SEAL
The Corporation shall adopt and use a corporate seal consisting of a circle
setting forth on its circumference the name of the corporation and showing the
State and date of incorporation.
8.
<PAGE>
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, being all the directors of FOUNTAINVIEW
CONVALESCENT HOSPITAL, a corporation incorporated, organized and existing under
the laws of the State of California, do hereby certify that the foregoing
By-Laws, were duly adopted as the By-Laws of the said corporation.
IN WITNESS WHEREOF, we have hereunto subscribed our names this 30th
day of June, 1967
/s/ Julian Robinson
-----------------------------------
JULIAN ROBINSON
/s/ Alan B. Bodley
-----------------------------------
ALAN B. BODLEY
/s/ Alan L. Belinkoff
-----------------------------------
ALAN L. BELINKOFF
KNOW ALL MEN BY THESE PRESENTS:
That I, the undersigned, the duly elected, and acting Secretary of
FOUNTAINVIEW CONVALESCENT HOSPITAL do hereby certify, that the above and
foregoing By-Laws were adopted as the By-Laws of said corporation on the 30th
day of June, 1967
IN WITNESS WHEREOF, I have hereunto subscribed my name this 30th day
of June, 1967.
/s/ Morris Freedman
-----------------------------------
Secretary
MORRIS FREEDMAN
KNOW ALL MEN BY THESE PRESENTS:
That I, the undersigned, the duly elected, and acting Secretary of
do hereby certify, that the above and
foregoing Code of By-Laws was submitted to the shareholders at their first
meeting held on the day of 19 , and was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the seal of said corporation this day of 19
-----------------------------------
Secretary
9.
<PAGE>
Exhibit 3.35
ARTICLES OF INCORPORATION
OF
FOUNTAIN VIEW MANAGEMENT, INC.
I
The name of this corporation is Fountain View Management, Inc.
II
The purpose of this corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's initial
agent for service of process is: Robert Snukal, 4311 Wilshire Boulevard, Suite
206, Los Angeles, California 90010.
IV
This corporation is authorized to issue only one class of shares of stock; and
the total number of shares which this corporation is authorized to issue is
500,000.
DATED: November 28, 1988. /s/ David B. Bloom
-----------------------------------
DAVID B. BLOOM
I hereby declare that I am the person who executed the foregoing Articles of
Incorporation, which execution is my act and deed.
/s/ David B. Bloom
-----------------------------------
DAVID B. BLOOM
[SEAL OF THE
SECRETARY OF
STATE APPEARS
HERE]
<PAGE>
Exhibit 3.36
BY-LAWS OF
FOUNTAIN VIEW MANAGEMENT, INC.
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and or
------- -
the transaction of any other proper business and any special meeting shall be
held on the date and at the time as the Board of Directors shall from time to
time fix.
Time of Meeting: Ten o'clock A.M. Date of
Meeting: The 10th day of January of each year.
Section 2. PLACE. Annual meetings and special meetings shall
------- -
be held at such place, within or without the State of California, as the
Directors may, from time to time, fix. Whenever the Directors shall fail to fix
such place, the meetings shall be held at the principal executive office of the
corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the
------- -
Chairman of the Board, if any, Vice Chairman of the Board, if any, the
President, if any, the Secretary, or by any officer instructed by the Directors
to call the meeting. Special meetings may be called in like manner and by the
holders of shares entitled to cast not less than ten percent of the votes at the
meeting being called.
Section 4. NOTICE. Written notice stating the place, day and hour of
------- -
each meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such
<PAGE>
address appears or is given, at the place where the principal executive office
of the corporation is located or by publication at least once in a newspaper of
general circulation in the county in which the said principal executive office
is located. Such notice shall be deemed to be delivered when deposited in the
United States mail with first class postage therein prepaid, or sent by other
means of written communication addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation. The notice of any
meeting at which directors are to be elected shall include the names of nominees
intended at the time of notice to be presented by management for election. At an
annual meeting of shareholders, any matter relating to the affairs of the
corporation, whether or not stated in the notice of the meeting, may be brought
up for action except matters which the General Corporation Law requires to be
stated in the notice of the meeting. The notice of any annual or special meeting
shall also include, or be accompanied by, any additional statements,
information, or documents prescribed by the General Corporation Law. When a
meeting is adjourned to another time or place, notice of the adjourned meeting
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken; provided that, if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder. At the adjourned meeting, the
corporation may transact any business Which might have been transacted at the
original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
- ------- -
and wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
- ------- -
over by one of the following
<PAGE>
officers in the order of seniority and if present and acting the Chairman of the
Board, if any, the Vice-Chairman of the Board, if any, the President, if any, a
Vice President or, if none of the foregoing is in office and present and acting,
by a chairman to be chosen by the shareholders. The Secretary of the
corporation, or in his absence, an Assistant Secretary, shall act as secretary
of every meeting, but if neither the Secretary nor an Assistant Secretary is
present, the Chairman of the meeting shall appoint a secretary of the meeting.
Section 7. PROXY REPRESENTATION. Every shareholder may authorize
------- -
another person or persons to act as his proxy at a meeting or by written action.
No proxy shall be valid after the expiration of eleven months from the date of
its execution unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the person executing it prior to the vote or
written action pursuant thereto, except as otherwise provided by the General
Corporation Law. As used herein, a "proxy" shall be deemed to mean a written
authorization signed by a shareholder or a shareholder's attorney in fact giving
another person or persons power to vote or consent in writing with respect to
the shares of such shareholder, and "Signed" as used herein shall be deemed to
mean the placing of such shareholder's name on the proxy, whether by manual
signature, typewriting, telegraphic transmission or otherwise by such
shareholder or such shareholder's attorney in fact. Where applicable, the form
of any proxy shall comply with the provisions of Section 604 of the General
Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the
------- -
Board of Directors may appoint inspectors of election to act at the meeting and
any adjournment thereof. If inspectors of election are not so appointed, or, if
any persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity, and effect of
proxies, receive votes, ballots, if any, or consents, hear and determine all
challenges and questions in any way arising in connection with the right to
vote, count and tabulate all votes or consents, determine when the polls shall
close, determine the result, and do such acts as may be proper to conduct the
election or vote with fairness to all
<PAGE>
shareholders. If there are three inspectors of election, the decision, act, or
certificate of a majority shall be effective in all respects as the decision,
act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
- ------- -
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
- ------- --
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
elected by written consent except by unanimous written
<PAGE>
consent of all shares entitled to vote for the election of directors. Notice of
any shareholder approval pursuant to Section 310, 317, 1201 or 2007 without a
meeting by less than unanimous written consent shall be given at least ten days
before the consummation of the action authorized by such approval, and prompt
notice shall be given of the taking of any other corporate action approved by
shareholders without a meeting by less than unanimous written consent to those
shareholders entitled to vote who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be
- ------- --
by ballot unless a shareholder demands election by ballot at the election and
before the voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
- ------- --
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by them shall be voted as provided therein or in Section 706 and may
otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
- ------- -
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
- ------- -
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided
<PAGE>
however such agreement shall, to the extent and so long as the discretion or the
powers of the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
- ------- -
the corporation, a citizen of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be 4. Thereafter, the authorized number of
directors constituting the Board shall be at least three provided that, whenever
the corporation shall have only two shareholders, the number of directors may be
at least two, and, whenever the corporation shall have only one shareholder, the
number of directors may be at least one. Subject to the foregoing provisions,
the number of directors may be changed from time to time by an amendment of
these By-Laws adopted by the shareholders. Any such amendment reducing the
number of directors to fewer than five cannot be adopted if the votes cast
against its adoption at a meeting or the shares not consenting in writing in the
case of action by written consent are equal to more than sixteen and two-thirds
percent of the outstanding shares. No decrease in the authorized number of
directors shall have the effect of shortening the term of any incumbent
director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
- ------- -
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a
<PAGE>
majority of the directors then in office or of the sole remaining director,
although less than a quorum exists. Any director may resign effective upon
giving written notice to the Chairman of the Board, if any, the President, the
Secretary or the Board of Directors, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to the office when the resignation
becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
- ------- -
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
Section 6. MEETINGS.
- ------- -
TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State of
California, which has been designated in any notice of the meeting, or, if not
stated in said notice, or, if there is no notice given, at the place designated
by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice need not specify the
purpose of any regular or special meeting of the Board of Directors.
<PAGE>
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
- ------- -
only one director is required by the By-Laws or Articles of Incorporation then
any reference herein to notices, waivers, consents, meetings or other actions
by a majority or quorum of the directors shall be deemed to refer to such
notice, waiver, etc., by such sole director, who shall have all the rights and
duties and shall be entitled to exercise all of the powers and shall assume all
the responsibilities otherwise herein described as given to a Board of
Directors.
Section 8. QUORUM AND ACTION. A majority of the authorized number of directors
- ------- -
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors present
at a meeting duly held at which a quorum is present shall be the act of the
Board of Directors. Members of the Board of Directors may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another, and
participation by such use shall be deemed to constitute presence in person at
any such meeting.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, provided that any action
which may be taken is approved by at least a majority of the required quorum for
such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
- ------- -
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
- ------- --
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient
<PAGE>
to elect such director voted cumulatively at an election of directors at which
the same total number of votes were cast, or, if such action is taken by written
consent, in lieu of a meeting, all shares entitled to vote were voted, and the
entire number of directors authorized at the time of the director's most recent
election were then being elected. If any or all directors are so removed, new
directors may be elected at the same meeting or by such written consent. The
Board of Directors may declare vacant the office of any director who has been
declared of unsound mind by an order of court or convicted of a felony.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a
- ----------
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
- ----------
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
- ----------
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
ARTICLE III.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
- ---------
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article.
<PAGE>
One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
- ---------
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
- ---------
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board
of Directors, or to the President, or to the Secretary of the corporation. Any
such resignation shall take effect at the date of the receipt of such notice or
at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
- ---------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ---------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including
<PAGE>
the Executive Committee, if any, and shall have general powers and duties
of management usually in the office of President of a corporation, and shall
have such other powers and duties as may be prescribed by the Board of Directors
or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the
- ---------
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
- ---------
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and he shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
- ----------
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the Board of Directors. He shall disburse the funds of the corporation
<PAGE>
as may be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
---------
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors; if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
In the event that the corporation shall issue the whole or any part of its
shares as partly paid and subject to call for the remainder of the consideration
to be paid therefor, any such certificate for shares shall set forth thereon the
statements prescribed by Section 409 of the General Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may
---------
issue a new certificate for shares or for any other security in the place of any
other certificate theretofore issued by it, which is alleged to have been lost,
stolen or destroyed. As a condition to such issuance, the corporation may
require any such owner of the allegedly lost, stolen or destroyed certificate or
any such owner's legal representative to give the corporation a bond, or other
adequate security, sufficient to indemnify it against any claim that may be made
against it, including any expense or liability, on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such
<PAGE>
new certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
- ---------
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
- ---------
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as aforesaid,
the record date for determining shareholders entitled to notice of or to vote at
a meeting of shareholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held; the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given; and the record date for determining shareholders for
any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth day
prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
<PAGE>
Section 5. PRESENTATION OF SPARES IN OTHER CORPORATIONS. Shares of other
- ------- -
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the
- ------- -
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders of record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights where there are two or more classes or
series of shares or upon which or upon whom the General Corporation Law confers
such rights notwithstanding that the Articles of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
- ------- -
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418 (c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports), 16 (Rights of
Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived thereby,
but to the extent they are not so altered or waived, these By-Laws shall be
applicable.
<PAGE>
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purposes or any amount, except as
provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended
or repealed or new By-Laws may be adopted by the shareholders entitled to
exercise a majority of the voting power or by the Board of Directors; provided,
however, that the Board of Directors shall have no control over any By-Law which
fixes or changes the authorized number of directors of the corporation;
provided, further, than any control over the By-Laws herein vested in the Board
of Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of directors
to fewer than five shall require authorization by the greater proportion of
voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS -STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
- ---------
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or
<PAGE>
at the office of its transfer agent or registrar, a record its shareholders,
giving the names and addresses of all shareholders and the number and class of
shares held by each. Such minutes shall be in written form. Such other books and
records shall be kept either in written form or in any other form capable of
being converted into written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for payment of
- ---------
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
- ---------
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of process
- ---------
within the State of California is Robert Snukal.
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of Incorporation to
act as the Incorporator(s) or First Director(s) of the above named corporation
hereby adopt the same as the By-Laws of said corporation.
Executed this 18th day of January, 1989.
/s/ Robert Snukal
--------------------------------------
Name
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the
above-named corporation; that the foregoing By-Laws were adopted as the By-Laws
of said corporation on the date set forth above by the person(s) appointed in
the Articles of Incorporation to act as the Incorporator(s) or First Director(s)
of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal this 18th day of January, 1989.
/s/ Sheila Snukal
--------------------------
Secretary, Sheila Snukal
(SEAL)
<PAGE>
Exhibit 3.37
ARTICLES OF INCORPORATION
OF
RIO HONDO NURSING CENTER
I
The name of this corporation is RIO HONDO NURSING CENTER.
II
The purpose of this corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's initial
agent for service of process is: Robert Snukal, 273 East Beverly Boulevard,
Montebello, California.
IV
This corporation is authorized to issue only one class of shares of stock; and
the total number of shares which this corporation is authorized to issue is
300,000.
DATED: March 21, 1990.
/s/ David B. Bloom
-----------------------------------
DAVID B. BLOOM
I hereby declare that I am the person who executed the foregoing Articles of
Incorporation, which execution is my act and deed.
/s/ David B. Bloom
-----------------------------------
DAVID B. BLOOM
[SEAL OF THE SECRETARY OF
STATE APPEARS HERE]
<PAGE>
Exhibit 3.38
BY-LAWS OF
RIO HONDO NURSING CENTER,
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section l. TIME. An annual meeting for the election of directors and or the
- ---------
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Time of Meeting: Ten o'clock A.M. Date of Meeting: First day of June of
each year.
Section 2. PLACE. Annual meetings and special meetings shall be held at such
- ---------
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the Chairman
- ---------
of the Board, if any, Vice Chairman of the Board, if any, the President, if any,
the Secretary, or by any officer instructed by the Directors to call the
meeting. Special meetings may be called in like manner and by the holders of
shares entitled to cast not less than ten percent of the votes at the meeting
being called.
Section 4. NOTICE. Written notice stating the place, day and hour of each
- ---------
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located. Such notice shall be deemed to be delivered when
deposited in the United States mail with first class postage therein prepaid, or
sent by other means of written communication addressed to the
1
<PAGE>
shareholder at his address as it appears on the stock transfer books of the
corporation. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of notice to be
presented by management for election. At an annual meeting of shareholders, any
matter relating to the affairs of the corporation, whether or not stated in the
notice of the meeting, may be brought up for action except matters which the
General Corporation Law requires to be stated in the notice of the meeting. The
notice of any annual or special meeting shall also include, or be accompanied
by, any additional statements, information, or documents prescribed by the
General Corporation Law. When a meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; provided that,
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
- ---------
and wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
- ---------
over by one of the following officers in the order of seniority and if present
and acting the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, if any, a Vice President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the Chairman of the meeting
shall appoint a secretary of the meeting.
2
<PAGE>
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person
- ---------
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it prior to the vote or written action pursuant
thereto, except as otherwise provided by the General Corporation Law. As used
herein, a "proxy" shall be deemed to mean a written authorization signed by a
shareholder or a shareholder's attorney in fact giving another person or persons
power to vote or consent in writing with respect to the shares of such
shareholder, and "Signed" as used herein shall be deemed to mean the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
- ---------
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of states represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
- ---------
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
- ----------
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The
3
<PAGE>
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum if any action
taken, other than adjournment, is approved by at least a majority of the shares
required to constitute a quorum. In the absence of a quorum, any meeting of
shareholders may be adjourned from time to time by the vote of a majority of the
shares represented thereat, but no other business may be transacted except as
hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation
Law, the Articles of Incorporation or these By-Laws, any action which may be
taken at any annual or special meeting may be taken without a meeting and
without prior notice, if a consent in writing, setting forth the action so
taken, shall be signed by holders of shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Directors may not be elected by written consent except by unanimous written
consent of all shares entitled to vote for the election of directors. Notice of
any shareholder approval pursuant to Section 310, 317, 1201 or 2007 without a
meeting by less than unanimous written consent shall be given at least ten days
before the consummation of the action authorized by such approval, and prompt
notice shall be given of the taking of any other corporate action approved by
shareholders without a meeting by less than unanimous written consent to those
shareholders entitled to vote who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by ballot
- ----------
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
- ----------
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders
4
<PAGE>
thereof, if in writing and signed by the parties thereof, may provide that in
exercising any voting rights the shares held by them shall be voted as provided
therein or in Section 706 and may otherwise modify these provisions as to
shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
- ---------
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
- ---------
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
- ---------
the corporation, a citizen of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be 4. Thereafter, the authorized number of
directors constituting the Board shall be at least three provided that, whenever
the corporation shall have only two shareholders, the number of directors may be
at least two, and, whenever the corporation shall have only one shareholder, the
number of directors may be at least one. Subject to the foregoing provisions,
the number of directors may be changed from time to time by an amendment of
these By-Laws adopted by the shareholders. Any such amendment reducing the
number of
5
<PAGE>
directors to fewer than five cannot be adopted if the votes cast against its
adoption at a meeting or the shares not consenting in writing in the case of
action by written consent are equal to more than sixteen and two-thirds percent
of the outstanding shares. No decrease in the authorized number of directors
shall have the effect of shortening the term of any incumbent director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
- ---------
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a majority of the directors then in office or of
the sole remaining director, although less than a quorum exists. Any director
may resign effective upon giving written notice to the Chairman of the Board, if
any, the President, the Secretary or the Board of Directors, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to the
office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
- ---------
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
6
<PAGE>
Section 6. MEETINGS.
- ---------
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State
of California, which has been designated in any notice of the meeting, or, if
not stated in said notice, or, if there is no notice given, at the place
designated by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice need not specify the
purpose of any regular or special meeting of the Board of Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
- ---------
only one director is required by the By-Laws or Articles of Incorporation, then
any reference herein to notices, waivers, consents, meetings or other actions by
a majority or quorum of the directors shall be deemed to refer to such notice,
waiver, etc., by such sole director, who shall have all the rights and duties
and shall be entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to a Board of Directors.
Section 8. QUORUM AND ACTION. A majority of the authorized number of directors
- ---------
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors
7
<PAGE>
present at a meeting duly held at which a quorum is present shall be the act of
the Board of Directors. Members of the Board of Directors may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another, and
participation by such use shall be deemed to constitute presence in person at
any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action which may be taken is approved by at least a majority of the required
quorum for such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
- ---------
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
- ----------
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such action
is taken by written consent, in lieu of a meeting, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. If any or all directors
are so removed, new directors may be elected at the same meeting or by such
written consent. The Board of Directors may declare vacant the office of any
director who has been declared of unsound mind by an order of court or convicted
of a felony.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted by a
- ----------
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
- ----------
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
8
<PAGE>
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
- ----------
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
ARTICLE III.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
- ---------
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
- ---------
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
- ---------
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
9
<PAGE>
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
- ---------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ---------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the
- ---------
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
- ---------
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
10
<PAGE>
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
- ----------
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
---------
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 -- 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
11
<PAGE>
In the event that the corporation shall issue the whole or any
part of its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation
- ---------
may issue a new certificate for shares or for any other security in the place of
any other certificate theretofore issued by it, which is alleged to have been
lost, stolen or destroyed. As a condition to such issuance, the corporation may
require any such owner of the allegedly lost, stolen or destroyed certificate or
any such owner's legal representative to give the corporation a bond, or other
adequate security, sufficient to indemnify it against any claim that may be made
against it, including any expense or liability, on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
- ---------
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
- ---------
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; the record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors has been taken, shall be the day on which the
first written consent is given; and the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth day
prior to the day of such other action, whichever is later.
12
<PAGE>
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, any transfer of any shares on the books of the
corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
- ---------
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the
- ---------
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders of record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights where there are two or more classes or
series of shares or upon which or upon whom the General Corporation Law confers
such rights notwithstanding that the Articles of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
- ---------
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418 (c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles
13
<PAGE>
of Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports) , 16 (Rights of
Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived thereby,
but to the extent they are not so altered or waived, these By-Laws shall be
applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purposes or any amount, except as
provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended or
repealed or new By-Laws may be adopted by the shareholders entitled to exercise
a majority of the voting power or by the Board of Directors; provided, however,
that the Board of Directors shall have no control aver any By-Law which fixes or
changes the authorized number of directors of the corporation; provided,
further, than any control over the By-Laws herein vested in the Board of
Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of
directors to fewer than five shall require authorization by the greater
proportion of voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS -STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
- ---------
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
14
<PAGE>
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for payment of
- ---------
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
- ---------
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of process
- ---------
within the State of California is Robert Snukal.
15
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of
Incorporation to act as the Incorporator(s) or First Director(s) of the above
named corporation hereby adopt the same as the By-Laws of said corporation.
Executed this 1st day of June, 1990.
/s/ David B.Bloom
-------------------------
Name David B. Bloom
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of
the above-named corporation; that the foregoing By-Laws were adopted as the
By-Laws of said corporation on the date set forth above by the person(s)
appointed in the Articles of Incorporation to act as the Incorporator(s) or
First Director(s) of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 1st day of June, 1990.
/s/ Claire Padama
-------------------------
Secretary, Claire Padama
(SEAL)
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE. THIS IS TO
CERTIFY:
That I am the duly-elected, qualified and acting Secretary of
the above-named corporation and that the above and foregoing Code of By-Laws
was submitted to the shareholders at their first meeting held on the date set
forth in the By-Laws and recorded in the minutes thereof, was ratified by the
vote of shareholders entitled to exercise the majority of the voting power of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 1st day of
June, 1990.
/s/ Claire Padama
------------------------
Secretary, Claire Padama
<PAGE>
EXHIBIT 3.39
CERTIFICATE OF INCORPORATION
OF
Locomotion Holdings, Inc.
-------------------------
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the
provisions of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: The name of the Corporation is Locomotion Holdings, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, 19801 and the name of the Corporation's registered agent
at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 3,000 shares of Class A Common Stock, $.01 par value.
FIFTH: The name and the mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Kathleen M. Sablone Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
SIXTH: The Directors shall have power to adopt, amend, or repeal the By-
Laws of the Corporation.
SEVENTH: Election of Directors need not be by written ballot unless the
By-Laws of the Corporation so provide.
EIGHTH: The Corporation shall indemnify and hold harmless any director,
officer employee or agent of the Corporation from and against any and all
expenses and liabilities that may be imposed upon or incurred in connection
with, or as a result of, any proceeding in which he or she may become involved,
as a party or otherwise, by reason of the fact that
<PAGE>
he or she is or was such a director, officer, employee or agent, whether or not
he or she continues to be such at the time such expenses and liabilities shall
have been imposed or incurred, to the fullest extent permitted by the laws of
the State of Delaware as they may be amended from time to time.
NINTH: No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title 8 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The undersigned incorporator hereinbefore named, for the purpose of forming
a corporation pursuant to the General Corporation Law of the State of Delaware,
does make this certificate, hereby declaring and certifying that this is her act
and deed and the facts stated herein are true and accordingly has hereunto set
her hand this 14th day of July, 1997.
/s/ Kathleen M. Sablone
----------------------------------------------
Kathleen M. Sablone, Incorporator
<PAGE>
EXHIBIT 3.40
BY - LAWS
---------
OF
--
LOCOMOTION HOLDINGS, INC.
-------------------------
(A Delaware Corporation)
----------------
ARTICLE I
---------
STOCKHOLDERS
------------
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
-------------------------------
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation certifying the number of shares owned by him in the corporation. Any
and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than
one class of stock or more than one series of any class of stock, and whenever
the corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not
--------------------------
be required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions
<PAGE>
are determined, or (3) issue scrip or warrants in registered or bearer form
which shall entitle the holder to receive a certificate for a full share upon
the surrender of such scrip or warrants aggregating a full share. A certificate
for a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
---------------
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
----------------------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. For the purpose of
determining the stockholders entitled to express consent to corporate action in
writing without a meeting, the directors may fix a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted by
the board of directors, and which shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at any meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
-2-
<PAGE>
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right
------------------------
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such right
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation.
6. STOCKHOLDER MEETINGS.
--------------------
- TIME. The annual meeting shall be held on the date and at the time
----
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
- PLACE. Annual meetings and special meetings shall be held at such
-----
place, within or without the State of Delaware, as the directors may, from time
to time fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
----
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
--------------------------
given, stating the place, date and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual
meeting shall state that the meeting is called for the election of directors and
for the transaction of other business which may properly come before the
meeting, and shall, (if any other action which could be taken at a special
meeting is to be taken at such annual meeting) state the purpose or purposes.
The notice of a special meeting shall in all instances state the purpose or
purposes for which the meeting is called. The notice of any meeting shall also
include, or be accompanied by, any additional statements, information, or
documents prescribed by the General Corporation Law. Except as otherwise
provided by the General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten days nor more than
sixty days before the date of the meeting, unless the
-3-
<PAGE>
lapse of the prescribed period of time shall have been waived, and directed to
each stockholder at his record address or at such other address which he may
have furnished by request in writing to the Secretary of the corporation. Notice
by mail shall be deemed to be given when deposited, with postage thereon
prepaid, in the United States mail. If a meeting is adjourned to another time,
not more than thirty days hence, and/or to another place, and if an announcement
of the adjourned time and/or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice need not be
given to any stockholder who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
----------------
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
------------------
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another
--------------------
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in
-4-
<PAGE>
law to support an irrevocable power. A proxy may be made irrevocable regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
----------
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of
------
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one
------
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by a majority of the votes cast except
where the General Corporation Law prescribes a different percentage of votes
and/or a different exercise of voting power, and except as may be otherwise
prescribed by the provisions of the certificate of incorporation and these By-
Laws. In the election of directors, and for any other action, voting need not
be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
-----------------------------------
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meetings
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
-5-
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
1. FUNCTIONS AND DEFINITION. The business and affairs of the
------------------------
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
-------------------------
a citizen of the United States, or a resident of the State of Delaware. The
property, affairs and business of the corporation shall be managed by its Board
of Directors. The number of directors may be fixed from time to time by action
of the stockholders or of the directors and may be increased or decreased by
action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
-----------------
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. In the
interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of directors and/or for the removal of one
or more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
--------
- TIME. Meetings shall be held at such time as the Board shall fix,
----
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
-----
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
----
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
-6-
<PAGE>
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
---------------------------------------
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
-----------------
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these By-Laws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
-----------------------
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
--------------------
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. Whenever its number consists of three or more, the
----------
Board of Directors may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two or more of
the directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees, the member
or
-7-
<PAGE>
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation with the exception of any authority the delegation of which is
prohibited by Section 14l of the General Corporation Law, and may authorize the
seal of the corporation to be affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at
--------------
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting, without prior notice and without a vote if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
ARTICLE III
-----------
OFFICERS
--------
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board
of Directors choosing him, no officer other than the Chairman or Vice-Chairman
of the Board, if any, need be a director. Any number of officers may be held by
the same person, as the directors may determine, except that no person may hold
the offices of President and Secretary simultaneously.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may
-8-
<PAGE>
be removed, with or without cause, by the Board of Directors. Any vacancy in any
office may be filled by the Board of Directors.
ARTICLE IV
----------
CORPORATE SEAL
--------------
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
---------
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VI
----------
CONTROL OVER BY-LAWS
--------------------
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter or repeal
these By-Laws and to adopt new By-Laws may be exercised by the Board of
Directors or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy
of the By-Laws of Locomotion Holdings, Inc., a Delaware corporation, as in
effect on the date hereof.
WITNESS my hand and the seal of the corporation.
Dated:
______________________________________
Secretary of Locomotion Holdings, Inc.
(SEAL)
-9-
<PAGE>
EXHIBIT 3.41
[STAMP APPEARS HERE]
CERTIFICATE OF INCORPORATION
OF
Locomotion Therapy, Inc.
------------------------
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to the
provisions of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: The name of the Corporation is Locomotion Therapy, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, 19801 and the name of the Corporation's registered agent
at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 3,000 shares of Class A Common Stock, $.01 par value.
FIFTH: The name and the mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Kathleen M. Sablone Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
SIXTH: The Directors shall have power to adopt, amend, or repeal the By-
Laws of the Corporation.
SEVENTH: Election of Directors need not be by written ballot unless the
By-Laws of the Corporation so provide.
EIGHTH: The Corporation shall indemnify and hold harmless any director,
officer employee or agent of the Corporation from and against any and all
expenses and liabilities that may be imposed upon or incurred in connection
with, or as a result of, any proceeding in which he or she may become involved,
as a party or otherwise, by reason of the fact that
<PAGE>
he or she is or was such a director, officer, employee or agent, whether or not
he or she continues to be such at the time such expenses and liabilities shall
have been imposed or incurred, to the fullest extent permitted by the laws of
the State of Delaware as they may be amended from time to time.
NINTH: No director of the Corporation shall be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title 8 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit.
TENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The undersigned incorporator hereinbefore named, for the purpose of forming
a corporation pursuant to the General Corporation Law of the State of Delaware,
does make this certificate, hereby declaring and certifying that this is her act
and deed and the facts stated herein are true and accordingly has hereunto set
her hand this 14th day of July, 1997.
/s/ Kathleen M. Sablone
----------------------------------------------
Kathleen M. Sablone, Incorporator
<PAGE>
CERTIFICATE OF MERGER
OF
LOCOMOTION THERAPY, INC.,
A CALIFORNIA CORPORATION
AND
LOCOMOTION THERAPY, INC.,
A DELAWARE CORPORATION
It is hereby certified that:
1. The constituent business corporations participating in the merger herein
certified are:
(i) Locomotion Therapy, Inc., which is incorporated under the laws of the
State of Delaware (the "Surviving Corporation"); and
(ii) Locomotion Therapy, Inc., which is incorporated under the laws of the
State of California (the "Terminating Corporation") and which has 500,000 shares
of common stock, par value $.01, authorized.
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by each of the aforesaid constituent corporations in
accordance with the provisions of Section 252 of the General Corporation Law of
the State of Delaware; and in accordance with the provisions of Section 1108 of
the General Corporation Law of the State of California.
3. The name of the Surviving Corporation in the merger is Locomotion Therapy,
Inc., which will continue its existence as said surviving corporation under this
name upon the effective date of said merger pursuant to the provisions of the
laws of the State of Delaware.
4. The Certificate of Incorporation of Locomotion Therapy, Inc., a Delaware
corporation, as now in force and effect, shall be the Certificate of
Incorporation of said surviving corporation.
5. The executed Agreement and Plan of Merger between the aforesaid constituent
corporations is on file at the principal place of business of the aforesaid
surviving corporation, the address of which is as follows:
Locomotion Therapy, Inc.
4751 Wilshire Blvd., #213
Los Angeles, CA 90010
[STAMP APPEARS HERE]
<PAGE>
6. A copy of the aforesaid Agreement and Plan of Merger will be furnished by
the aforesaid Surviving Corporation, on request and without cost, to any
stockholder of each of the aforesaid constituent corporations.
Dated: As of August 1, 1997.
LOCOMOTION THERAPY, INC.,
A DELAWARE CORPORATION
By: /s/ Robert Snukal
------------------------------
Robert Snukal
Chief Financial Officer
Attest:
/s/ Sheila Snukal
- --------------------------------
Sheila Snukal
Secretary
Dated: As of August 1, 1997.
LOCOMOTION THERAPY, INC.,
A CALIFORNIA CORPORATION
By: /s/ Robert Snukal
------------------------------
Robert Snukal
Chief Financial Officer
Attest:
/s/ Sheila Snukal
- --------------------------------
Sheila Snukal
Secretary
<PAGE>
EXHIBIT 3.42
BY - LAWS
---------
OF
--
LOCOMOTION THERAPY, INC.
------------------------
(A Delaware Corporation)
----------------
ARTICLE I
---------
STOCKHOLDERS
------------
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
-------------------------------
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation certifying the number of shares owned by him in the corporation. Any
and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than
one class of stock or more than one series of any class of stock, and whenever
the corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not
--------------------------
be required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions
<PAGE>
are determined, or (3) issue scrip or warrants in registered or bearer form
which shall entitle the holder to receive a certificate for a full share upon
the surrender of such scrip or warrants aggregating a full share. A certificate
for a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
---------------
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
----------------------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. For the purpose of
determining the stockholders entitled to express consent to corporate action in
writing without a meeting, the directors may fix a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted by
the board of directors, and which shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, shall be
the day on which the first written consent is expressed; and the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at any meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
-2-
<PAGE>
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right
------------------------
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such right
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation.
6. STOCKHOLDER MEETINGS.
--------------------
- TIME. The annual meeting shall be held on the date and at the time
----
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
- PLACE. Annual meetings and special meetings shall be held at such
-----
place, within or without the State of Delaware, as the directors may, from time
to time fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
----
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
--------------------------
given, stating the place, date and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual
meeting shall state that the meeting is called for the election of directors and
for the transaction of other business which may properly come before the
meeting, and shall, (if any other action which could be taken at a special
meeting is to be taken at such annual meeting) state the purpose or purposes.
The notice of a special meeting shall in all instances state the purpose or
purposes for which the meeting is called. The notice of any meeting shall also
include, or be accompanied by, any additional statements, information, or
documents prescribed by the General Corporation Law. Except as otherwise
provided by the General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten days nor more than
sixty days before the date of the meeting, unless the
-3-
<PAGE>
lapse of the prescribed period of time shall have been waived, and directed to
each stockholder at his record address or at such other address which he may
have furnished by request in writing to the Secretary of the corporation. Notice
by mail shall be deemed to be given when deposited, with postage thereon
prepaid, in the United States mail. If a meeting is adjourned to another time,
not more than thirty days hence, and/or to another place, and if an announcement
of the adjourned time and/or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice need not be
given to any stockholder who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
----------------
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
------------------
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another
--------------------
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in
-4-
<PAGE>
law to support an irrevocable power. A proxy may be made irrevocable regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
----------
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of
------
stock shall constitute a quorum at a meeting of stockholders for the transaction
of any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one
------
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by a majority of the votes cast except
where the General Corporation Law prescribes a different percentage of votes
and/or a different exercise of voting power, and except as may be otherwise
prescribed by the provisions of the certificate of incorporation and these By-
Laws. In the election of directors, and for any other action, voting need not
be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
-----------------------------------
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meetings
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
-5-
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
1. FUNCTIONS AND DEFINITION. The business and affairs of the
------------------------
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
-------------------------
a citizen of the United States, or a resident of the State of Delaware. The
property, affairs and business of the corporation shall be managed by its Board
of Directors. The number of directors may be fixed from time to time by action
of the stockholders or of the directors and may be increased or decreased by
action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the
-----------------
members thereof shall have been named in the certificate of incorporation, shall
be elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. In the
interim between annual meetings of stockholders or of special meetings of
stockholders called for the election of directors and/or for the removal of one
or more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
--------
- TIME. Meetings shall be held at such time as the Board shall fix,
----
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
-----
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
----
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
-6-
<PAGE>
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
---------------------------------------
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
-----------------
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these By-Laws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
-----------------------
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
--------------------
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. Whenever its number consists of three or more, the
----------
Board of Directors may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two or more of
the directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees, the member
or
-7-
<PAGE>
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation with the exception of any authority the delegation of which is
prohibited by Section 14l of the General Corporation Law, and may authorize the
seal of the corporation to be affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at
--------------
any meeting of the Board of Directors or any committee thereof may be taken
without a meeting, without prior notice and without a vote if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
ARTICLE III
-----------
OFFICERS
--------
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board
of Directors choosing him, no officer other than the Chairman or Vice-Chairman
of the Board, if any, need be a director. Any number of officers may be held by
the same person, as the directors may determine, except that no person may hold
the offices of President and Secretary simultaneously.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may
-8-
<PAGE>
be removed, with or without cause, by the Board of Directors. Any vacancy in any
office may be filled by the Board of Directors.
ARTICLE IV
----------
CORPORATE SEAL
--------------
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
---------
FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VI
----------
CONTROL OVER BY-LAWS
--------------------
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter or repeal
these By-Laws and to adopt new By-Laws may be exercised by the Board of
Directors or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy
of the By-Laws of Locomotion Therapy, Inc., a Delaware corporation, as in effect
on the date hereof.
IN WITNESS WHEREOF, I set my hand this 14th day of July, 1997.
/s/ Sheila Snukal
-------------------------------------
Secretary of Locomotion Therapy, Inc.
-9-
<PAGE>
Exhibit 3.43
1797984
FILED
In the office of the Secretary of State
of the State of California
JAN 21 1997
/s/ Bill Jones
BILL JONES, Secretary of State
ARTICLES OF INCORPORATION
OF
ON-TRACK THERAPY CENTER, INC.
I
The name of this corporation is ON-TRACK THERAPY CENTER, INC.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the general corporation
law of California other than the banking business, the trust business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is: Robert Snukal, c/o Fountain View
Management, Inc., 11900 West Olympic Boulevard, Suite 680, Los Angeles,
California 90064.
IV
This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is authorized to
issue is 500,000.
Dated: January 17, 1997
/s/ David B Bloom
--------------------
DAVID B. BLOOM
I hereby declare that I am the person who executed the foregoing
Articles of Incorporation, which execution is my act and deed.
/s/ David B Bloom
--------------------
DAVID B. BLOOM
(SEAL)
<PAGE>
Exhibit 3.44
BY-LAWS OF ON-TRACK THERAPY CENTER, INC.
-----------------------------
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and or the
- ---------
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Section 2. PLACE. Annual meetings and special meetings shall be held at such
- ---------
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the Chairman
- ---------
of the Board, if any, Vice Chairman of the Board, if any, the President, if any,
the Secretary, or by any officer instructed by the Directors to call the
meeting. Special meetings may be called in like manner and by the holders of
shares entitled to cast not less than ten percent of the votes at the meeting
being called.
Section 4. NOTICE. Written notice stating the place, day and hour of each
- ---------
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located. Such notice shall be deemed to be delivered when
deposited in the United States mail with first class postage therein prepaid, or
sent by other means of written
<PAGE>
communication addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at the
time of notice to be presented by management for election. At an annual meeting
of shareholders, any matter relating to the affairs of the corporation, whether
or not stated in the notice of the meeting, may be brought up for action except
matters which the General Corporation Law requires to be stated in the notice of
the meeting. The notice of any annual or special meeting shall also include, or
be accompanied by, any additional statements, information, or documents
prescribed by the General Corporation Law. When a meeting is adjourned to
another time or place, notice of the adjourned meeting need not be given if the
time and place thereof are announced at the meeting at which the adjournment is
taken; provided that, if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
- ---------
and wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601. of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
- ---------
over by one of the following officers in the order of seniority and if present
and acting the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, if any, a Vice President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but
2
<PAGE>
if neither the Secretary nor an Assistant Secretary is present, the Chairman of
the meeting shall appoint a secretary of the meeting.
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person
- ---------
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it prior to the vote or written action pursuant
thereto, except as otherwise provided by the General Corporation Law. As used
herein, a "proxy" shall be deemed to mean a written authorization signed by a
shareholder or a shareholder's attorney in fact giving another person or persons
power to vote or consent in writing with respect to the shares of such
shareholder, and "Signed" as used herein shall be deemed to mean the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of
- ---------
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairmen of any
meeting or shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
- ---------
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
proposes is defined as a corporation, the
3
<PAGE>
share of which possessing more than 25% of the total combined voting power of
all classes of shares entitled to vote, are owned directly or indirectly through
one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
- ----------
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting
4
<PAGE>
by less than unanimous written consent to those shareholders entitled to vote
who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by ballot
- ----------
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
- ----------
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by them shall be voted as provided therein or in Section 706 and may
otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
- ---------
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
- ---------
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs, of this corporation by the shareholders, provided however such
5
<PAGE>
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
- ---------
the corporation, a citizen of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be 4. Thereafter, the authorized number of
directors constituting the Board shall be at least three provided that, whenever
the corporation shall have only two shareholders, the number of directors may be
at least two, and, whenever the corporation shall have only one shareholder, the
number of directors may be at least one. Subject to the foregoing provisions,
the number of directors may be changed from time to time by an amendment of
these By-Laws adopted by the shareholders. Any such amendment reducing the
number of directors to fewer than five cannot be adopted if the votes cast
against its adoption at a meeting or the shares not consenting in writing in the
case of action by written consent are equal to more than sixteen and two-thirds
percent of the outstanding shares. No decrease in the authorized number of
directors shall have the effect of shortening the term of any incumbent
director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
- ---------
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a
6
<PAGE>
majority of the directors then in office or of the sole remaining director,
although less than a quorum exists. Any director may resign effective upon
giving written notice to the Chairman of the Board, if any, the President, the
Secretary or the Board of Directors, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to the office when the resignation
becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
- ---------
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
Section 6. MEETINGS.
- ---------
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State
of California, which has been designated in any notice of the meeting, or, if
not stated in said notice, or, if there is no notice given, at the place
designated by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice
7
<PAGE>
need not specify the purpose of any regular or special meeting of the Board of
Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
- ---------
only one director is required by the By-Laws or Articles of Incorporation, then
any reference herein to notices, waivers, consents, meetings or other actions by
a majority or quorum of the directors shall be deemed to refer to such notice,
waiver, etc., by such sole director, who shall have all the rights and duties
and shall be entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to a Board of Directors.
Section 8. QUORUM AND ACTION. A majority of the authorized number of directors
- ---------
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors present
at a meeting duly held at which a quorum is present shall be the act of the
Board of Directors. Members of the Board of Directors may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another, and
participation by such use shall be deemed to constitute presence in person at
any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action which may be taken is approved by at least a majority of the required
quorum for such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
- ---------
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
- ----------
individual director may be removed from office without cause
8
<PAGE>
by approval of the holders of at least a majority of the shares provided, that
unless the entire Board is removed, an individual director shall not be removed
when the votes cast against such removal, or not consenting in writing to such
removal, would be sufficient to elect such director if voted cumulatively at an
election of directors at which the same total number of votes were cast, or, if
such action is taken by written consent, in lieu of a meeting, all shares
entitled to vote were voted, and the entire number of directors authorized at
the time of the director's most recent election were then being elected. If any
or all directors are so removed, new directors may be elected at the same
meeting or by such written consent. The Board of Directors may declare vacant
the office of any director who has been declared of unsound mind by an order of
court or convicted of a felony.
Section 11. COMMITTEES. The Board or Directors, by resolution adopted by a
- ----------
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
- ----------
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
- ----------
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
9
<PAGE>
ARTICLE III.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
- ---------
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
- ---------
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
- ---------
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
- ---------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
10
<PAGE>
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ---------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the
- ---------
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
- ---------
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
11
<PAGE>
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
- ----------
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors of the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
- ---------
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
12
<PAGE>
In the event that the corporation shall issue the whole or any part of
its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue
- ---------
a new certificate for shares or for any other security in the place of any other
certificate theretofore issued by it, which is alleged to have been lost, stolen
or destroyed. As a condition to such issuance, the corporation may require any
such owner of the allegedly lost, stolen or destroyed certificate or any such
owner's legal representative to give the corporation a bond, or other adequate
security, sufficient to indemnify it against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
- ---------
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
- ---------
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; the record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors has been taken, shall be the day on which the
first written consent is given; and the record date for determining shareholders
for any other
13
<PAGE>
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto, or the sixtieth day prior to
the day of such other action, which ever is later.
A determination so shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
- ---------
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the
- ---------
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders of record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights where there are two or more classes or
series of shares or upon which or upon whom the General Corporation Law confers
such rights notwithstanding that the Articles of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
- ---------
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418 (c).
14
<PAGE>
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions, 1ll (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports), 16 (Rights of
Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived thereby,
but to the extent they are not so altered or waived, these By-Laws shall be
applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purposes or any amount, except as
provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended or
repealed or new By-Laws may be adopted by the shareholders entitled to exercise
a majority of the voting power or by the Board of Directors; provided, however,
that
15
<PAGE>
the Board of Directors shall have no control over any By-Law which fixes or
changes the authorized number of directors of the corporation; provided,
further, than any control over the By-Laws herein vested in the Board of
Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of
directors to fewer than five shall require authorization by the greater
proportion of voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS - STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
- ---------
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for payment of
- ---------
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
- ---------
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the
16
<PAGE>
corporation the annual report prescribed by Section 1501 of the General
Corporation Law unless it shall determine that a useful purpose would be served
by causing the same to be sent or unless the Department of Corporations,
pursuant to the provisions of the Corporate Securities Law of 1968, shall direct
the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of process
- ---------
within the State of California is Mr. Robert Snukal.
17
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATION(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of
Incorporation to act as the Incorporator(s) or First Director(s) of the above
named corporation hereby adopt the same as the By-Laws of said corporation.
Executed this 21st day of January, 1997.
/s/ David B. Bloom
---------------------------------
INCORPORATOR, DAVID B. BLOOM
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of
the above-named corporation; that the foregoing By-Laws were adopted as the
By-Laws of said corporation on the date set forth above by the person(s)
appointed in the Articles of Incorporation to act as the Incorporator(s) or
First Director(s) of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 21st day of January, 1997.
/s/ Sheila Snukal
---------------------------------
SECRETARY, SHEILA SNUKAL
(SEAL)
<PAGE>
CERTIFICATE BY SECRETARY OF ADOPTION BY
SHAREHOLDERS' VOTE
THIS IS TO CERTIFY: That I am the duly-elected, qualified and
acting Secretary of the above-named corporation and that the above and
foregoing Code of By-Laws was submitted to the shareholders at their first
meeting held on the date set forth in the By-Laws and recorded in the minutes
thereof, was ratified by the vote of shareholders entitled to exercise the
majority of the voting power of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day
of January, 1997.
/s/ Sheila Snukal
---------------------------------
SECRETARY, SHEILA SNUKAL
19
<PAGE>
Exhibit 3.45
1776225
ARTICLES OF INCORPORATION
FILED
OF in the office of the
Secretary of State
I.' n O., Inc. of the State of California
JAN 11, 1996
/s/ Bill Jones
BILL JONES, Secretary of State
I
The name of this corporation is I.' n O., Inc.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the general corporation
law of California other than the banking business, the trust business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is: Robert Snukal, c/o Fountain View
Management, 11900 W. Olympic Boulevard, Suite 680, Los Angeles, California
90064.
IV
This corporation is authorized to issue only one class of shares of
stock; and the total number of shares which this corporation is authorized to
issue is 500,000.
Dated: January 11, 1996
/s/ David B. Bloom
-----------------------
David B. Bloom
I hereby declare that I am the person who executed the foregoing
Articles of Incorporation, which execution is my act and deed.
/s/ David B. Bloom
-----------------------
David B. Bloom
(SEAL)
<PAGE>
Exhibit 3.46
BY-LAWS OF I.' n. O., Inc.
--------------
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and or the
- ---------
transaction of any other proper business and any special meeting shall be held
on the date and at the time as the Board of Directors shall from time to time
fix.
Section 2. PLACE. Annual meetings and special meetings shall be held at such
- ---------
place, within or without the State of California, as the Directors may, from
time to time, fix. Whenever the Directors shall fail to fix such place, the
meetings shall be held at the principal executive office of the corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the Chairman
- ---------
of the Board, if any, Vice Chairman of the Board, if any, the President, if any,
the Secretary, or by any officer instructed by the Directors to call the
meeting. Special meetings may be called in like manner and by the holders of
shares entitled to cast not less than ten percent of the votes at the meeting
being called.
Section 4. NOTICE. Written notice stating the place, day and hour of each
- ---------
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the said principal
executive office is located. Such notice shall be deemed to be delivered when
deposited in the United States mail with first class postage therein prepaid, or
sent by other means of written
<PAGE>
communication addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at the
time of notice to be presented by management for election. At an annual meeting
of shareholders, any matter relating to the affairs of the corporation, whether
or not stated in the notice of the meeting, may be brought up for action except
matters which the General Corporation Law requires to be stated in the notice of
the meeting. The notice of any annual or special meeting shall also include, or
be accompanied by, any additional statements, information, or documents
prescribed by the General Corporation Law. When a meeting is adjourned to
another time or place, notice of the adjourned meeting need not be given if the
time and place thereof are announced at the meeting at which the adjournment is
taken; provided that, if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and noticed,
- ---------
and wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the shareholders or his proxy signs a written waiver of
notice or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting constitutes a waiver of notice of such meeting, except when
the person objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and except that
attendance at a meeting shall not constitute a waiver of any right to object to
the consideration of matters required by the General Corporation Law to be
included in the notice if such objection is expressly made at the meeting.
Except as otherwise provided in subdivision (f) of Section 601 of the General
Corporation Law, neither the business to be transacted at nor the purpose of any
regular or special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided
- ---------
over by one of the following officers in the order of seniority and if present
and acting the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, if any, a Vice President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but
2
<PAGE>
if neither the Secretary nor an Assistant Secretary is present, the Chairman of
the meeting shall appoint a secretary of the meeting.
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another person
- ---------
or persons to act as his proxy at a meeting or by written action. No proxy shall
be valid after the expiration of eleven months from the date of its execution
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it prior to the vote or written action pursuant
thereto, except as otherwise provided by the General Corporation Law. As used
herein, a "proxy" shall be deemed to mean a written authorization signed by a
shareholder or a shareholder's attorney in fact giving another person or persons
power to vote or consent in writing with respect to the shares of such
shareholder, and "Signed" as used herein shall be deemed to mean the placing of
such shareholder's name on the proxy, whether by manual signature, typewriting,
telegraphic transmission or otherwise by such shareholder or such shareholder's
attorney in fact. Where applicable, the form of any proxy shall comply with the
provisions of Section 604 of the General Corporation Law.
Section 8. INSPECTORS -- APPOINTMENT. In advance of any meeting, the Board of
- ---------
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or, if any
persons so appointed fail to appear or refuse to act, the Chairmen of any
meeting or shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented shall determine
whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
- ---------
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
proposes is defined as a corporation, the
3
<PAGE>
share of which possessing more than 25% of the total combined voting power of
all classes of shares entitled to vote, are owned directly or indirectly through
one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of the
- ----------
voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name or
the candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not be
elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting
4
<PAGE>
by less than unanimous written consent to those shareholders entitled to vote
who have not consented in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by ballot
- ----------
unless a shareholder demands election by ballot at the election and before the
voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above provisions in
- ----------
the event this corporation elects to become a close corporation, an agreement
between two or more shareholders thereof, if in writing and signed by the
parties thereof, may provide that in exercising any voting rights the shares
held by them shall be voted as provided therein or in Section 706 and may
otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall be
- ---------
managed and all corporate powers shall be exercised by or under the direction of
its Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such
duties in good faith, in the manner such director believes to be in the best
interests of the corporation, and with care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
- ---------
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
5
<PAGE>
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a shareholder of
- ---------
the corporation, a citizen of the United States, or a resident of the State of
California. The authorized number of directors constituting the Board of
Directors until further changed shall be 4. Thereafter, the authorized number of
directors constituting the Board shall be at least three provided that, whenever
the corporation shall have only two shareholders, the number of directors may be
at least two, and, whenever the corporation shall have only one shareholder, the
number of directors may be at least one. Subject to the foregoing provisions,
the number of directors may be changed from time to time by an amendment of
these By-Laws adopted by the shareholders. Any such amendment reducing the
number of directors to fewer than five cannot be adopted if the votes cast
against its adoption at a meeting or the shares not consenting in writing in the
case of action by written consent are equal to more than sixteen and two-thirds
percent of the outstanding shares. No decrease in the authorized number of
directors shall have the effect of shortening the term of any incumbent
director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall consist of
- ---------
the persons elected at the meeting of the incorporator, all of whom shall hold
office until the first annual meeting of shareholders and until their successors
have been elected and qualified, or until their earlier resignation or removal
from office. Thereafter, directors who are elected to replace any or all of the
members of the initial Board of Directors or who are elected at an annual
meeting of shareholders, and directors who are elected in the interim to fill
vacancies, shall hold office until the next annual meeting of shareholders and
until their successors have been elected and qualified, or until their earlier
resignation, removal from office, or death. In the interim between annual
meetings of shareholders or of special meetings of shareholders called for the
election of directors, any vacancies in the Board of Directors, including
vacancies resulting from an increase in the authorized number of directors which
have not been filled by the shareholders, including any other vacancies which
the General Corporation Law authorizes directors to fill, and including
vacancies resulting from the removal of directors which are not filled at the
meeting of shareholders at which any such removal has been effected, if the
Articles of Incorporation or a By-Law adopted by the shareholders so provides,
may be filled by the vote of a
6
<PAGE>
majority of the directors then in office or of the sole remaining director,
although less than a quorum exists. Any director may resign effective upon
giving written notice to the Chairman of the Board, if any, the President, the
Secretary or the Board of Directors, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to the office when the resignation
becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
- ---------
corporation may indemnify any Director, Officer, agent or employee as to those
liabilities and on those terms and conditions as are specified in Section 317.
In any event, the corporation shall have the right to purchase and maintain
insurance on behalf of any such persons whether or not the corporation would
have the power to indemnify such person against the liability insured against.
Section 6. MEETINGS.
- ---------
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State
of California, which has been designated in any notice of the meeting, or, if
not stated in said notice, or, if there is no notice given, at the place
designated by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice
7
<PAGE>
need not specify the purpose of any regular or special meeting of the Board of
Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event
- ---------
only one director is required by the By-Laws or Articles of Incorporation, then
any reference herein to notices, waivers, consents, meetings or other actions by
a majority or quorum of the directors shall be deemed to refer to such notice ,
waiver, etc., by such sole director, who shall have all the rights and duties
and shall be entitled to exercise all of the powers and shall assume all the
responsibilities otherwise herein described as given to a Board of Directors.
Section 8. QUORUM AND ACTION. A majority of the authorized number of directors
- ---------
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors present
at a meeting duly held at which a quorum is present shall be the act of the
Board of Directors. Members of the Board of Directors may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another, and
participation by such use shall be deemed to constitute presence in person at
any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action which may be taken is approved by at least a majority of the required
quorum for such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
- ---------
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors
- ----------
or any individual director may be removed from office without cause
8
<PAGE>
by approval of the holders of at least a majority of the shares provided, that
unless the entire Board is removed, an individual director shall not be removed
when the votes cast against such removal, or not consenting in writing to such
removal, would be sufficient to elect such director if voted cumulatively at an
election of directors at which the same total number of votes were cast, or, if
such action is taken by written consent, in lieu of a meeting, all shares
entitled to vote were voted, and the entire number of directors authorized at
the time of the director's most recent election were then being elected. If any
or all directors are so removed, new directors may be elected at the same
meeting or by such written consent. The Board of Directors may declare vacant
the office of any director who has been declared of unsound mind by an order of
court or convicted of a felony.
Section 11. COMMITTEES. The Board or Directors, by resolution adopted by a
- ----------
majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board of
- ----------
Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken may be
- ----------
taken without a meeting if all of the members of the Board of Directors shall
individually or collectively consent in writing to such action. Any such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
9
<PAGE>
ARTICLE III.
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman of the
- ---------
Board or a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such officers as
- ---------
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such
- ---------
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with or
- ---------
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 5. VACANCIES. A vacancy in any office because of death, resignation,
- ---------
removal, disqualification or any other cause shall be filled in the manner
prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there shall be
- ---------
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
10
<PAGE>
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
- ---------
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President, the
- ---------
Vice Presidents, in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to, all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of
- ---------
minutes at the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Directors' meetings, the
number of shares present or represented at Shareholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
11
<PAGE>
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
- ----------
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be open to inspection
by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors of the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
- ---------
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
12
<PAGE>
In the event that the corporation shall issue the whole or any part of
its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue
- ---------
a new certificate for shares or for any other security in the place of any other
certificate theretofore issued by it, which is alleged to have been lost, stolen
or destroyed. As a condition to such issuance, the corporation may require any
such owner of the allegedly lost, stolen or destroyed certificate or any such
owner's legal representative to give the corporation a bond, or other adequate
security, sufficient to indemnify it against any claim that may be made against
it, including any expense or liability, on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the General
- ---------
Corporation Law and/or the Corporate Securities Law of 1968 which may restrict
the transferability of shares, transfers of shares of the corporation shall be
made only on the record of shareholders of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
- ---------
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; the record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors has been taken, shall be the day on which the
fist written consent is given; and the record date for determining shareholders
for any other
13
<PAGE>
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto, or the sixtieth day prior to
the day of such other action, which ever is later.
A determination so shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
- ---------
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect of the
- ---------
right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote thereat or to assent or consent or dissent in writing in
lieu of a meeting, as the case may be, the term "share" or "shares" or
"shareholder" or "shareholders" refers to an outstanding share or shares and to
a holder or holders of record or outstanding shares when the corporation is
authorized to issue only one class of shares, and said reference is also
intended to include any outstanding share or shares and any holder or holders of
record of outstanding shares of any class upon which or upon whom the Articles
of Incorporation confer such rights where there are two or more classes or
series of shares or upon which or upon whom the General Corporation Law confers
such rights notwithstanding that the Articles of Incorporation may provide for
more than one class or series of shares, one or more of which are limited or
denied such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares
- ---------
of this corporation, in the event it shall elect to become a close corporation,
shall contain the legend required by Section 418 (c).
14
<PAGE>
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions,111 (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports), 16 (Rights of
Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived thereby,
but to the extent they are not so altered or waived, these By-Laws shall be
applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purposes or any amount, except as
provided in Section 313 of the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended or
repealed or new By-Laws may be adopted by the shareholders entitled to exercise
a majority of the voting power or by the Board of Directors; provided, however,
that
15
<PAGE>
the Board of Directors shall have no control over any By-Law which fixes or
changes the authorized number of directors of the corporation; provided,
further, than any control over the By-Laws herein vested in the Board of
Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of
directors to fewer than five shall require authorization by the greater
proportion of voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS - STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its
- ---------
principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for payment of
- ---------
money, notes or other evidences of indebtedness, issued in the name of or
payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
- ---------
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the
16
<PAGE>
corporation the annual report prescribed by Section 1501 of the General
Corporation Law unless it shall determine that a useful purpose would be served
by causing the same to be sent or unless the Department of Corporations,
pursuant to the provisions of the Corporate Securities Law of 1968, shall direct
the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of process
- ---------
within the State of California is Mr. Robert Snukal.
<PAGE>
CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATION(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of
Incorporation to act as the Incorporator(s) or First Director(s) of the above
named corporation hereby adopt the same as the By-Laws of said corporation.
Executed this 11th day of January, 1996.
/s/ Robert Snukal
-------------------------------
PRESIDENT, ROBERT SNUKAL
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of
the above-named corporation; that the foregoing By-Laws were adopted as the
By-Laws of said corporation on the date set forth above by the person(s)
appointed in the Articles of Incorporation to act as the Incorporator(s) or
First Director(s) of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the corporate seal this __th day of January, 1996.
/s/ Sheila Snukal
-------------------------------
SECRETARY, SHEILA SNUKAL
(SEAL)
<PAGE>
Exhibit 3.47
ARTICLES OF INCORPORATION
of
SYCAMORE PARK CONVALESCENT HOSPITAL
We, the undersigned, hereby associate ourselves for the purpose of
forming a corporation under the laws of the State of California and we certify
the following:
I
The name of the corporation shall be:
SYCAMORE PARK CONVALESCENT HOSPITAL
II
The purpose for which this corporation are formed are as follows:
1. The specific business in which the corporation proposes primarily and
initially to engage is the ownership and operation of a convalescent and nursing
hospital.
2. The additional purposes for which the corporation is formed are:
(a) To engage in any one or more other businesses or transactions
which the Board of Directors of the corporation may from time to time authorize
or approve, whether related or unrelated to the business described in
Subparagraph 1 above or to any other business then or theretofore done by this
corporation.
(b) To exercise any and all rights and powers which a corporation may
now or hereafter exercise.
(c) To act as principal, agent, joint venturer, partner or in any
other capacity which may be
1
(4) 8-9-65
<PAGE>
authorized or approved by the Board of Directors of this corporation.
(d) To transact business in the State of California or in any other
jurisdiction of the United States of America, or elsewhere in the world.
The foregoing statement of purposes shall be construed as a statement
of both purposes and powers, and the purposes and powers in each clause shall,
except where otherwise expressed, be in no wise limited or restricted by
reference to or inference from the terms or provisions of any other clause but
shall be regarded as independent purposes and powers.
III
The principal office for the transaction of the business of the
corporation is to be located in the County of Los Angeles, State of California.
IV
The corporation is authorized to issue one class of stock, to wit:
common stock. The total number of shares which the corporation is authorized to
issue is 250 shares. The par value of each share is $100.00 and the aggregate
par value of such shares is $25,000.00.
V
The number of its directors shall be five. The names and addresses of
the persons who are appointed to act as the first directors are as follows:
2
(4) 8-9-65
<PAGE>
NAME ADDRESS
---- -------
CHARLES D. SILVERBERG 3605 Valley Meadow Road
Sherman Oaks, California
GARY L. ZIMMERMAN 7331 Cleargrove Drive
Downey, California
IRENE A. IRWIN 1921 North Edgemont Street
Los Angeles, California
REBECCA COOPER 506 North Flores Street
Los Angeles 48, California
CAROLINA JUAREZ 2924 Acresite Street
Los Angeles 39, California
IN WITNESS WHEREOF, we do execute these Articles of Incorporation and
have hereunto set our hands this 10th day of August, 1965.
/s/ Charles D. Silverberg
--------------------------------
CHARLES D. SILVERBERG
/s/ Gary L. Zimmerman
--------------------------------
GARY L. ZIMMERMAN
/s/ Irene A. Irwin
--------------------------------
IRENE A. IRWIN
/s/ Rebecca Cooper
--------------------------------
REBECCA COOPER
/s/ Carolina Juarez
--------------------------------
CAROLINA JUAREZ
3
(4) 8-9-65
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On this 10th day of August, 1965, before me, the undersigned, a
Notary Public in and for said County and State, personally appeared Charles D.
Silverberg, Gary L. Zimmerman, Irene A. Irwin, Rebecca Cooper, and Carolina
Juarez, known to me to be the persons whose names are subscribed to the
foregoing Articles of Incorporation as incorporators, and who are also named
therein as directors, and each duly acknowledged to me that he executed the
same.
WITNESS my hand and official seal.
/s/ Rose De Jack
---------------------------------
ROSE DeJACK, Notary Public in
and for said County and State.
ROSE DeJACK
My Commission Expires:_______________
<PAGE>
A495741
CERTIFICATE OF AMENDMENT FILED
In the office of the
OF Secretary of the State
of California
ARTICLES OF INCORPORATION
August 11, 1997
/s/ Bill Jones
BILL JONES,SECRETARY OF STATE
The undersigned, Robert Snukal and Sheila Snukal, hereby
certify that:
1. They are the President and Secretary, respectively, of
Sycamore Park Convalescent Hospital, a California corporation (the
"Corporation").
2. Article IV of the Articles of Incorporation of this
Corporation is amended and restated to read in its entirety as follows:
"The corporation is authorized to issue one class of capital
stock, to wit: common stock. The total number of shares which
the corporation is authorized to issue is 625. The par value
of each such share is $100.00, and the aggregate value of
such shares is $62,500.00."
3. The foregoing amendment of the Articles of Incorporation has
been duly approved by the Board of Directors.
4. The foregoing amendment of the Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902 of the California Corporations Code. The total number of outstanding
shares of the Corporation entitled to vote thereon is 250. The number of shares
voting in favor of the amendment equaled or exceeded the vote required. The
percentage vote required was greater than 50%.
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this Certificate are true
and correct of our own knowledge.
DATED: August 8th, 1997
---------------------------
Robert Snukal
President
---------------------------
Sheila Snukal
Secretary
[SEAL OF THE SECRETARY
OF STATE APPEARS HERE]
<PAGE>
Exhibit 3.48
BY-LAWS OF
SYCAMORE PARK CONVALESCENT HOSPITAL
ARTICLE I
SHAREHOLDERS' MEETING
Section 1. PLACE OF MEETINGS.
All meetings of the shareholders shall be held at the office of the
corporation in the State of California, as may be designated for that purpose
from time to time by the Board of Directors.
Section 2. ANNUAL MEETINGS.
The annual meeting of the shareholders shall be held on the 30th day
of September in each year, if not a legal holiday, and if a legal holiday, then
on the next succeeding business day, at the hour of 10:00 o'clock A.M., at
which time the shareholders shall elect by plurality vote a Board of Directors,
consider reports of the affairs of the Corporation, and transact such other
business as may properly be brought before the meeting.
Section 3. SPECIAL MEETINGS.
Special meetings of the shareholders, for any purpose or purposes
whatsoever, may be called at any time by the President, or by the Board of
Directors, or by any two or more members thereof, or by one or more shareholders
holding not less than one-fifth (1/5) of the voting power of the corporation.
Section 4. NOTICE OF MEETINGS.
Notices of meetings annual or special, shall be given in writing to
shareholders entitled to vote by the Secretary or the Assistant Secretary, or if
there be no such officer, or in case of his neglect or refusal, by any director
or shareholder.
Such notices shall be sent to the shareholder's address appearing on
the books of the corporation, or supplied by him to the corporation for the
purpose of notice, not less than seven days before such meeting.
Notice of any meeting of shareholders shall specify the place, the day
and the hour of meeting, and in case of special meeting, as provided by the
Corporations Code of California, the general nature of the business to be
transacted.
When a meeting is adjourned for thirty days or more, notice of the
adjourned meeting shall be given as in case of an original meeting. Save, as
aforesaid, it shall not be necessary to give any notice of the adjournment or of
the business to be transacted at an adjourned meeting other than by announcement
at the meeting at which such adjournment is taken.
Section 5. CONSENT TO SHAREHOLDERS' MEETINGS.
The transactions of any meeting of shareholders, however called and
noticed, shall be valid as though had at a meeting duly held after regular call
and notice if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each
-- 1 --
<PAGE>
of the shareholders entitled to vote, not present in person or by proxy, sign a
written waiver of notice, or a consent to the holding of such meeting, or an
approval of the minutes thereof. All such waivers, consents or approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
Any action which may be taken at a meeting of the shareholders, may
be taken without a meeting if authorized by a writing signed by all of the
holders of shares who would be entitled to vote at a meeting for such purpose,
and filed with the Secretary of the corporation.
Section 6. QUORUM.
The holders of a majority of the shares entitled to vote thereat,
present in person, or represented by proxy, shall be requisite and shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by law, by the Articles of Incorporation,
or by these By-Laws. If, however, such majority shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote thereat, present in person, or by proxy, shall have power to adjourn the
meeting from time to time, until the requisite amount of voting shares shall be
present. At such adjourned meeting at which the requisite amount of voting
shares shall be represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 7. VOTING RIGHTS; CUMULATIVE VOTING.
Only persons in whose names shares entitled to vote stand on the stock
records of the corporation on the day of any meeting of shareholders, unless
some other day be fixed by the Board of Directors for the determination of
shareholders of record, then on such other day, shall be entitled to vote at
such meeting.
Every shareholder entitled to vote shall be entitled to one vote for
each of said shares and shall have the right to cumulate his votes as provided
in Section 2235, Corporations Code of California.
Section 8. PROXIES.
Every shareholder entitled to vote, or to execute consents, may do so,
either in person or by written proxy, executed in accordance with the provisions
of Section 2225 of the Corporations Code of California and filed with the
Secretary of the corporation.
ARTICLE II
DIRECTORS; MANAGEMENT
Section 1. POWERS.
Subject to the limitation of the Articles of Incorporation, of the
By-Laws and of the Laws of the State of California as to action to be
authorized or approved by the shareholders, all corporate powers shall be
exercised by or under authority of, and the business and affairs of this
corporation shall be controlled by, a Board of Directors.
-- 2 --
<PAGE>
Section 2. NUMBER AND QUALIFICATION.
The authorized number of directors of the corporation shall be five
(5) until changed by amendment to the Articles of Incorporation or by an
amendment to this Section 2, Article II of these By-Laws, adopted by the vote
or written assent of the shareholders entitled to exercise the majority of
the voting power of the corporation.
Section 3. ELECTION AND TENURE OF OFFICE.
The directors shall be elected by ballot at the annual meeting of the
shareholders, to serve for one year and until their successors are elected and
have qualified. Their term of office shall begin immediately after election.
Section 4. VACANCIES.
Vacancies in the Board of Directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director,
and each director so elected shall hold office until his successor is elected at
an annual meeting of shareholders or at a special meeting called for that
purpose.
The shareholders may at any time elect a director to fill any vacancy
not filled by the directors, and may elect the additional directors at the
meeting at which an amendment of the By-Laws is voted authorizing an increase in
the number of directors.
A vacancy or vacancies shall be deemed to exist in case of the death,
resignation or removal of any director, or if the shareholders shall increase
the authorized number of directors but shall fail at the meeting at which such
increase is authorized, or at an adjournment thereof, to elect the additional
director so provided for, or in case the shareholders fail at any time to elect
the full number of authorized directors.
If the Board of Directors accepts the resignation of a Director
tendered to take effect at a future time, the Board, or the shareholders, shall
have power to elect a successor to take office when the resignation shall become
effective.
No reduction of the number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
Section 5. REMOVAL OF DIRECTORS.
The entire Board of Directors or any individual director may be
removed from office as provided by Sections 807, 810 and 811 of the Corporations
Code of the State of California.
Section 6. PLACE OF MEETINGS.
Meetings of the Board of Directors shall be held at the office of the
corporation in the State of California, as designated for that purpose, from
time to time, by resolution of the Board of Directors, or written consent of all
of the Members of the Board. Any meeting shall be valid, wherever held, if held
by the written consent of all Members of the Board of Directors, given either
before or after the meeting and filed with the Secretary of the corporation.
-- 3 --
<PAGE>
Section 7. ORGANIZATION MEETINGS.
The organization meetings of the Board of Directors shall be held
immediately following the adjournment of the annual meetings of the
shareholders.
Section 8. OTHER REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held on the last
Monday of March, June, September and December.
If said day shall fall upon a holiday, such meetings shall be held on the next
succeeding business day thereafter. No notice need be given of such regular
meetings.
Section 9. SPECIAL MEETINGS--NOTICES.
Special meetings of the Board of Directors for any purpose or purposes
shall be called at any time by the President or if he is absent or unable or
refuses to act, by any Vice-President, or by any two directors.
Written notice of the time and place of special meetings shall be
delivered personally to the directors or sent to each director by letter or by
telegram, charges prepaid, addressed to him at his address as it is shown upon
the records of the corporation, or if it is not so shown on such records or is
not readily ascertainable, at the place in which the meetings of the directors
are regularly held. In case such notice is mailed or telegraphed, it shall be
deposited in the United States mail or delivered to the telegraph company in the
place in which the principal office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting. In case
such notice is delivered as above provided; it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the meeting. Such
mailing, telegraphing or delivery as above provided shall be due, legal and
personal notice to such director.
Section 10. WAIVER OF NOTICE.
When all the directors are present at any directors' meeting, however
called or noticed, and sign a written consent thereto on the records of such
meeting, or, if a majority of the directors are present, and if those not
present sign in writing a waiver of notice of such meeting, whether prior to or
after the holding of such meeting, which said waiver shall be filed with
Secretary of the corporation, the transactions thereof are as valid as if had at
a meeting regularly called and noticed.
Section 11. NOTICE OF ADJOURNMENT.
Notice of the time and place of holding an adjourned meeting need not
be given to absent directors if the time and place be fixed at the meeting
adjourned.
Section 12. QUORUM.
A majority of the number of directors as fixed by the articles or
By-Laws shall be necessary to constitute a quorum for the transaction of
business, and the action of a majority of the directors
-- 4 --
<PAGE>
present at any meeting at which there is a quorum, when duly assembled, is valid
as a corporate act; provided that a minority of the directors, in the absence of
a quorum, may adjourn from time to time, but may not transact any business.
Section 13. CONSENT OF BOARD OBVIATING NECESSITY OF MEETING
Notwithstanding anything to the contrary contained in these By-Laws,
any action required or permitted to be taken by the board of directors under any
provisions of Sections 100 - 6804 of the Corporations Code of California may be
taken without a meeting, if all members of the board of directors shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board. Such action by written consent shall have the same force and effect as a
unanimous vote of such directors.
ARTICLE III
OFFICERS
Section 1. OFFICERS.
The officers shall be a President, one or more Vice-Presidents, a
Secretary and a Treasurer, which officers shall be elected by, and hold office
at the pleasure of, the Board of Directors.
Section 2. ELECTION.
After their election the directors shall meet and organize by electing
a President from their own number, and one or more Vice-Presidents, a
Secretary and a Treasurer, who may, but need not be, members of the Board of
Directors. Any two or more of such offices except those of President and
Secretary, may be held by the same person.
Section 3. COMPENSATION AND TENURE OF OFFICE.
The compensation and tenure of office of all the officers of the
corporation shall be fixed by the Board of Directors.
Section 4. REMOVAL AND RESIGNATION.
Any officer may be removed, either with or without cause, by a
majority of the directors at the time in office, at any regular or special
meeting of the Board, or, except in case of any officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be conferred by
the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors or to the President, or to the Secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
-- 5 --
<PAGE>
Section 5. VACANCIES.
A vacancy in any office because of death, resignation, removal;
disqualification or other cause shall be filled in the manner prescribed in the
By-Laws for regular appointments to such office.
Section 6. PRESIDENT.
The President shall be the Chief Executive Officer of the corporation
and shall, subject to the control of the Board of Directors, have general
supervision, direction and control of the business and affairs of the
corporation. He shall preside at all meetings of the shareholders and of the
Board of Directors. He shall be ex-officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 7. VICE-PRESIDENTS.
The Vice-Presidents shall, in the order designated by the Board of
Directors, in the absence or disability of the President, perform the duties and
exercise the powers of the President, and shall perform such other duties as the
Board of Directors shall prescribe.
Section 8. SECRETARY.
The Secretary shall keep, or cause to be kept, a book of minutes at
the principal office or such other place as the Board of Directors may order, of
all meetings of directors and shareholders, with the time and place of holding,
whether regular or special, and if special, how authorized, the notice thereof
given, the names of those present at directors' meetings, the number of shares
present or represented at shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or a
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given; he shall keep the seal of the corporation and
affix said seal to all documents requiring a seal, and shall have such other
powers and perform such other duties as may be prescribed by the Board of
Directors or the By-Laws.
Section 9. TREASURER.
The Treasurer shall receive and keep all the funds of the corporation,
and pay them out only on the check of the corporation, signed in the manner
authorized by the Board of Directors.
-- 6 --
<PAGE>
Section 10. ASSISTANTS.
Any Assistant Secretary or Assistant Treasurer, respectively, may
exercise any of the powers of Secretary or Treasurer, respectively, as provided
in these By-Laws or as directed by the Board of Directors, and shall perform
such other duties as are imposed upon them by the By-Laws or the Board of
Directors.
SECTION 11. SUBORDINATE OFFICERS.
The Board of Directors may from time to time appoint such subordinate
officers or agents as the business of the corporation may require, fix their
tenure of office and allow them suitable compensation.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
The Board of Directors may appoint an executive committee, and such
other committees as may be necessary from time to time, consisting of such
number of its members and with such powers as it may designate, consistent with
the Articles of Incorporation and By-Laws and the General Corporation Laws of
the State of California. Such committees shall hold office at the pleasure of
the board.
ARTICLE V
CORPORATE RECORDS AND REPORTS--INSPECTION
Section 1. RECORDS.
The corporation shall maintain adequate and correct accounts, books
and records of its business and properties. All of such books, records and
accounts shall be kept at its principal place of business in the State of
California, as fixed by the Board of Directors from time to time.
Section 2. INSPECTION OF BOOKS AND RECORDS.
All books and records provided for in Sections 3003 - 3005 of the
Corporations Code of California shall be open to inspection of the directors and
shareholders from time to time and in the manner provided in said Sections 3003
- - 3005.
Section 3. CERTIFICATION AND INSPECTION OF BY-LAWS.
The original or a copy of these By-Laws, as amended or otherwise
altered to date, certified by the Secretary, shall be open to inspection by the
shareholders of the company, as provided in Section 502 of the Corporations Code
of California.
Section 4. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or endorsed by such person or persons and in such
manner as shall be determined from time to time by resolution of the Board of
Directors.
--7--
<PAGE>
Section 5. CONTRACTS, ETC.--HOW EXECUTED.
The Board of Directors, except as in the By-Laws otherwise provided,
may authorize any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation. Such authority may be general or confined to specific instances.
Unless so authorized by the Board of Directors, no officer, agent or employee
shall have any power of authority to bind the corporation by any contract or
engagement, or to pledge its credit, or to render it liable for any purpose or
to any amount.
Section 6. ANNUAL REPORTS.
The Board of Directors shall cause annual reports to be made to the
shareholders as provided by Sections 3006 - 3012 of the Corporations Code of
California. The Board of Directors shall cause such annual reports to be sent to
the shareholders not later than one hundred twenty (120) days after the close of
the fiscal or calendar year.
ARTICLE VI
CERTIFICATES AND TRANSFER OF SHARES
Section 1. CERTIFICATES FOR SHARES.
Certificates for shares shall be of such form and device as the Board of
Directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; the par value, if any, or a statement that such shares
are without par value; a statement of the rights, privileges, preferences and
restrictions, if any; a statement as to redemption or conversion, if any; a
statement of liens or restrictions upon transfer or voting, if any; if the
shares be assessable, or, if assessments are collectible by personal action, a
plain statement of such facts.
Every certificate for shares must be signed by the President or a
Vice-President and the Secretary or an Assistant Secretary or must be
authenticated by facsimiles of the signatures of the President and Secretary or
by a facsimile of the signature of its President and the written signature of
its Secretary or an Assistant Secretary. Before it becomes effective every
certificate for shares authenticated by a facsimile of a signature must be
countersigned by a transfer agent or transfer clerk and must be registered by an
incorporated bank or trust company, either domestic or foreign, as registrar of
transfers.
Section 2. TRANSFER ON THE BOOKS.
Upon surrender to the Secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 3. LOST OR DESTROYED CERTIFICATES.
Any person claiming a certificate of stock to be lost or
--8--
<PAGE>
destroyed shall make an affidavit or affirmation of that fact and advertise the
same in such manner as the Board of Directors may require, and shall if the
directors so require give the corporation a bond of indemnity, in form and with
one or more sureties satisfactory to the Board, in at least double the value of
the stock represented by said certificate, whereupon a new certificate may be
issued of the same tenor and for the same number of shares as the one alleged to
be lost or destroyed.
Section 4. TRANSFER AGENTS AND REGISTRARS.
The Board of Directors may appoint one or more transfer agents of
transfer clerks, and one or more registrars, which shall be an incorporated bank
or trust company--either domestic or foreign, who shall be appointed at such
times and places as the requirements of the corporation may necessitate and the
Board of Directors may designate.
Section 5. CLOSING STOCK TRANSFER BOOKS.
The Board of Directors may close the transfer books in their discretion
for a period not exceeding thirty days preceding any meeting, annual or special,
of the shareholders, or the day appointed for the payment of a dividend.
Section 6. RESTRICTION ON TRANSFERS OF SHARES.
Before there can be a valid sale or transfer of any of the shares of
this corporation by the holders thereof, the holder of the shares to be sold or
transferred shall first give notice in writing to the secretary of this
corporation of his intention to sell or transfer such shares. Said notice shall
specify the number of shares to be sold or transferred, the price per share, and
the terms upon which such holder intends to make such sale or transfer. The
secretary shall, within five (5) days thereafter, mail or deliver a copy of said
notice to each of the other shareholders of record of this corporation.. Such
notice may be delivered to such shareholders personally or may be mailed to the
last known addresses of such shareholders, as the same may appear on the books
of this corporation. Within twenty (20) days after the mailing or delivering of
said notice to such shareholders, any such shareholder or shareholders desiring
to acquire any part or all of the shares referred to in said notice shall
deliver by mail or otherwise to the secretary of this corporation a written
offer or offers, expressed to be acceptable immediately, to purchase a specified
number or numbers of such shares at the price and upon the terms
--9--
<PAGE>
stated in said notice, accompanied by the purchase price therefor with
authorization to pay such purchase price against delivery of such shares.
If the total number of shares specified in such offer exceeds the number
of shares referred to in said notice, each offering shareholder shall be
entitled to purchase such proportion of the shares referred to in said notice to
the secretary as the number of shares of this corporation, which he holds, bears
to the total number of shares held by all such shareholders desiring to purchase
the shares referred to in said notice to the secretary.
If all of the shares referred to in said notice to the secretary are not
disposed of under such apportionment, each shareholder desiring to purchase
shares in a number in excess of his proportionate share, as provided above,
shall be entitled to purchase such proportion of those shares which remain thus
undisposed of, as the total number of shares which he holds bears to the total
number of shares held by all of the shareholders desiring to purchase shares in
excess of those to which they are entitled under such apportionment.
If none or only a part of the shares referred to in said notice to the
secretary is purchased, as aforesaid, in accordance with offers made within said
twenty (20) days period, the shareholder desiring to sell or transfer may
dispose of all shares of stock referred to in said notice to the secretary not
so purchased by the other shareholders, to any person or persons he may so
desire; provided, however, that he shall not sell or transfer such shares at a
lower price or on terms more favorable to the purchaser or transferee than those
specified in said notice to the secretary.
Any sale or transfer, or purported sale or transfer, of the shares of
this corporation shall be null and void unless the terms, conditions and
provisions of this Section 6 are strictly observed and followed.
ARTICLE VII
CORPORATE SEAL
The corporate seal shall be circular in form, and shall have inscribed
thereon the name of the corporation, the date of its incorporation, and the word
California.
--10--
<PAGE>
ARTICLE VIII
AMENDMENTS TO BY-LAWS
SECTION 1. BY SHAREHOLDERS.
New By-Laws may be adopted or these By-Laws may be repealed or amended
at their annual meeting, or at any other meeting of the shareholders called for
that purpose, by a vote of shareholders entitled to exercise a majority of the
voting power of the corporation, or by written assent of such shareholders.
Section 2. POWERS OF DIRECTORS.
Subject to the right of the shareholders to adopt, amend or repeal
By-Laws, as provided in Section 1 of this Article VIII, the Board of Directors
may adopt, amend or repeal any of these By-Laws other than a By-Law or amendment
thereof changing the authorized number of directors.
Section 3. RECORD OF AMENDMENTS.
Whenever an amendment or new By-Law is adopted, it shall be copied in
the Book of By-Laws with the original By-Laws, in the appropriate place. If any
By-Law is repealed, the fact of repeal with the date of the meeting at which
the repeal was enacted or written assent was filed shall be stated in said
book.
--11--
<PAGE>
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, being all of the persons appointed in the Articles of
Incorporation to act as the first Board of Directors of Sycamore Park
Convalescent Hospital hereby assent to the foregoing By-Laws, and adopt the
same as the By-Laws of said corporation.
IN WITNESS WHEREOF, We have hereunto set our hands on this 25th day of August,
1965.
)
)
/s/ Charles D. Silverberg )
- ----------------------------
CHARLES D. SILVERBERG )
)
)
/s/ Gary L. Zimmerman )
- ----------------------------
GARY L. ZIMMERMAN )
)
)
/s/ Irene A. Irwin ) Directors.
- ----------------------------
IRENE A. IRWIN )
)
)
/s/ Rebecca Cooper )
- ----------------------------
REBECCA COOPER )
)
)
/s/ Carolina Juarez )
- ----------------------------
CAROLINA JUAREZ
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of Sycamore
Park Convalescent Hospital and that the above and foregoing By-Laws were
adopted as the By-Laws of said corporation on the 25th day of August, 1965, by
the persons appointed in the Articles of Incorporation to act as the first
directors of said corporation.
IN WITNESS WHEREOF, I have hereto set my hand this 25th day of August,
1965.
/s/ Charles D. Silverberg
--------------------------------
Secretary, CHARLES D. SILVERBERG
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of
and that the above and foregoing Code of By-Laws was submitted to the
shareholders at their first meeting held on the day of 19 , and was ratified
by the vote of the shareholders entitled to exercise the majority of the voting
power of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this day of
19 .
----------------------------------
Secretary.
-- 12 --
<PAGE>
AMENDMENT TO BY-LAWS OF
SYCAMORE PARK CONVALESCENT HOSPITAL
A CALIFORNIA CORPORATION
I. Section 8 of Article II of said By-Laws is hereby amended by the
deletion therefrom of the words:
"the last Monday of March, June, September and December" and to substitute in
lieu thereof the words:
"the first Wednesday of March, June, September, and December."
KNOW ALL MEN BY THESE PRESENTS:
That I, the undersigned, duly elected and acting Secretary of SYCAMORE
PARK CONVALESCENT HOSPITAL, do hereby certify that the foregoing Amendment to
the By-Laws of said corporation was duly adopted by the directors on the 3rd
day of March, 1966.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 3rd day of
March, 1966.
/s/ Charles D. Silverberg
---------------------------------
CHARLES D. SILVERBERG
Secretary
<PAGE>
of the Board of Directors. Discussion followed regarding the possibility of
changing the date of the annual meeting of the shareholders. Upon motion duly
made, seconded and unanimously carried, the following resolution was unanimously
adopted:
RESOLVED, that Section 2 of Article I of the By-Laws of this
corporation be and it is hereby deleted and the following
substituted in lieu thereof:
Section 2. ANNUAL MEETINGS.
The annual meeting of the shareholders shall be held on the
last Thursday of October in each year, if not a legal holiday, and
if a legal holiday, then on the next succeeding business day, at
the hour of 7:30 P.M., at which time the shareholders shall elect
by plurality vote a Board of Directors, consider reports of the
affairs of the Corporation, and transact such other business as may
properly be brought before the meeting.
The meeting then proceeded to a discussion regarding Section 6 of
Article VI which deals with right of first refusal in the event of a proposed
sale or transfer of any shares of this corporation by any holder thereof. It was
felt by those present that a holder of shares of this corporation should be
allowed to make a gift of his shares to a member of his family and have them
remain subject to the right of first refusal therein contained. After extensive
discussion, and upon motion duly made, seconded and unanimously carried, the
following resolution was adopted:
2
<PAGE>
RESOLVED, that Section 6 of Article VI be
and it is hereby amended by the
addition of the following:
"Nothing herein contained shall apply when
a holder of the shares of this corporation
makes a gift or other transfer without
consideration to a member of his immediate
family. Said shares when transferred shall
nevertheless remain subject to the right of
first refusal herein contained."
RESOLVED FURTHER, that the By-laws as
amended hereinabove be and the same hereby
are adopted, ratified and confirmed.
Julian Robinson, President of the Corporation, gave a report of the
past year's operation of the corporation's business. He reviewed in detail all
of the financial statements of the corporation, copies of which had been
supplied to each shareholder prior to this meeting. Said statements revealed,
among other things, that the corporation was currently operating at a profit.
Mr. Robinson cautioned the meeting that labor costs were increasing rapidly and
that the Federal and State Aid Programs which would benefit the hospital were
requiring the addition of certain personnel to the hospital's staff. Mr.
Robinson reported that the corporation had received a cost reimbursement rate
from MediCal (The California State Medical Program) of $11.06 per day per
patient. Mr. Robinson anticipated that upon review by the State, that the rate
for the corporation might go as high as $12.51 per day per patient.
3
<PAGE>
the board that Article II Section 8 of the By-laws of the
corporation provided for regular meetings on the last Monday of
March, June, September and December of each year. Following
discussion and upon motion duly made, seconded and unanimously
carried, it was --
RESOLVED that Section 8 of Article II of the By-laws
of this corporation be and they are hereby amended to
Amendment adopted delete therefrom the words "the last Monday of March,
March 3, 1966 June, September and December" and to substitute in
lieu thereof the words "the first Wednesday of March,
June, September and December".
Mr.Silverberg recommended that the corporation
create the office of Assistant Secretary, and that Mr. Gary
L. Zimmerman of his law firm be elected to the office of Assistant
Secretary to facilitate preparation and execution of documents,
board minutes, and other similar matters in the event of Mr.
Silverberg's absence.
After discussion and upon motion duly made, seconded
and unanimously carried, it was --
RESOLVED that this corporation hereby creates the
office of ASSISTANT SECRETARY; that GARY L. ZIMMERMAN
of Silverberg and Rosen, 1680 North Vine Street,
Hollywood, be and he is hereby elected to the office
of Assistant Secretary.
There being no further business, upon motion duly
made, seconded and unanimously carried, the meeting adjourned.
- ------------------------- ---------------------------
JULIAN ROBINSON, Chairman CHARLES D. SILVERBERG, Secy.
5
<PAGE>
AMENDMENT TO BY-LAWS OF
SYCAMORE PARK CONVALESCENT HOSPITAL
Pursuant to Section 5 of Article I of the by-laws of Sycamore Park
Convalescent Hospital, a California corporation, the undersigned, being all of
the shareholders of Sycamore Park Convalescent Hospital, do hereby unanimously
adopt the following resolution amending the by-laws of this corporation:
RESOLVE, that Section 2 of Article II of the by-laws of this
corporation being in the same are hereby amended to read as follows:
"Section 2. NUMBER AND QUALIFICATIONS. The authorized number of
directors of the corporation shall be four (4), until changed by amendment to
the Articles of Incorporation or by an amendment to this Section 2, Article II
of these by-laws, adopted by the vote or written assent of the shareholders
entitled to exercise the majority of the voting power of the corporation."
DATED: July 1, 1982
/s/ Gertrude Snukal /s/ Robert Snukal
- ------------------------- ---------------------------
Fountainview Convalescent Robert Snukal
Hospital
By: Gertrude Snukal, /s/ Sheila Snukal
President ---------------------------
Sheila Snukal
/s/ Manuel Padama
---------------------------
Manuel Padama
/s/ Consolacion Padama
---------------------------
Consolacion Padama
<PAGE>
Exhibit 4.1
________________________________________________________________________________
FOUNTAIN VIEW, INC.
SERIES A AND SERIES B
11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
_____________________________
Dated as of April 16, 1998
_____________________________
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.
Trustee
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE..................................... 1
Section 1.01. Definitions................................................................ 1
Section 1.02. Other Definitions.......................................................... 20
Section 1.03. Terms of TIA............................................................... 20
Section 1.04. Rules of Construction...................................................... 21
ARTICLE 2. THE NOTES...................................................................... 21
Section 2.01. Form and Dating............................................................ 21
Section 2.02. Execution and Authentication............................................... 23
Section 2.03. Registrar and Paying Agent................................................. 23
Section 2.04. Paying Agent to Hold Money in Trust........................................ 24
Section 2.05. Holder Lists............................................................... 24
Section 2.06. Transfer and Exchange...................................................... 24
Section 2.07. Replacement Notes.......................................................... 38
Section 2.08. Outstanding Notes.......................................................... 38
Section 2.09. Treasury Notes............................................................. 39
Section 2.10. Temporary Notes............................................................ 39
Section 2.11. Cancellation............................................................... 39
Section 2.12. Defaulted Interest......................................................... 39
ARTICLE 3. REDEMPTION AND PREPAYMENT...................................................... 40
Section 3.01. Notices to Trustee......................................................... 40
Section 3.02. Selection of Notes to Be Redeemed.......................................... 40
Section 3.03. Notice of Redemption....................................................... 40
Section 3.04. Effect of Notice of Redemption............................................. 41
Section 3.05. Deposit of Redemption Price................................................ 41
Section 3.06. Notes Redeemed in Part..................................................... 42
Section 3.07. Optional Redemption........................................................ 42
Section 3.08. Mandatory Redemption....................................................... 43
Section 3.09. Offer to Purchase by Application of Excess Proceeds........................ 43
ARTICLE 4. COVENANTS...................................................................... 45
Section 4.01. Payment of Notes........................................................... 45
Section 4.02. Maintenance of Office or Agency............................................ 45
Section 4.03. Reports.................................................................... 46
Section 4.04. Compliance Certificate..................................................... 46
Section 4.05. Taxes...................................................................... 47
Section 4.06. Stay, Extension and Usury Laws............................................. 47
Section 4.07. Restricted Payments........................................................ 48
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries............. 50
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock................. 51
Section 4.10. Asset Sales............................................................... 53
Section 4.11. Transactions with Affiliates............................................... 54
Section 4.12. Liens...................................................................... 55
Section 4.13. No Senior Subordinated Debt................................................ 55
Section 4.14. Corporate Existence........................................................ 55
Section 4.15. Offer to Repurchase Upon Change of Control................................. 56
Section 4.16. Payments for Consent....................................................... 57
Section 4.17. Additional Subsidiary Guarantees........................................... 57
Section 4.18. Sale Leaseback Transactions................................................ 57
ARTICLE 5. SUCCESSORS..................................................................... 57
Section 5.01. Merger, Consolidation, or Sale of Assets................................... 57
Section 5.02. Successor Corporation Substituted.......................................... 58
ARTICLE 6. DEFAULTS AND REMEDIES.......................................................... 59
Section 6.01. Events of Default.......................................................... 59
Section 6.02. Acceleration............................................................... 60
Section 6.03. Other Remedies............................................................. 61
Section 6.04. Waiver of Past Defaults.................................................... 61
Section 6.05. Control by Majority........................................................ 62
Section 6.06. Limitation on Suits........................................................ 62
Section 6.07. Rights of Holders of Notes to Receive Payment.............................. 63
Section 6.08. Collection Suit by Trustee................................................. 63
Section 6.09. Trustee May File Proofs of Claim........................................... 63
Section 6.10. Priorities................................................................. 64
Section 6.11. Undertaking for Costs...................................................... 64
ARTICLE 7. TRUSTEE........................................................................ 64
Section 7.01. Duties of Trustee.......................................................... 64
Section 7.02. Rights of Trustee.......................................................... 65
Section 7.03. Individual Rights of Trustee............................................... 66
Section 7.04. Trustee's Disclaimer....................................................... 67
Section 7.05. Notice of Defaults......................................................... 67
Section 7.06. Reports by Trustee to Holders of the Notes................................. 67
Section 7.07. Compensation and Indemnity................................................. 67
Section 7.08. Replacement of Trustee..................................................... 68
Section 7.09. Successor Trustee by Merger, Etc........................................... 69
Section 7.10. Eligibility; Disqualification.............................................. 69
Section 7.11. Preferential Collection of Claims Against Company.......................... 70
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE....................................... 70
Section 8.01. Option to effect legal defeasance or covenant Defeasance................... 70
Section 8.02. Legal Defeasance and Discharge............................................. 70
Section 8.03. Covenant Defeasance........................................................ 70
Section 8.04. Conditions to Legal or Covenant Defeasance................................. 71
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions............................................. 72
Section 8.06. Repayment to Company....................................................... 73
Section 8.07. Reinstatement.............................................................. 73
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER............................................... 74
Section 9.01. Without Consent of Holders of Notes........................................ 74
Section 9.02. With Consent of Holders of Notes........................................... 74
Section 9.03. Compliance with Trust Indenture Act........................................ 76
Section 9.04. Revocation and Effect of Consents.......................................... 76
Section 9.05. Notation on or Exchange of Notes........................................... 76
Section 9.06. Trustee to Sign Amendments, Etc............................................ 77
ARTICLE 10. SUBORDINATION................................................................. 77
Section 10.01. Agreement to Subordinate.................................................. 77
Section 10.02. Liquidation; Dissolution; Bankruptcy...................................... 77
Section 10.03. Default on Designated Senior Debt......................................... 78
Section 10.04. Acceleration of Securities................................................ 78
Section 10.05. When Distribution Must Be Paid Over....................................... 78
Section 10.06. Notice by Company......................................................... 79
Section 10.07. Subrogation............................................................... 79
Section 10.08. Relative Rights........................................................... 79
Section 10.09. Subordination May Not Be Impaired by Company.............................. 80
Section 10.10. Distribution or Notice to Representative.................................. 80
Section 10.11. Rights of Trustee and Paying Agent........................................ 80
Section 10.12. Authorization to Effect Subordination..................................... 80
Section 10.13. Amendments................................................................ 81
ARTICLE 11. SUBSIDIARY GUARANTEES......................................................... 81
Section 11.01. Guarantee................................................................. 81
Section 11.02. Subordination of Subsidiary Guarantee..................................... 82
Section 11.03. Limitation on Guarantor Liability......................................... 82
Section 11.04. Execution and Delivery of Subsidiary Guarantee............................ 83
Section 11.05. Guarantors May Consolidate, Etc., on Certain Terms........................ 83
Section 11.06. Releases Following Sale of Assets or Capital Stock........................ 84
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 12. MISCELLANEOUS................................................................. 84
Section 12.01. Trust Indenture Act Controls.............................................. 84
Section 12.02. Notices................................................................... 84
Section 12.03. Communication by Holders of Notes with Other Holders of Notes............. 86
Section 12.04. Certificate and Opinion as to Conditions Precedent........................ 86
Section 12.05. Statements Required in Certificate or Opinion............................. 86
Section 12.06. Rules by Trustee and Agents............................................... 87
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders.. 87
Section 12.08. Governing Law............................................................. 87
Section 12.09. No Adverse Interpretation of Other Agreements............................. 87
Section 12.10. Successors................................................................ 87
Section 12.11. Severability.............................................................. 87
Section 12.12. Counterpart Originals..................................................... 87
Section 12.13. Table of Contents, Headings, Etc.......................................... 88
</TABLE>
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E FORM OF SUBORDINATED SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
iv
<PAGE>
INDENTURE dated as of April 16, 1998 among Fountain View, Inc., a
Delaware corporation (the "Company"), the Guarantors (as defined below) and
State Street Bank and Trust Company of California, N.A., a national banking
association organized and existing under the laws of the United States of
America, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 11 1/4% Series A Senior Subordinated Notes due 2008 (the "Series A Notes")
and the 11 1/4% Series B Senior Subordinated Notes due 2008 (the "Series B
Notes" and, together with the Series A Notes, the "Notes") of the Company:
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
<PAGE>
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole will be governed by
Sections 4.15 or 5.01 and not by Section 4.10 hereof and (ii) the issue or sale
by the Company or any of its Restricted Subsidiaries of Equity Interests of any
of the Company's Restricted Subsidiaries, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $1.0 million or (b) for net proceeds
in excess of $1.0 million. Notwithstanding the foregoing, the following items
shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii)
a Restricted Payment that is permitted by Section 4.07 hereof and (iv) an
exchange of facilities by the Company or a Restricted Subsidiary to the extent
that such facilities are exchanged for one or more nursing centers, long-term
care facilities, assisted living facilities, outpatient clinics or any other
facilities or businesses that are used or useful in the provision of healthcare
related services, in each case the aggregate fair market value of which is equal
to or greater than the fair market value of the facilities so exchanged, as
determined in good faith by the Board of Directors.
"Attributable Debt" in respect of a sale and leaseback transaction or
an operating lease in respect of a healthcare facility means, at the time of
determination, the present value (discounted at the rate of interest implicit in
such transaction, determined in accordance with GAAP) of the obligation of the
lessee of the property subject to such sale and leaseback transaction or
operating lease in respect of a healthcare facility or net rental payments
during the remaining term of the lease included in such transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
2
<PAGE>
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500 million and a Thompson Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) - (v) of this
definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than one or more Principals and their Related Parties,
(ii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than one or more Principals and their Related Parties, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is currently exercisable or is exercisable only upon the occurrence
of a subsequent condition), directly or indirectly, of more than 50% of the
Voting Stock of the Company (measured by voting power rather than number of
shares), (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than one or more Principals and their Related
Parties, becomes the "beneficial owner" (as defined above), directly or
indirectly, of more than 35% of the Voting Stock of the Company (measured by
voting power rather than number of shares) and the Principals and their Related
Parties in the aggregate "beneficially own" (as defined above) less than 35% of
the Voting Stock of the Company (measured by
3
<PAGE>
voting power rather than number of shares) or, in the event the Company has
consummated a Public Equity Offering, less than 20% of the Voting Stock of the
Company (measured by voting power rather than number of shares), or (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
"Company" means Fountain View, Inc., a Delaware corporation, and any
and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, plus (v) any non-recurring
expenses related to the Company's reorganization transactions during August
1997, plus (vi) non-recurring financing, advisory and other expenses incurred in
connection with the Transactions, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than items accrued in the
ordinary course of business), in each case, on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other non-cash expenses of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
that a corresponding amount would be permitted at the date of determination to
be dividended to the Company by such Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries
4
<PAGE>
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, (v) the Net Income of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Restricted Subsidiaries, and (vi) the Net Income of any Restricted
Subsidiary shall be calculated after deducting preferred stock dividends payable
by such Restricted Subsidiary to Persons other than the Company and its other
Restricted Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less all investments as of such
date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries
(except, in each case, Permitted Investments).
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture, (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election or (iii) was elected to such Board of Directors pursuant
to a designation made pursuant to the Stockholders Agreement, provided that at
such time the Principals and their Related Parties own more than 35% of the
Voting Stock of the Company.
"Corporate Trust Office" shall be at the address of the Trustee
specified in Section 12.02 hereof or such other address as to which the Trustee
may give notice to the Company.
"Credit Facilities" means one or more debt facilities (including,
without limitation, the New Credit Facility) or commercial paper facilities with
banks, insurance companies, commercial finance companies or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of
5
<PAGE>
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time. Indebtedness under Credit Facilities outstanding
on the date on which Notes are first issued and authenticated under this
Indenture shall be deemed to have been incurred on such date in reliance on the
exception provided by clause (i) of the definition of Permitted Indebtedness.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means (i) so long as the New Credit Facility
is outstanding, any Indebtedness outstanding under the New Credit Facility, and
(ii) at any time thereafter any other Senior Debt permitted under the Indenture
the principal amount of which is $25.0 million or more and that has been
designated by the Company as "Designated Senior Debt".
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 4.07 hereof.
"Employment Agreement" means any of the employment agreements between
the Company and William C. Scott, Robert M. Snukal or Shiela S. Snukal in effect
as of the date of this Indenture.
6
<PAGE>
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Affiliate Transactions" means any transaction contemplated
by any of (i) the Stockholders Agreement, (ii) the Employment Agreements, (iii)
the Merger Agreement, (iv) the Investment Agreement, (v) the leases of the
Company's Rio Hondo, Fountain View, Montebello and Sycamore Park skilled nursing
facilities, between Robert M. Snukal, Sheila S. Snukal or their affiliates and
the Company, and (vi) the purchase and supply agreements between the Company or
its Subsidiaries and Twin Med, Inc. consistent with past practice in the
ordinary course of business.
"Existing Disqualified Stock" means the Series A Preferred Stock of
the Company.
"Existing Indebtedness" means up to $165.0 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of this
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs (other than
any such costs incurred in connection with the Transactions) and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether
7
<PAGE>
or not such Guarantee or Lien is called upon) and (iv) the product of (a) all
dividend payments, whether or not in cash, on any series of preferred stock of
such Person or any of its Restricted Subsidiaries, other than dividend payments
on Equity Interests payable solely in Equity Interests of the Company (other
than Disqualified Stock) or to the Company or a Restricted Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
8
<PAGE>
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each of Summit Care Corporation, a California
corporation, Summit Care-California, Inc., a California corporation, Summit Care
Pharmacy, Inc., a California corporation, Skilled Care Network, a California
corporation, Summit Care Texas Equity, Inc., a California corporation, Summit
Care-Texas No. 2, Inc., a Texas corporation, Summit Care-Texas No. 3, Inc., a
Texas corporation, Summit Care Management Texas, Inc., a Texas corporation,
Summit Care Texas, L.P., a Texas limited partnership, Fountain View Holdings,
Inc., a Delaware corporation, AIB Corp., a California corporation, Alexandria
Convalescent Hospital, Inc., a California corporation, BIA Hotel Corp., a
California corporation, Brier Oak Convalescent, Inc.,, a California corporation,
Elmcrest Convalescent Hospital, a California corporation, Fountainview
Convalescent Hospital, a California corporation, Fountain View Management, Inc.,
a California corporation, Rio Hondo Nursing Center, a California corporation,
Locomotion Holdings, Inc., a Delaware corporation, Locomotion Therapy, Inc., a
Delaware corporation, On-Track Therapy Center, Inc., a California corporation,
I.'NO., Inc., a California corporation, Sycamore Park Convalescent Hospital, a
California corporation, SNF Pharmacy, Inc., a California corporation, and (ii)
any other subsidiary that executes a Guarantee in accordance with the provisions
of this Indenture, and their respective successors and assigns.
"Healthcare Related Business" means a business, at least a majority of
whose revenues result from healthcare, long-term care or assisted living related
businesses or facilities.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or currency changes.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease
9
<PAGE>
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing (other than letters of credit and Hedging Obligations) would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, as well as all Indebtedness of others secured by a Lien on any asset of
such Person (whether or not such Indebtedness is assumed by such Person) and, to
the extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person. The amount of any Indebtedness outstanding as
of any date shall be (i) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Purchaser" means an initial purchaser of the Notes pursuant
to that certain Purchase Agreement dated as of April 9, 1998 among the Company,
the Guarantors and the other parties thereto.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, but that is not also a QIB.
"Investment Agreement" means that certain Investment Agreement, dated
as of March 27, 1998, by and among the Company, Robert M. Snukal, Sheila S.
Snukal, William C. Scott, Heritage Fund II, L.P., Heritage Investors II, L.L.C.,
Heritage Fund II Investment Corporation, HFV Holdings, LLC, Nassua Capital
Partners II, L.P., NAS Partners I LLC, Paribas North America, Inc., Phoenix Home
Life Mutual Insurance Company, PMI Mezzanine Fund, L.P., GS Private Equity
Partners, L.P., GS Private Equity Partners Offshore, L.P., and Sutro Investment
Partners V, LLC.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of
10
<PAGE>
the Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or the city in which the principal
Corporate Trust Office of the Trustee is located are authorized by law,
regulation or executive order to remain closed. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue on such
payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Merger" means the merger of FV-SCC Acquisition Corp. with and into
Summit Care Corporation pursuant to the terms of the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger,
dated as of February 6, 1998, by and among the Company, FV-SCC Acquisition
Corp., Summit Care Corporation and Heritage Fund II, L.P.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and
11
<PAGE>
sales commissions) and any relocation expenses incurred as a result thereof,
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be applied to the repayment of Indebtedness (other than Indebtedness
under the New Credit Facility) secured by a Lien on the asset or assets that
were the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, dated as of
April 16, 1998, by and among the Company and Bank of Montreal, as agent and
lender, and the other lenders named therein, providing for up to $30.0 million
of revolving credit borrowings and $85.0 million of term loan borrowings,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise) or (c) constitutes the lender; (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes) of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the
12
<PAGE>
principal financial officer, the treasurer or the principal accounting officer
of the Company, that meets the requirements of Sections 12.04 and 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
12.04 and 12.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Permitted Investments" means (a) any Investment in the Company or in
a Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment
in Cash Equivalents; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such Investment (i)
such Person becomes a Restricted Subsidiary of the Company and a Guarantor or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary of the Company that is a Guarantor; (d)
any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(e) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; (f) Hedging
Obligations; (g) any Investment in a Permitted Joint Venture; (h) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (h) that are at the time outstanding, not to exceed $2.5 million;
and (i) Investments provided for in the Investment Agreement as of the date of
this Indenture.
"Permitted Joint Venture" mean (i) any Restricted Subsidiary which
owns, operates or services a Healthcare Related Business, and (ii) Summit Care
Pharmacy, L.L.C., which owns and operates a pharmacy in Texas.
"Permitted Junior Securities" means Equity Interests in the Company or
any Guarantor or debt securities that are unsecured and subordinated to all
Senior Debt (and any debt securities issued in exchange for Senior Debt) to at
least the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to Article 10 of this Indenture.
"Permitted Liens" means (i) Liens on assets of the Company, any of its
Restricted Subsidiaries or any of the Guarantors securing Senior Debt that was
permitted by the terms of this Indenture to be incurred; (ii) Liens in favor of
the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
13
<PAGE>
Company; (iv) Liens on property or assets existing at the time of acquisition
thereof or the acquisition of a Person owning such property or assets by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition; (v) Liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of Section 4.09 hereof covering only the
assets acquired with such Indebtedness; (vii) Liens existing on the date of this
Indenture; (viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the ordinary
course of business for sums not yet delinquent or being contested in good faith,
if such reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof; (x) easements, rights-of-way,
zoning restrictions and other similar charges or encumbrances in respect of real
property not interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Restricted Subsidiaries; (xi) Liens on
assets of Guarantors to secure Senior Debt of such Guarantors that was permitted
by the Indenture to be incurred; (xii) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary of the Company with respect
to obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary; and (xiii) Liens on
assets or Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or
14
<PAGE>
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Principals" means Heritage Partners Management Company, Inc. and
Heritage Fund II, L.P.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means a public offering of common stock of
the Company pursuant to a registration statement filed with the Securities and
Exchange Commission in accordance with the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Indenture, by and among the Company and
the other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on Rule 903
of Regulation S.
"Related Party" with respect to any Principal means (A) any
controlling holder of Equity Interests, 80% (or more) owned Subsidiary, or
spouse or ex-spouse or
15
<PAGE>
immediate family member (in the case of an individual) of such Principal or (B)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (A) or (C) any
investment fund, whether a limited partnership, limited liability corporation or
corporation, or other entity managed and controlled by Heritage Partners
Management Company, Inc.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" means, with respect to any Person, each
Subsidiary of such Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness outstanding under Credit
Facilities and all Hedging Obligations with respect thereto, (ii) any other
Indebtedness permitted to be incurred by the Company under the terms of this
Indenture, unless the
16
<PAGE>
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes and (iii)
all Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owned or owing by the Company, (x) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (y)
any trade payables or (z) any Indebtedness that is incurred in violation of this
Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Series A Preferred Stock" means the Series A Preferred Stock, par
value $.01 per share, authorized under the Company's certificate of
incorporation in effect as of the date of this Indenture, with such additional
or different rights, preferences, privileges and terms as do not adversely
affect the interests of the Holders of the Notes.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders Agreement" means the Stockholders Agreement, dated as of
March 27, 1998, among the Company and certain of its stockholders, as in effect
on the date of this Indenture, and as thereafter amended from time to time;
provided for purposes of the definition of "Continuing Director" that no such
amendment alters the provision relating to the designation and election of
members of the Company's Board of Directors.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
17
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Transaction Related Payments" mean (i) certain bonus and other
payments not to exceed $1,925,000 from Summit Care Corporation or the Company to
William Scott, payable at the effective time of the Merger, (ii) payments not to
exceed $2,535,000 in the aggregate to effect the cash-out of Summit stock
options, as described in the Merger Agreement, (iii) the payment of a
transaction fee of up to $3,000,000 by the Company to Heritage, payable at the
effective time of the Merger, and (iv) payments to Mr. and Mrs. Snukal and
William Scott, not to exceed $150,000 in the aggregate, upon the forfeiture of
Series B Common Stock pursuant to the Stockholders Agreement.
"Transactions" means (i) the transactions contemplated by the Merger
Agreement, (ii) the offering of the Notes on or prior to the date of this
Indenture, (iii) the execution and initial funding under the New Credit
Facility, and (iv) the transactions contemplated by the Investment Agreement,
and the application of the proceeds from the foregoing.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (i) has no Indebtedness
other than Non-Recourse Debt; (ii) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (iii) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (A) to subscribe for additional Equity Interests or (B) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (iv) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (v) has at least one director
on its board of directors that is not a director or executive officer of the
Company or any of its
18
<PAGE>
Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation compiled with the foregoing conditions and was
permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under Section 4.09
hereof the Company shall be in default of such covenant). The Board of Directors
of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Section 4.09
hereof calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (ii) no Default or Event
of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned" means, when used with respect to any Subsidiary or
Restricted Subsidiary of a Person, a Subsidiary (or Restricted Subsidiary, as
appropriate) of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Subsidiaries (or
Wholly Owned Restricted Subsidiaries, as appropriate) of such Person and one or
more Wholly Owned Subsidiaries (or Wholly Owned Restricted Subsidiaries, as
appropriate) of such Person.
19
<PAGE>
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction".................. 4.11
"Asset Sale Offer"....................... 3.09
"Authentication Order"................... 2.02
"DTC".................................... 2.03
"Change of Control Offer"................ 4.15
"Change of Control Payment".............. 4.15
"Change of Control Payment Date"......... 4.15
"Covenant Defeasance".................... 8.03
"Event of Default"....................... 6.01
"Excess Proceeds"........................ 4.10
"incur".................................. 4.09
"Legal Defeasance"....................... 8.02
"Offer Amount"........................... 3.09
"Offer Period"........................... 3.09
"Paying Agent"........................... 2.03
"Permitted Debt"......................... 4.09
"Purchase Date".......................... 3.09
"Registrar".............................. 2.03
"Restricted Payments".................... 4.07
</TABLE>
Section 1.03. Terms of TIA.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the Company
and the Guarantors, respectively, and any successor obligor upon the Notes and
the Subsidiary Guarantees, respectively.
20
<PAGE>
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibits A-1 or A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of
21
<PAGE>
the outstanding Notes as shall be specified therein and each shall provide that
it shall represent the aggregate principal amount of outstanding Notes from time
to time endorsed thereon and that the aggregate principal amount of outstanding
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its Corporate Trust Office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel Bank, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Restricted Period
shall be terminated upon the receipt by the Trustee of (i) a written certificate
from the Depositary, together with copies of certificates from Euroclear and
Cedel Bank certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the Regulation
S Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein during the Restricted Period pursuant to
another exemption from registration under the Securities Act and who will take
delivery of a beneficial ownership interest in a 144A Global Note bearing a
Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof),
and (ii) an Officers' Certificate from the Company. Following the termination of
the Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
22
<PAGE>
Section 2.02. Execution and Authentication.
An Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer (an "Authentication Order"), authenticate Notes for original issue up to
the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
The Company shall, prior to each Record Date, notify the Paying Agent
of any wire transfer instructions for payments that it receives from Holders.
23
<PAGE>
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act and provided further, there shall be
no continuing Default or Event of Default. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or
24
<PAGE>
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b),(c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of
25
<PAGE>
beneficial interests in the Regulation S Temporary Global Note prior to (x)
the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof;
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
26
<PAGE>
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note
27
<PAGE>
proposes to exchange such beneficial interest for a Restricted Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Note, then, upon receipt by
the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)(d) thereof,
if applicable:
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof,
28
<PAGE>
and the Company shall execute and, upon receipt of an Authentication
Order, the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on transfer contained
therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a broker-
dealer, (2) a Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in Rule 144) of
the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
29
<PAGE>
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for
a Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and, upon receipt of an Authentication Order, the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iv) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
30
<PAGE>
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)(d) thereof,
if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, and increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case of
clause (B) above, the 144A Global Note, and in the case of clause (c)
above, the Regulation S Global Note.
31
<PAGE>
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive
Notes and
32
<PAGE>
increase or cause to be increased the aggregate principal amount of
the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of Exhibit
B
33
<PAGE>
hereto, including the certifications, certificates and Opinion of
Counsel required by item (3)(d) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon
34
<PAGE>
receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions
from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not broker-
dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE
35
<PAGE>
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN)."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such
36
<PAGE>
Global Note by the Trustee or by the Depositary at the direction of the Trustee
to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon receipt of an Authentication Order.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Registrar shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (C) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
37
<PAGE>
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.07. Replacement Notes
If any mutilated Note is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary of the
Company or an Affiliate of any thereof) holds, on a redemption date or maturity
date, money sufficient to pay Notes payable on that date, then on and after that
date such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company,
38
<PAGE>
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
39
<PAGE>
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed or purchased in
an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
40
<PAGE>
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed;
(h) the CUSIP number or numbers of the Notes called for redemption;
and
(i) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and
41
<PAGE>
unpaid interest shall be paid to the Person in whose name such Note was
registered at the close of business on such record date. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to April 15, 2003. Thereafter, the Notes will be subject to
redemption at any time or from time to time at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on April 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003..................................... 105.625%
2004..................................... 103.750%
2005..................................... 101.875%
2006 and thereafter...................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
at any time prior to April 15, 2001, the Company may on any one or more
occasions redeem up to 35% in aggregate principal amount of Notes originally
issued on the date of the Indenture at a redemption price of 111.25% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
one or more Public Equity Offerings by the Company; provided that at least $78.0
million in aggregate principal amount of Notes remain outstanding immediately
after the occurrence of such redemption (excluding Notes held by the Company and
its Subsidiaries); and provided, further, that such redemption shall occur
within 60 days of the date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
42
<PAGE>
Section 3.08. Mandatory Redemption.
Except as set forth in Sections 4.10 and 4.15 hereof, the Company
shall not be required to make mandatory redemption payments with respect to the
Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders. The
notice shall contain all instructions and materials necessary to enable such
Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer
shall be made to all Holders. The notice, which shall govern the terms of the
Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
43
<PAGE>
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed,
or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon receipt of an Authentication Order from the Company, shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer on the Purchase Date.
44
<PAGE>
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
45
<PAGE>
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Trustee and
the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and 10-
K if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the SEC on Form 8-K if the Company were required to
file such reports, in each case within the time periods specified in the SEC's
rules and regulations. In addition, following the consummation of the exchange
offer contemplated by the Registration Rights Agreement, whether or not required
by the rules and regulations of the SEC, the Company shall file a copy of all
such information and reports with the SEC for public availability within the
time periods specified in the SEC's rules and regulations (unless the SEC will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
(b) In addition, for so long as any Notes remain outstanding, the Company
and the Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act. Any materials
required to be furnished to Holders of Notes by this Section 4.03 shall discuss,
in reasonable detail, either on the face of the financial statements included
therein or in the footnotes thereto and in any Management's Discussion and
Analysis of Financial Condition and Results of Operations, the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no
46
<PAGE>
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the
47
<PAGE>
direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes, except a payment of interest or principal at Stated
Maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii), (iv), (vi) and (vii) of the next
succeeding paragraph), is less than the sum, without duplication, of (i)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the date of this Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company since the date of this Indenture as a contribution to its
common equity capital or from the issue or sale of Equity Interests of the
Company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company), plus (iii) to the extent that any Restricted Investment that
was made after the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment.
48
<PAGE>
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Indebtedness that is subordinated to the Notes or Equity
Interests of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of Indebtedness that is
subordinated to the Notes with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend (in cash or
otherwise) by a Restricted Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Restricted Subsidiary of the Company held by any member of the Company's
(or any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement, stock option agreement, or employment agreement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests of the Company or any Restricted Subsidiary
shall not exceed $2.0 million in any twelve-month period and no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction; (vi) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement, stock
option agreement or employment agreement, provided that the purchase price is
paid with the proceeds to the Company of key man life or disability insurance
policies purchased by the Company specifically to finance any such repurchase,
redemption or other acquisition, or (vii) the payment of the Transaction Related
Payments.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (c) of this Section 4.07 or Permitted
Investments, as applicable. All such outstanding Investments will be deemed to
constitute Restricted Investments in an amount equal to the greatest of (x) the
net book value of such Investments at the time of such designation, (y) the fair
market value of such Investments at the time of such designation and (z) the
original fair market value of such Investments at the time they were made. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if such redesignation
would not cause a Default.
49
<PAGE>
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
Section 4.07 shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee, such determination to be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if such fair market value exceeds
$10.0 million. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, together with a copy
of any opinion or appraisal required by this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of this Indenture
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are not materially more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in the agreements governing the Existing Indebtedness as in
effect on the date of this Indenture, (b) the New Credit Facility as in effect
as of the date of this Indenture, or other Credit Facilities entered into
subsequent to the date of this Indenture, and in either case any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such other Credit Facilities
or amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are not materially more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in the New Credit Facility as in effect on the date of this
Indenture as determined in good faith by the Company's Board of Directors, (c)
the Indenture and the Notes, (d) applicable law, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the
50
<PAGE>
properties or assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of this Indenture to be incurred,
(f) customary non-assignment provisions in leases and other contracts and other
contracts entered into in the ordinary course of business and consistent with
past practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (h) any agreement for the sale
of a Subsidiary or a substantial portion of such Subsidiary's assets that
restricts distributions by that Subsidiary pending its sale, (i) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are not materially
more restrictive, taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced as determined in good faith by the
Company's Board of Directors, (j) secured Indebtedness otherwise permitted to be
incurred pursuant to the provisions of Section 4.09 that limits the right of the
debtor to dispose of the assets securing such Indebtedness, (k) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (l) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and the Company's Subsidiaries may incur Indebtedness or
issue preferred stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters (excluding any fiscal quarters ended
prior to July 1, 1997) for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock or preferred stock is issued would have been at least
2.0 to 1, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this Section 4.09 will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters of
credit (with letters of credit being deemed to have a principal amount
equal to the stated amount thereof) and other obligations under Credit
Facilities in an
51
<PAGE>
aggregate principal amount that does not exceed at any one time $115.0
million less the aggregate amount of all Net Proceeds of Asset Sales
applied to repay Indebtedness under such Credit Facilities pursuant to
Section 4.10 hereof (other than temporary paydowns pending final
application of such Net Proceeds);
(ii) the incurrence by the Company and the Guarantors of the
Existing Indebtedness and the issuance of the Existing Disqualified Stock;
(iii) the incurrence by the Company of Indebtedness represented by
the Notes in an aggregate principal amount not to exceed $120.0 million;
(iv) the incurrence by the Company or any of the Guarantors of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (iv), that does not
exceed at any one time the amount of such Capital Lease Obligations,
mortgage financings or purchase money obligations outstanding as of the
date of this Indenture, plus $5.0 million;
(v) the incurrence by the Company or any of the Guarantors of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that is permitted by this Indenture to be
incurred under the first paragraph hereof or clauses (ii) or (iv) of this
paragraph;
(vi) the incurrence by the Company or any of the Guarantors of
intercompany Indebtedness between or among the Company and any Guarantor;
provided, however, that (i) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Guarantor and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Guarantor
thereof shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Guarantor, as the case may be, that was
not permitted by this clause (vi);
(vii) the incurrence by the Company or any of the Guarantors of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
52
<PAGE>
(viii) the guarantee by the Company or any of its Subsidiaries or any
of the Guarantors of Indebtedness of the Company or another Guarantor that
was permitted to be incurred by another provision of this Section 4.09;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (ix), and
the issuance of preferred stock by Unrestricted Subsidiaries; and
(x) the incurrence by the Company or any of the Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (x), not to exceed $5.0
million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09. Accrual of interest, accretion
or amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this Section
4.09; provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued (to the extent not already included in Fixed
Charges).
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or the Subsidiary Guarantees) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) in the case of any Asset Sale constituting the
transfer (by merger or otherwise) of all of the Capital Stock of a Restricted
Subsidiary, any liabilities (as shown on such Restricted Subsidiary's most
53
<PAGE>
recent balance sheet) of such Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
the Subsidiary Guarantees) that will remain outstanding after such transfer and
will not be a liability of the Company or any other Restricted Subsidiary of the
Company following such transfer and (z) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to repay
Senior Debt, or (b) to the acquisition of a majority of the assets of, or a
majority of the Voting Stock of a Healthcare Related Business, the making of a
capital expenditure or the acquisition of other long-term assets for use in a
Healthcare Related Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company will be required to make an offer to all Holders of Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in this Indenture. To the extent that
any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
this Indenture. If the aggregate principal amount of Notes tendered into such
Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i)
54
<PAGE>
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Subsidiary, (ii)
transactions between or among the Company and/or its Restricted Subsidiaries,
(iii) payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company, (iv) any sale or other issuance of Equity Interests
(other than Disqualified Stock) of the Company, (v) Restricted Payments that are
permitted by Section 4.07 hereof and (vi) Existing Affiliate Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired,
securing Indebtedness or trade payables, except Permitted Liens.
Section 4.13. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, (i) the Company
shall not incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is expressly subordinate or junior in right of payment to
any Senior Debt and senior in any respect in right of payment to the Notes, and
(ii) no Guarantor shall incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is expressly subordinate or junior in
right of payment to Senior Debt of such Guarantor and senior in any respect in
right of payment to the Subsidiary Guarantees.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
55
<PAGE>
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within fifteen Business Days following any Change
of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by this Indenture and described in such notice. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being repurchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unrepurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.15, but in any event within 90 days
following a Change of Control, the Company shall either repay all outstanding
Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of Notes required by
this Section 4.15. The Company shall publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 hereof and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
Section 4.16. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise,
56
<PAGE>
to any Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid or is paid to all Holders of the
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Section 4.17. Additional Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Subsidiary after the date of this Indenture, then such newly
acquired or created Subsidiary shall become a Guarantor and execute a
Supplemental Indenture and deliver an Opinion of Counsel, in accordance with the
terms of this Indenture; provided, that all Subsidiaries that have properly been
designated as Unrestricted Subsidiaries in accordance with this Indenture (i)
shall not be subject to the requirements of this Section 4.17 and (ii) shall be
released from all Obligations under any Subsidiary Guarantee, in each case for
so long as they continue to constitute Unrestricted Subsidiaries.
Section 4.18. Sale Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof,
(ii) the gross cash proceeds of such sale and leaseback transaction are at least
equal to the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
Section 4.10 hereof.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) except in the case of a merger or consolidation of the Company with or into
a Wholly Owned Restricted Subsidiary of the Company, the entity or Person formed
57
<PAGE>
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, conveyance or
other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger or consolidation of the Company
with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, conveyance
or other disposition shall have been made (A) shall have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) shall,
immediately after such transaction after giving pro forma effect thereto and any
related financial transaction as if the same had occurred at the beginning of
the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof. The Company shall not lease
its properties and assets substantially as an entity to any Person.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes (whether or not
prohibited by the subordination provisions of this Indenture);
58
<PAGE>
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of this Indenture);
(c) failure by the Company or any of its Subsidiaries for 30 days after
notice to comply with any of the provisions of Section 4.07, 4.09, 4.10 or
4.15 hereof;
(d) the Company or any of its Subsidiaries fails to comply with any other
covenant, representation, warranty or other agreement in this Indenture or
the Notes for 60 days after notice;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be issued or by which there
may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), whether
such Indebtedness or Guarantee now exists, or is created after the date of
this Indenture, which default results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of such Indebtedness, together with the principal amount of any other
such Indebtedness the maturity of which has been so accelerated, aggregates
$5.0 million or more (other than Existing Indebtedness to the extent it is
secured by or paid by the drawing against a letter of credit permitted to be
issued under this Indenture);
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) the Company or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors,
or
59
<PAGE>
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid in any
material respect or shall cease for any reason to be in full force and effect
or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny
or disaffirm its obligations under its Subsidiary Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary) occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01
hereof occurs with respect to the Company, any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, all outstanding Notes shall be due and payable without
further action or notice. Holders of the Notes may not enforce this Indenture or
the Notes except as provided in this Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
If an Event of Default occurs on or after April 15, 2003 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the
60
<PAGE>
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to Section 3.07
hereof, then, upon acceleration of the Notes, an equivalent premium shall also
become and be immediately due and payable to the extent permitted by law,
anything in this Indenture or in the Notes to the contrary notwithstanding. If
an Event of Default occurs prior to April 15, 2003 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable in an amount, for each of the
twelve-month periods beginning on April 15 of the years set forth below, as set
forth below (expressed as a percentage of the Principal Amount):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998..................................................... 111.250%
1999..................................................... 110.125%
2000..................................................... 109.000%
2001..................................................... 107.875%
2002..................................................... 106.750%
</TABLE>
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may,
subject to Article 10, pursue any available remedy to collect the payment of
principal, premium, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on the Notes (including any waiver obtained in connection with a purchase of,
tender offer or exchange offer for Notes)(provided, however, that the Holders of
a majority in aggregate principal amount of the then outstanding Notes may
rescind an acceleration and its consequences, including any related payment
default that resulted from such acceleration). Upon such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
61
<PAGE>
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture and subject to
Article 10 and Section 11.02,, the right of any Holder of a Note to receive
payment of principal, premium and Liquidated Damages, if any, and interest on
the Note, on or after the respective due dates expressed in the Note (including
in connection with an offer to purchase), or to bring suit for the enforcement
of any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
62
<PAGE>
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall,
subject to Article 10, pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
63
<PAGE>
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
64
<PAGE>
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to this Section 7.01
and Section 7.02.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) In connection with the Trustee's rights and duties under this
Indenture, the Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting under this Indenture,
it may require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
65
<PAGE>
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.01 hereof, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article 4
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to Sections 6.01(a), 6.01(b) and 4.01 or (ii) any Default or Event of Default of
which the Trustee shall have received written notification or obtained actual
knowledge.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the Trustee
may, in its discretion, make such further inquiry or investigation into such
facts or matters as it may see fit and if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or attorney.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as defined in the TIA) it must eliminate such conflict within 90 days,
apply to the SEC for permission to continue as trustee or resign. Any Agent may
do the same with like rights and duties. The Trustee is also subject to
Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any
66
<PAGE>
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default relating to the payment of principal or
interest on any Note, the Trustee may withhold the notice if it determines that
withholding the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA (S) 313(a) (but if no event described in
TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and each of its officers,
directors, employees and agents against any and all losses, liabilities or
expenses (including reasonable attorneys' fees) incurred by it arising out of or
in connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company (including this Section 7.07) and defending itself against any claim
(whether asserted by the Company or any Holder or any other person) or liability
in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify
67
<PAGE>
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal
68
<PAGE>
amount of the then outstanding Notes may appoint a successor Trustee to replace
the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has (or in the case of a corporation included in a bank
holding company, the bank holding company and related entities has) a combined
capital and surplus of at least $100 million as set forth in its most recent
published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
69
<PAGE>
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to effect legal defeasance or covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest and Liquidated Damages on such Notes when such
payments are due, solely from the trust fund described in Section 8.04 hereof,
(b) the Company's obligations with respect to such Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's obligations in connection therewith and
(d) this Article Eight. Subject to compliance with this Article Eight, the
Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.05, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"),
70
<PAGE>
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in United States dollars, non-
callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages on the outstanding Notes on the Stated
Maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
71
<PAGE>
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or
insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at any time in the
period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is bound including, without limitation, the New Credit Facility;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over any other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
72
<PAGE>
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium,
Liquidated Damages, if any, or interest on any Note and remaining unclaimed for
two years after such principal, and premium, if any, or interest has become due
and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
73
<PAGE>
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may (subject to Section 10.13) amend or supplement this Indenture or the
Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's (and Guarantors')
obligations to the Holders of the Notes in the case of a merger or
consolidation or sale of all or substantially all of the Company's (and
Guarantors') assets pursuant to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note; and
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02 and in Section 10.13,
the Company and the Trustee may amend or supplement this Indenture (including
Section 3.09, 4.10 and 4.15 hereof), or the Notes and any Subsidiary Guarantees
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding voting as a single
class (including, without limitation, consents obtained in connection with a
purchase of, tender offer or exchange offer for, Notes), and, subject to
Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium,
if any, or interest on the Notes, except a payment default resulting from an
74
<PAGE>
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a purchase of, tender offer or exchange offer for,
Notes). Section 2.08 hereof shall determine which Notes are considered to be
"outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes except as
provided above with respect to Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest on any
Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal
amount of the Notes and a waiver of the payment default that resulted from
such acceleration);
75
<PAGE>
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes; or
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 and 4.15 hereof or make any change in
Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver
provisions.
In addition, any amendment to the provisions of Article 10 of this
Indenture (which relate to subordination) will require the consent of the
Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Notes.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
76
<PAGE>
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company or any Guarantor in
a liquidation or dissolution of the Company or any Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company, any Guarantor, or their property, an assignment for the benefit of
creditors or any marshaling of the Company's or any Guarantor's assets and
liabilities, the holders of Senior Debt shall be entitled to receive payment in
full of all Obligations due in respect of such Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt whether or not allowed as a claim in any such proceeding)
before the Holders of Notes will be entitled to receive any payment with respect
to the Notes or under the Subsidiary Guarantee, and until all Obligations with
respect to Senior Debt are paid in full, any distribution to which the Holders
of Notes would be entitled shall be made to the holders of Senior Debt (except
that Holders of Notes may receive and retain Permitted Junior Securities and
payments made from the trust created pursuant to Article 8 hereof).
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company and the Guarantors also may not make any payment upon or
in respect of the Notes or the Subsidiary Guarantees (except in Permitted Junior
Securities or from the trust created pursuant to Article 8 hereof) if (i) a
default in the payment of the principal of, premium, if any, or interest on
Senior Debt occurs and is
77
<PAGE>
continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Debt that currently,
or with the passage of time or giving of notice, permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity and, in the case of any such default described in this clause (ii), the
Trustee receives a notice of such default of the type referred to in this clause
(ii) (a "Payment Blockage Notice") from the Company or the holders of any
Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived in writing by the holders of the applicable Senior Debt and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived in writing by the holders of Designated Senior Debt
or 179 days after the date on which the applicable Payment Blockage Notice is
received by the Trustee, unless the maturity of any Designated Senior Debt has
been accelerated. No new period of payment blockage may be commenced under
clause (ii) above unless and until (i) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal of, premium, if any, and interest on the Notes
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived in writing or cured for a
period of not less than 180 days. In the event that the Company or any Guarantor
makes any payment to the Trustee or any Holder of any Note prohibited by the
foregoing, such payment will be required to be held in trust for and paid over
to the holders of Senior Debt (or the representatives thereof).
SECTION 10.04. ACCELERATION OF SECURITIES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.03 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be
78
<PAGE>
deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Debt shall be entitled by virtue of this Article 10,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
SECTION 10.07. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of
the Company other than their rights in relation to holders of Senior Debt;
or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the
79
<PAGE>
Company or any Holder or by the failure of the Company or any Holder to comply
with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative(s) or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least two Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
Subject to Section 7.03 hereof and the applicable provisions of the
TIA, the Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10 and the subordination of the Subsidiary Guarantees as provided in
Section 11.02, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
80
<PAGE>
SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 or Section 11.02 shall not be
amended or modified without the written consent of the holders of all Senior
Debt.
ARTICLE 11.
SUBSIDIARY GUARANTEES
SECTION 11.01. GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of, premium, Liquidated Damages, if any, and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of, premium, Liquidated
Damages and interest on the Notes, if any, if lawful, and all other obligations
of the Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in accordance with the terms hereof and
thereof; and (b) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed or any performance so guaranteed for whatever
reason, the Guarantors shall be jointly and severally obligated to pay the same
immediately. Each Guarantor agrees that this is a guarantee of payment and not
a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
81
<PAGE>
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior Debt
of such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
10 hereof.
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed
82
<PAGE>
on behalf of such Guarantor by its Chairman, President or one of its Vice
Presidents. Further, the Company shall cause all future Guarantors to execute a
Supplemental Indenture substantially in the form of Exhibit F.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.17 hereof the
Company shall cause such Subsidiaries to execute supplemental indentures to this
Indenture and Subsidiary Guarantees in accordance with Section 4.17 hereof and
this Article 11, to the extent applicable.
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person), another corporation, Person or
other entity whether or not affiliated with such Guarantor unless (i) subject to
the provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor under the Registration Rights Agreement and,
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction, no Default or Event of Default exists;
and (iii) except in the case of a merger of a Guarantor with or into another
Guarantor or a merger of a Guarantor with or into the Company, the Company would
be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.09 hereof.
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS OR CAPITAL STOCK.
In the event of a sale or other disposition of all of the assets of
any Guarantor (other than to the Company or another Guarantor), by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Guarantor (other than to the Company or another Guarantor),
then such Guarantor (in the event of a sale or other disposition, by way of such
a merger, consolidation or otherwise, of all of the Capital Stock of such
Guarantor) or the entity acquiring the property (in the
83
<PAGE>
event of a sale or other disposition of all of the assets of such Guarantor)
will be released and relieved of any obligations under its Subsidiary Guarantee
and any such acquiring entity will not be required to assume any obligations of
such Guarantor under the applicable Subsidiary Guarantee; provided that such
sale or other disposition complies with all applicable provisions of this
Indenture including, without limitation, Section 4.10 or Article 10.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight courier guaranteeing next day delivery, to the
other's address.
If to the Company and/or any Guarantor:
Fountain View, Inc.
11900 Olympic Boulevard, Suite 680
Los Angeles, California 90064
Telecopier No.: (310) 571-0365
Attention: Robert M. Snukal
With a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Telecopier No.: (617) 248-4000
Attention: Stephen M.L. Cohen, Esq.
84
<PAGE>
If to the Trustee:
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, 12th Floor
Los Angeles, California 90071
Telecopier No.: (213) 362-7357
Attention: Corporate Trust Department
With a copy to:
Brown, Rudnick, Freed & Gesmer
City Place I, 185 Asylum Street
Hartford, Connecticut 06103
Telecopier No.: (860) 509-6501
Attention: Kevin Mallery, Esq.
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight courier
guaranteeing next day delivery to its address shown on the register kept by the
Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA (S) 313(c), to the extent required by the TIA. Failure to mail
a notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
85
<PAGE>
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION. 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, as such, shall have any
liability for any
86
<PAGE>
obligations of the Company or such Guarantor under the Notes, the Subsidiary
Guarantees, this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part of this Indenture and shall in no way modify or restrict
any of the terms or provisions hereof.
[SIGNATURES ON FOLLOWING PAGES]
87
<PAGE>
SIGNATURES
DATED AS OF APRIL 16, 1998
FOUNTAIN VIEW, INC.
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
FOUNTAIN VIEW HOLDINGS, INC.,
as guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
AIB CORP.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
ALEXANDRIA CONVALESCENT HOSPITAL,
inc., as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
BRIER OAK CONVALESCENT, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
88
<PAGE>
ELMCREST CONVALESCENT HOSPITAL,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
FOUNTAINVIEW CONVALESCENT HOSPITAL,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
FOUNTAIN VIEW MANAGEMENT, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
I.'N O., Inc.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
LOCOMOTION HOLDINGS, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
89
<PAGE>
LOCOMOTION THERAPY, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
ON-TRACK THERAPY CENTER, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
RIO HONDO NURSING CENTER,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SYCAMORE PARK CONVALESCENT HOSPITAL,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE CORPORATION,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
90
<PAGE>
SUMMIT CARE - CALIFORNIA, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE PHARMACY, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SKILLED CARE NETWORK,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE TEXAS EQUITY, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE - TEXAS NO. 2, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
91
<PAGE>
SUMMIT CARE - TEXAS NO. 3, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE MANAGEMENT TEXAS, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SUMMIT CARE TEXAS, L.P.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
SNF PHARMACY, INC.,
as Guarantor
By: /s/ William C. Scott
--------------------------
Name: William C. Scott
Title: Chairman
State Street Bank and trust Company of
California, N.A.,
as Trustee
By /s/ Scott Emmons
--------------------------
Name: Scott Emmons
Title: Assistant Vice President
92
<PAGE>
EXHIBIT A-1
(Face of Note)
CUSIP: ________
[ISIN: ________]
11 1/4% [Series A] [Series B] Senior Subordinated Notes due 2008
No.: $________
FOUNTAIN VIEW, INC.
promises to pay to ___________________________________________________________
or registered assigns,
the principal sum of__________________________________________________________
Dollars on April 15, 2008.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Dated: __________, _____
Fountain View, Inc.
By:_________________________
Name:
Title:
(SEAL)
This is one of the [Global] Notes referred
to in the within-mentioned Indenture:
State Street Bank and Trust
Company of California, N.A.,
as Trustee
By: ________________________
Name:
Title:
A1-1
<PAGE>
(Back of Note)
11 1/4% [Series A] [Series B] Senior Subordinated Notes due 2008
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE
INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS
OF THE INDENTURE]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Fountain View, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 11
1/4% per annum from ____________ until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on April 15 and October 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance; provided that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand to the extent lawful at a rate that is 1% per annum
in excess of the rate then in effect; it shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the April 1 or October 1
next preceding the Interest Payment Date, even if such Notes are cancelled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. Principal,
premium, if any, and interest and Liquidated Damages, if any, on the Notes will
be payable at the office or agency of the Company maintained for such purpose
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments of principal, premium, interest and Liquidated Damages, if any, with
respect to Notes the Holders of which have given wire transfer instructions to
the Company prior to the Record Date will be required to be made by wire
transfer of immediately available funds within the United States to the accounts
specified by the Holders thereof. Until
A1-2
<PAGE>
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, State Street Bank and
Trust Company of California, N.A., the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
4. Indenture and subordination. The Company issued the Notes under
an Indenture dated as of April 16, 1998 ("Indenture") between the Company and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the Indenture
shall govern and be controlling. The Notes are general unsecured obligations of
the Company limited to $170.0 million in aggregate principal amount.
The payment of the Notes will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Debt.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to April 15, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on April 15 of the years indicated below:
Year Percentage
---- ----------
2003..................................... 105.625%
2004..................................... 103.750%
2005..................................... 101.875%
2006 and thereafter...................... 100.000%
(b) Notwithstanding the foregoing, at any time prior to April 15,
2001, the Company may on any one or more occasions redeem up to 35% in aggregate
principal amount of Notes originally issued on the date of the Indenture at a
redemption price of 111.25% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds
A1-3
<PAGE>
of one or more Public Equity Offerings by the Company; provided that at least
$78.0 million in aggregate principal amount of Notes remain outstanding
immediately after the occurrence of such redemption (excluding Notes held by the
Company and its Subsidiaries); and provided, further, that such redemption shall
occur within 60 days of the date of the closing of such Public Equity Offering.
6. Mandatory Redemption. Except as set forth in Paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, each Holder of Notes will have
the right to require the Company to make an offer (a "Change of Control Offer")
to repurchase all or any part (equal to $1,000 or an integral multiple thereof)
of such Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 15 Business Days following any Change of Control, the Company will mail a
notice to each Holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase Notes on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the ``Change of Control Payment
Date''), pursuant to the procedures required by the Indenture and described in
such notice. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million the
Company will be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8. Notice of Redemption. Notice of redemption will be mailed by
first class mail at least 30 days but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. Notes in denominations
larger than $1,000 may be redeemed in part. If any Note is to be redeemed in
part only, the notice of redemption that relates to such
A1-4
<PAGE>
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original Note.
On and after the redemption date interest ceases to accrue on Notes or portions
thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company or the Registrar is not required to
transfer or exchange any Note selected for redemption. Also, the Company or the
Registrar is not required to transfer or exchange any Notes for a period of 15
days before a selection of Notes to be redeemed.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture, the Notes or the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes) and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes). Without the consent of any Holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of the Notes in case of a merger or
consolidation, or sale of all or substantially all of the Company's assets, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with the requirements of the SEC
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages, if
any, with respect to, the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (ii) default in payment when due of principal of
or premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Subsidiaries for 30 days after notice to comply with Section 4.07, 4.09, 4.10 or
4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries
for 60 days after notice to comply with any of its other agreements in the
Indenture or the Notes; (v) default under any mortgage, indenture or instrument
under
A1-5
<PAGE>
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or
is created after the date of the Indenture, which default results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $5.0 million or more (other than Existing Indebtedness
to the extent it is secured by or paid by the drawing against a letter of credit
permitted to be issued under the Indenture); (vi) failure by the Company or any
of its Restricted Subsidiaries to pay final judgments aggregating in excess of
$5.0 million, which judgments are not paid, discharged or stayed for a period of
60 days; (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries as set forth in the Indenture;
and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid in any
material respect or shall cease for any reason to be in full force and effect or
any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency as set
forth in the Indenture, with respect to the Company, any Significant Subsidiary
or any group of Subsidiaries, that taken together would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required, upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue or resign.
A1-6
<PAGE>
14. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, the Subsidiary Guarantees or the Indenture or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of the date of the Indenture, between the Company and the
parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Fountain View, Inc.
11900 Olympic Boulevard, Suite 680
Los Angeles, California 90064
Attention: Chief Executive Officer
A1-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date:_________
Your Signature:_____________________________
(Sign exactly as your name appears on the
face of this Note)
SIGNATURE GUARANTEE.
_________________________
Participant in a Recognized Signature
Guarantee Medallion Program
A1-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_]Section 4.10 [_]Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date:_______ Your Signature:___________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:____________________________________
SIGNATURE GUARANTEE.
_______________________________________
Participant in a Recognized Signature
Guarantee Medallion Program
A1-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE/1/
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AMOUNT OF AMOUNT OF OF THIS SIGNATURE OF
DECREASE IN INCREASE IN GLOBAL NOTE AUTHORIZED
PRINCIPAL PRINCIPAL FOLLOWING SUCH OFFICER OF
DATE OF AMOUNT OF AMOUNT OF DECREASE (OR TRUSTEE OR
EXCHANGE THIS GLOBAL NOTE THIS GLOBAL NOTE INCREASE) CUSTODIAN
- -------- ---------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
</TABLE>
____________________________
/11/ This should be included only if the Note is issued in global form.
A1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
CUSIP:__________
ISIN:_________
11 1/4% [Series A] [Series B] Senior Subordinated Notes due 2008
No.___ $___________
FOUNTAIN VIEW, INC.
promises to pay to _____________________________________________________________
or registered assigns,
the principal sum of ___________________________________________________________
Dollars on April 15, 2008
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Dated:________________________
Fountain View, Inc.
By:___________________________
Name:
Title:
[(SEAL)]
This is one of the Global Notes
referred to in the within-mentioned Indenture:
State Street Bank and Trust
Company of California, N.A.,
as Trustee
By:___________________
Name:
Title:
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
11 1/4% [Series A] [Series B] Senior Subordinated Notes due 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN
WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS.
A2-2
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Fountain View, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 11
1/4% per annum from ______________ until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages, if any, semi-annually on April 15 and October 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance; provided that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand to the extent lawful at a rate that is 1% per annum
in excess of the rate then in effect; it shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Senior Subordinated Notes under the Indenture.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the April 1 or
October 1 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. Principal, premium, if any, and interest and Liquidated Damages, if
any, on the Notes will be payable at the office or agency of the Company
maintained for such purpose or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments of principal, premium, interest and
Liquidated Damages, if any, with respect to Notes the Holders of which have
given wire transfer instructions to the Company prior to the Record Date will be
required to be made by wire transfer of immediately available funds within the
United States to the accounts specified by the Holders thereof. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The
A2-3
<PAGE>
Notes will be issued in denominations of $1,000 and integral multiples thereof.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company of California, N.A., the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
4. INDENTURE AND SUBORDINATION. The Company issued the Notes under
an Indenture dated as of April 16, 1998 ("Indenture") between the Company and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the Indenture
shall govern and be controlling. The Notes are general unsecured obligations of
the Company limited to $170.0 million in aggregate principal amount.
The payment of the Notes will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Debt.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to April 15, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on April 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.................................... 105.625%
2004.................................... 103.750%
2005.................................... 101.875%
2006 and thereafter..................... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, at any time prior to April 15,
2001, the Company may on any one or more occasions redeem up to 35% in aggregate
principal amount of Notes originally issued on the date of the Indenture at a
redemption price of 111.25% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date,
with the net cash proceeds of one or more Public Equity Offerings by the
Company; provided that at least $78.0 million in aggregate principal amount of
Notes remain outstanding immediately after the
A2-4
<PAGE>
occurrence of such redemption (excluding Notes held by the Company and its
Subsidiaries); and provided, further, that such redemption shall occur within 60
days of the date of the closing of such Public Equity Offering.
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, each Holder of Notes will have
the right to require the Company to make an offer (a "Change of Control Offer")
to repurchase all or any part (equal to $1,000 or an integral multiple thereof)
of such Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 15 Business Days following any Change of Control, the Company will mail a
notice to each Holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase Notes on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company will be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by
first class mail at least 30 days but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. Notes in denominations
larger than $1,000 may be redeemed in part. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of
A2-5
<PAGE>
the Holder thereof upon cancellation of the original Note. On and after the
redemption date interest ceases to accrue on Notes or portions thereof called
for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company or the Registrar is not required to
transfer or exchange any Note selected for redemption. Also, the Company or the
Registrar is not required to transfer or exchange any Notes for a period of 15
days before a selection of Notes to be redeemed.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Notes or the Subsidiary Guarantees may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes) and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes). Without the consent of any Holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's obligations to Holders of the Notes in case of a merger or
consolidation or sale of all or substantially all of the Company's assets, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with the requirements of the SEC
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of principal of or premium,
if any, on the Notes (whether or
A2-6
<PAGE>
not permitted by the subordination provisions of the Indenture); (iii) failure
by the Company or any of its Subsidiaries for 30 days after notice to comply
with Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the
Company or any of its Subsidiaries for 60 days after notice to comply with any
of its other agreements in the Indenture or the Notes or (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or Guarantee now exists, or is created after the date of the
Indenture, which default results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
the maturity of which has been so accelerated, aggregates $5.0 million or more
(other than Existing Indebtedness to the extent it is secured by or paid by the
drawing against a letter of credit permitted to be issued under the Indenture);
(vi) failure by the Company or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant Subsidiaries
as set forth in the Indenture; and (viii) except as permitted by the Indenture,
any Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid in any material respect or shall cease for any reason
to be in full force and effect or any Guarantor, or any Person acting on behalf
of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency as set forth in the Indenture, with respect to the
Company, any Significant Subsidiary or any group of Subsidiaries, that taken
together would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates,
A2-7
<PAGE>
as if it were not the Trustee; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or any Guarantor, as such, shall not
have any liability for any obligations of the Company or any Guarantor under the
Notes, the Subsidiary Guarantees or the Indenture or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
15. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of the date of the Indenture, between the Company and the
parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Fountain View, Inc.
11900 Olympic Boulevard, Suite 680
Los Angeles, California 90064
Attention: Chief Executive Officer
A2-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date:____________
Your Signature:_____________________________________
(Sign exactly as your name appears on the face of this Note)
SIGNATURE GUARANTEE.
___________________________________________
Participant in a Recognized Signature
Guarantee Medallion Program
A2-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[_]Section 4.10 [_]Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
________________________________________________________________________________
Date: ___________ Your Signature:__________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.:_____________________
SIGNATURE GUARANTEE.
________________________________________
Participant in a Recognized Signature
Guarantee Medallion Program
A2-10
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
Amount of Principal Amount
decrease in amount of increase of this Signature of
principal in principal global note authorized
Date of Amount of Amount of following such officer of Trustee
Exchange this Global Note this Global Note decrease (or increase) or Custodian
-------- ---------------- ------------------ ---------------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
A2-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Fountain View, Inc.
11900 Olympic Boulevard, Suite 680
Los Angeles, California 90064
[Registrar address block]
Re: 11 1/4% Series [A] [B] Senior Subordinated Notes due 2008
----------------------------------------------------
Reference is hereby made to the Indenture, dated as of April 16, 1998
(the "Indenture"), among Fountain View, Inc., as issuer (the "Company"), the
--------- -------
guarantors named therein, and State Street Bank and Trust Company of California,
N.A., as trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
----------
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
--------
to __________ (the "Transferee"), as further specified in Annex A hereto. In
----------
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
- -----------------------------------------------------------
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
---------- ---
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
- --------------------------------------------------------------------------------
NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and
- -----------------------------
in accordance with Rule 903 or Rule 904 under the Securities Act and,
accordingly, the Transferor hereby further certifies that (i) the Transfer is
not being made to a person in
B-1
<PAGE>
the United States and (x) at the time the buy order was originated, the
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an initial
purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note, the Temporary
Regulation S Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
-------------------------------------------------------------------
INTEREST IN THE GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF
- -----------------------------------------------------------------------------
THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
- -------------------------------------------------------
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted
B-2
<PAGE>
Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of
a principal amount of Notes at the time of transfer of less than $250,000, an
Opinion of Counsel provided by the Transferor or the Transferee (a copy of which
the Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Global Note
and/or the Definitive Notes and in the Indenture and the Securities Act.
4. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
B-3
<PAGE>
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated:_____, ________ _______________________________
[Insert Name of Transferor]
By:____________________________
Name:
Title:
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _________), or
(ii) [_] Regulation S Global Note (CUSIP _________), or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ________), or
(ii) [_] Regulation S Global Note (CUSIP ________), or
(iii) [_] Unrestricted Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Fountain View, Inc.
11900 Olympic Boulevard, Suite 680
Los Angeles, California 90064
[Registrar address block]
Re: 11 1/4% Series [A] [B] Senior Subordinated Notes due 2008
----------------------------------------------------------
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of April 16, 1998
(the "Indenture"), among Fountain View, Inc., as issuer (the "Company"), the
--------- -------
guarantors named therein, and State Street Bank and Trust Company of California,
N.A., as trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
-----
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
--------
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
--------------------------------------------------
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
- ----------------------------------------------------------------------------
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
--------------
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
--------------------------------------------------
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
- ------------------------------------------------------
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
C-1
<PAGE>
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
- --------------------------------------------------
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
- ----------------------------
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
--------------------------------------------------
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
- ----------------------------------------------------
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
C-2
<PAGE>
(b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
- -----------------------------------------------
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] __144A Global Note, __ Regulation S Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________________
[Insert Name of Owner]
By: _______________________________
Name:
Title:
Dated: ________________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Fountain View, Inc.
11900 Olympic Boulevard, Suite 680
Los Angeles, California 90064
[Registrar address block]
Re: 11 1/4% Series [A] [B] Senior Subordinated Notes due 2008
----------------------------------------------------------
Reference is hereby made to the Indenture, dated as of April 16,
1998 (the "Indenture"), among Fountain View, Inc., as issuer (the "Company"),
--------- -------
the guarantors named therein, and State Street Bank and Trust Company of
California, N.A., as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
--------------
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer, of less than $250,000, an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the
D-1
<PAGE>
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
______________________________________
[Insert Name of Accredited Investor]
By:______________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF SUBORDINATED SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of April 16, 1998 (the "Indenture") among
Fountain View, Inc., the Guarantors listed on the signature page thereto and
State Street Bank and Trust Company of California, N.A., as trustee (the
"Trustee"), (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual payment
of interest on overdue principal and premium, and, to the extent permitted by
law, interest, and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee all in accordance with the terms of
the Indenture and (b) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise. The
obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Subsidiary Guarantee and the Indenture are expressly set forth
in Article 11 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Subsidiary Guarantee. Each Holder of a Note, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such
Holder for such purpose; provided, however, that the Indebtedness evidenced by
this Subsidiary Guarantee shall cease to be so subordinated and subject in right
of payment upon any defeasance of this Note in accordance with the provisions of
the Indenture.
The terms of Article 10 of the Indenture are incorporated herein by
reference.
Dated: _______________________
Fountain View Holdings, Inc.
By:__________________________________
Name:
Title:
E-1
<PAGE>
AIB Corp.
By:__________________________________
Name:
Title:
Alexandria convalescent hospital, inc.
By:__________________________________
Name:
Title:
Brier Oak convalescent, inc.
By:__________________________________
Name:
Title:
Elmcrest Convalescent Hospital
By:__________________________________
Name:
Title:
Fountainview Convalescent Hospital
By:__________________________________
Name:
Title:
E-2
<PAGE>
Fountain View Management, Inc.
By:__________________________________
Name:
Title:
I.'N O., Inc.
By:__________________________________
Name:
Title:
Locomotion Holdings, Inc.
By:__________________________________
Name:
Title:
Locomotion Therapy, Inc.
By:__________________________________
Name:
Title:
On-Track Therapy Center, inc.
By:__________________________________
Name:
Title:
E-3
<PAGE>
Rio Hondo nursing center
By:__________________________________
Name:
Title:
Sycamore Park Convalescent Hospital
By:__________________________________
Name:
Title:
Summit Care Corporation
By:__________________________________
Name:
Title:
Summit Care - California, Inc.
By:__________________________________
Name:
Title:
Summit Care Pharmacy, Inc.
By:__________________________________
Name:
Title:
E-4
<PAGE>
Skilled Care Network
By:__________________________________
Name:
Title:
Summit Care Texas Equity, Inc.
By:__________________________________
Name:
Title:
Summit Care - Texas No. 2, Inc.
By:__________________________________
Name:
Title:
Summit Care - Texas No. 3, Inc.
By:__________________________________
Name:
Title:
Summit Care Management Texas, Inc.
By:__________________________________
Name:
Title:
E-5
<PAGE>
Summit Care Texas, L.P.
By:__________________________________
Name:
Title:
SNF Pharmacy, Inc.
By:__________________________________
Name:
Title:
E-6
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Fountain View, Inc. (or its permitted successor), a Delaware
corporation (the "Company"), the Company, the other Guarantors (as defined in
the Indenture referred to herein) and State Street Bank and Trust Company of
California, N.A., as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of April 16, 1998 providing for
the issuance of an aggregate principal amount of up to $170.0 million of 11 1/4%
Senior Subordinated Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the Company
hereunder or thereunder, that:
F-1
<PAGE>
(i) the principal of and interest on the Notes will be promptly
paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof
and thereof; and
(ii) in case of any extension of time of payment or renewal of
any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay
the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands
whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes
and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting
in relation to either the Company or the Guarantors, any amount
paid by either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations
F-2
<PAGE>
guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) The obligations hereunder shall be subject to the subordination
provisions set forth in Article 10 of the Indenture.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that
the Subsidiary Guarantees shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) subject to Section 11.05 and 11.06 of the Indenture, the
Person formed by or surviving any such consolidation or
merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Subsidiary Guarantee on the
terms set forth herein or therein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; and
(iii) except in the case of a merger of a Guarantor with or into
another Guarantor or a merger of a Guarantor with or into
the
F-3
<PAGE>
Company, the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately
after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in Section 4.09 of the
Indenture.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon
the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had
been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Subsidiary
Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company
or another Guarantor, or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
5. Releases.
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all of the Capital Stock of any
Guarantor (other than to the Company or another Guarantor), then
such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the Capital
Stock of such Guarantor (other than to the Company or another
Guarantor)) or the entity acquiring the property (in the event of
a sale or other disposition of all or substantially all of the
assets of such Guarantor) will be released and relieved of any
obligations under its Subsidiary Guarantee and any such acquiring
entity will not be required to assume any obligations of such
Guarantor under the applicable
F-4
<PAGE>
Subsidiary Guarantee; provided that such sale or other
disposition complies with all applicable provisions of the
Indenture including, without limitation, Section 4.10 hereof.
Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such
sale or other disposition was made by the Company in accordance
with the provisions of the Indenture, including without
limitation Section 4.10 of the Indenture, the Trustee shall
execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its
Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided in
Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the SEC that such a waiver is against public policy.
7. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
F-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: _______________, ____
[Guaranteeing Subsidiary]
By: _______________________________
Name:
Title:
F-6
<PAGE>
EXHIBIT 10.32
================================================================================
LIMITED LIABILITY COMPANY
AGREEMENT
OF
APS-SUMMIT CARE PHARMACY, L.L.C.,
a Delaware Limited Liability Company
Dated as of November 30, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - ORGANIZATIONAL MATTERS..................................... 1
1.1 Formation......................................................... 1
1.2 Name.............................................................. 1
1.3 Principal Place of Business; Other Places of Business............. 1
1.4 Purpose........................................................... 1
1.5 Certificate of Formation; Filings................................. 1
1.6 Fictitious Business Name Statements............................... 1
1.7 Designated Agent for Service of Process........................... 2
1.8 Term.............................................................. 2
ARTICLE 2 - DEFINITIONS................................................ 2
2.1 "Act"............................................................. 2
2.2 "Additional Members".............................................. 2
2.3 "Affected Member"................................................. 2
2.4 "Adjusted Capital Account Deficit"................................ 2
2.5 "Affiliate"....................................................... 2
2.6 "Agreement"....................................................... 2
2.7 "Assignee"........................................................ 3
2.8 "Bona Fide Offer"................................................. 3
2.9 "Business"........................................................ 3
2.10 "Capital Account"................................................ 3
2.11 "Capital Contributions".......................................... 4
2.12 "Cash Available for Distribution"................................ 4
2.13 "Certificate".................................................... 4
2.14 "Code"........................................................... 4
2.15 "Company"........................................................ 4
2.16 "Company Assets"................................................. 4
2.17 "Company Minimum Gain"........................................... 4
2.18 "Company Price".................................................. 4
2.19 [Intentionally deleted.)......................................... 4
2.20 "Depreciation"................................................... 4
2.21 "Economic Interest".............................................. 5
2.22 "Fundamental Change"............................................. 5
2.23 "Gross Asset Value".............................................. 6
2.24 "Immediate Family"............................................... 7
2.25 "Incapacity"..................................................... 7
2.26 "Indemnitee"..................................................... 7
2.27 "Majority in Interest"........................................... 7
2.28 "Majority of Remaining Members".................................. 7
2.29 "Member Minimum Gain"............................................ 7
2.30 "Member Nonrecourse Debt"........................................ 7
2.31 "Member Nonrecourse Deductions".................................. 7
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
2.32 "Members"........................................................ 7
2.33 "Membership Interest" or "Interest".............................. 7
2.34 "Net Profits" or "Net Losses".................................... 7
2.35 "Nonrecourse Deductions"......................................... 8
2.36 "Nonrecourse Liability".......................................... 8
2.37 "Non-Transferring Members"....................................... 8
2.38 "Offerer"........................................................ 8
2.39 "Offer".......................................................... 8
2.40 "Offer by Transferor"............................................ 8
2.41 "Operating Cash Expenses"........................................ 9
2.42 "Ordinary Course"................................................ 9
2.43 "Percentage Interest"............................................ 9
2.44 "Person"......................................................... 9
2.45 "Recourse Liability"............................................. 9
2.46 "Regulations".................................................... 9
2.47 "Regulatory Allocations"......................................... 9
2.48 "Representative"................................................. 9
2.49 "Reserves"....................................................... 9
2.50 "Responsible Party".............................................. 9
2.51 "Substitute Member".............................................. 9
2.52 "Summit Care".................................................... 9
2.55 "Supermajority in Interest"...................................... 9
2.54 "Terminating Capital Transaction"................................ 10
2.55 "Termination Payment"............................................ 10
2.56 "Transfer"....................................................... 10
2.57 "Transferee"..................................................... 10
2.58 "Transferor"..................................................... 10
2.59 "Unaffected Members"............................................. 10
ARTICLE 3 - CAPITAL; CAPITAL ACCOUNTS AND MEMBERS...................... 10
3.1 Initial Capital Contributions of Members......................... 10
3.2 Additional Capital Contributions by Member....................... 10
3.3 Capital Accounts................................................. 11
3.4 Additional Members............................................... 11
3.5 Member Capital................................................... 11
3.6 Member Loans..................................................... 11
3.7 Liability of Members............................................. 11
ARTICLE 4 - DISTRIBUTIONS.............................................. 12
4.1 Distributions of Cash Available for Distribution................. 12
4.2 Distributions Upon Liquidation................................... 12
4.3 Withholding...................................................... 12
4.4 Distributions in Kind............................................ 13
4.5 Limitations on Distributions..................................... 13
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 5 - ALLOCATIONS OF NET PROFITS AND NET LOSSES................... 13
5.1 General Allocation of Net Profits and Losses...................... 13
5.2 Regulatory Allocations............................................ 13
5.3 Tax Allocations................................................... 15
5.4 Other Provisions.................................................. 15
ARTICLE 6 - OPERATIONS.................................................. 16
6.1 Management........................................................ 16
6.2 Reliance By Third Parties......................................... 18
6.3 Compensation...................................................... 18
6.4 Records and Reports............................................... 18
6.5 Indemnification and Liability of the Member....................... 19
6.6 Covenant Not To Compete........................................... 20
6.7 Services.......................................................... 21
ARTICLE 7 - INTERESTS AND TRANSFERS OF INTERESTS........................ 21
7.1 Transfers......................................................... 21
7.2 Further Restrictions.............................................. 21
7.3 Rights of Assignees............................................... 22
7.4 Admissions and Withdrawals........................................ 22
7.5 Payment Upon Withdrawal of Member................................. 22
7.6 Admission of Assignees as Substitute Members...................... 22
7.7 Withdrawal of Members............................................. 23
7.8 Conversion of Membership Interest................................. 23
7.9 Right of First Refusal............................................ 23
7.10 Buy and Sell Rights............................................... 25
7.11 Option to Purchase Upon Fundamental Change........................ 26
ARTICLE 8 - DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE
COMPANY................................................................. 27
8.1 Limitations....................................................... 27
8.2 Exclusive Causes.................................................. 27
8.3 Effect of Dissolution............................................. 27
8.4 No Capital Contribution Upon Dissolution.......................... 28
8.5 Liquidation....................................................... 28
ARTICLE 9 - MISCELLANEOUS............................................... 28
9.1 Amendments.......................................................... 28
9.2 Accounting and Fiscal Year.......................................... 29
9.3 Meetings............................................................ 29
9.4 Entire Agreement.................................................... 29
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.5 Further Assurances................................................ 29
9.6 Notices........................................................... 29
9.7 Tax Matters....................................................... 29
9.8 Governing Law..................................................... 30
9.9 Arbitration....................................................... 30
9.10 Construction...................................................... 30
9.11 Captions - Pronouns............................................... 30
9.12 Binding Effect.................................................... 30
9.13 Severability...................................................... 30
9.14 Confidentiality................................................... 30
9.15 Counterparts...................................................... 31
9.16 No Referrals...................................................... 31
</TABLE>
iv
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
APS-SUMMIT CARE PHARMACY, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT (the "AGREEMENT") is made and
entered into as of the 30th day of November, 1996, by and between American
Pharmaceutical Services, Inc., a Delaware corporation ("APS"), and Summit Care
Pharmacy, Inc., a California corporation ("SCPI"; each of APS and SCPI are a
MEMBER, as defined below) for the purpose of forming APS-Summit Care Pharmacy,
L.L.C. (the "COMPANY"), a limited liability company organized under the Delaware
Limited Liability Company Act (the "ACT").
ARTICLE 1
ORGANIZATIONAL MATTERS
1.1 FORMATION. The Members hereby form the Company under the Act
for the purposes and upon the terms and conditions hereinafter set forth. The
rights and liabilities of the Members of the Company shall be as provided in the
Act, except as otherwise expressly provided herein. In the event of any
inconsistency between any terms and conditions contained in this Agreement and
any nonmandatory provisions of the Act, the terms and conditions contained in
this Agreement shall govern.
1.2 NAME. The name of the Company shall be "APS-Summit Care Pharmacy,
L.L.C." The Company may also conduct business at the same time under one or more
fictitious names if a Majority in Interest determines that such is in the best
interests of the Company. The Members may, upon the written consent of a
Majority in Interest, change the name of the Company, from time to time, in
accordance with applicable law.
1.3 PRINCIPAL PLACE OF BUSINESS; OTHER PLACES OF BUSINESS. The
principal place of business of the Company is located at 2324 Ridgepoint Drive,
Suite G-1, Austin, Texas 78754 or such other place within or outside the State
of Delaware as a Majority in Interest may from time to time designate. The
Company may maintain offices and places of business at such other place or
places within or outside the State of Delaware as a Majority in Interest deems
advisable.
1.4 PURPOSE. The Company shall provide institutional pharmacy
services to nursing homes, retirement centers and the patients and residents
residing in such facilities, and may engage in any and all other lawful
business, purpose or activity in which a limited liability company may be
engaged under applicable law (including, without limitation, the Act).
1.5 CERTIFICATE OF FORMATION; FILINGS. The Members shall cause to be
executed and filed a Certificate of Formation in the form attached as Schedule I
hereto (the "CERTIFICATE") in the Office of the Delaware Secretary of state as
required by the Act. Any Member may, upon the written consent of a Majority in
Interest, execute and file any duly authorized amendments to the Certificate
from time to time in a form prescribed by the Act.
1.6 FICTITIOUS BUSINESS NAME STATEMENTS. Following the execution of
this Agreement, fictitious business name statements shall be filed and published
when and if a Majority in Interest determines it necessary. Any such statement
shall be renewed as required by applicable law.
<PAGE>
1.7 DESIGNATED AGENT FOR SERVICE OF PROCESS. The Company shall
continuously maintain a registered office and a designated and duly qualified
agent for service of process on the Company in the State of Delaware.
1.8 TERM. The Company shall commence on the date that the
Certificate is filed with the Office of the Delaware Secretary of State, and
shall continue until terminated pursuant to this Agreement.
ARTICLE 2
DEFINITIONS
Capitalized words and phrases used and not otherwise defined elsewhere
in this Agreement shall have the following meanings:
2.1 "ACT" is defined in the Preamble.
2.2 "ADDITIONAL MEMBERS" means those Persons admitted to the
Company pursuant to Paragraph 3.4 of this Agreement.
2.3 "AFFECTED MEMBER" is defined in Paragraph 7.11.1.
2.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant fiscal year, after giving effect to the following
adjustments:
2.4.1 Add to such Capital Account the following items:
(a) The amount, if any, that such Member is
obligated to contribute to the Company pursuant to this Agreement upon
liquidation of such Member's Interest; and
(b) The amount that such Member is obligated to
restore or is deemed to be obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
2.4.2 Subtract from such Capital Account such Member's
share of the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
2.5 "AFFILIATE" means, with reference to a specified Person: (a)
a Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the specified
Person, (b) any Person that is an officer, partner or trustee of, or serves in a
similar capacity with respect to, the specified Person, or for which the
specified Person is an officer, partner or trustee, or serves in a similar
capacity, or (c) any member of the Immediate Family of the specified Person.
2.6 "AGREEMENT" is defined in the Preamble.
2
<PAGE>
2.7 "ASSIGNEE" means any Person (a) to whom a Member (or assignee
thereof) Transfers all or any part of its Interest, and (b) which has not been.
admitted to the Company as a Substitute Member pursuant to Paragraph 7.6 of this
Agreement.
2.8 "BONA FIDE OFFER" shall mean an offer in writing signed by a
third party offeror or offerors (who must be a Person financially capable of
carrying out the term of such Bona Fide Offer), in a form legally enforceable
against such third party offeror or offerors.
2.9 "BUSINESS" means the provision of institutional pharmacy
services to nursing homes, retirement centers and the patients and residents
residing in such facilities, or any and all other lawful business, purpose or
activity in which the Company may be engaged.
2.10 "CAPITAL ACCOUNT" means the Capital Account maintained for
each Member on the Company's books and records in accordance with the following
provisions:
2.10.1 To each Member's Capital Account there shall be
added (a) such Member's Capital Contributions, (b) such Member's allocable share
of Net Profits and any items in the nature of income or gain that are specially
allocated to such Member pursuant to Article 5 hereof or other provisions of
this Agreement, and (c) the amount of any Company liabilities assumed by such
Member or which are secured by any property distributed to such Member.
2.10.2 From each Member's Capital Account there shall be
subtracted (a) the amount of (i) cash and (ii) the Gross Asset Value of any
Company Assets (other than cash) distributed to such Member (other than any
payment of principal and/or interest to such Member pursuant to the terms of a
loan made by the Member to the Company) pursuant to any provision of this
Agreement, (b) such Member's allocable share of Net Losses and any other items
in the nature of expenses or losses that are specially allocated to such Member
pursuant to Article 5 or other provisions of this Agreement.
2.10.3 In the event any interest in the Company is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred interest.
2.10.4 In determining the amount of any liability for
purposes of Paragraphs 2.10.1 and 2.10.2 hereof, there shall be taken into
account Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
2.10.5 The foregoing provisions and the other provisions
of this Agreement relating to the maintenance of Capital Accounts are intended
to comply with Regulations Sections 1.704-1(b) and 1.704-2 and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event that a Majority in Interest shall determine that it is prudent to modify
the manner in which the Capital Accounts, or any additions or subtractions
thereto, are computed in order to comply with such Regulations, the Members may,
upon the written consent of a Majority in Interest, make such modification,
provided that it is not likely to have a material effect on the amounts
distributable to any Member pursuant to Article 8 hereof upon the dissolution of
the Company. Upon the written consent of a Majority in Interest, the Members
shall also make (a) any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Members and the amount of
Company capital reflected on the Company's balance sheet, as computed for book
purposes, in accordance with Regulations
3
<PAGE>
Section 1.704-1(b)(2)(iv)(q), and (b) any appropriate modifications in
the event that unanticipated events might otherwise cause this Agreement
not to comply with Regulations Sections 1.704-1(b) and 1.704-2.
2.11 "CAPITAL CONTRIBUTIONS" means, with respect to any Member,
the total amount of money and the initial Gross Asset Value of property (other
than money), less any liabilities of such Member assumed by the Company or any
liabilities which are secured by any property contributed to the capital of the
Company by such Member, whether as an initial Capital Contribution or as an
additional Capital Contribution.
2.12 "CASH AVAILABLE FOR DISTRIBUTION" means, with respect to any
fiscal year, all Company cash receipts (excluding the proceeds from any
Terminating Capital Transaction), after deducting payments for Operating Cash
Expenses, payments required to be made in connection with any loan to the
Company or any other loan secured by a lien on any Company Assets, capital
expenditures and any other amounts set aside for the restoration, increase or
creation of reasonable Reserves.
2.13 "CERTIFICATE" means the Certificate of Formation of the
Company filed under the Act in the Office of the Delaware Secretary of State for
the purpose of forming the Company as a Delaware limited liability company, and
any duly authorized, executed and filed amendments or restatements thereof.
2.14 "CODE" means the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding law).
2.15 "COMPANY" is defined in the Preamble.
2.16 "COMPANY ASSETS" means all direct and indirect interests in
real and personal property owned by the Company from time to time, and shall
include both tangible and intangible property (including cash and cash
equivalents).
2.17 "COMPANY MINIMUM GAIN" has the meaning set forth in
Regulations Sections 1.7042(b)(2) and 1.704-2(d)(1) for the phrase "partnership
minimum gain."
2.18 "COMPANY PRICE" is defined in Paragraph 7.10.1
2.19 [Intentionally deleted.]
2.20 "DEPRECIATION" means, for each fiscal year or other period,
an amount equal to the federal income tax depreciation, amortization or other
cost recovery deduction allowable with respect to an asset for such year or
other period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount that bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year or other period bears to such
beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method agreed to by a Majority
in Interest.
4
<PAGE>
2.21 "ECONOMIC INTEREST" means a Person's right to share in the
Net Profits, Net Losses, or similar items of, and to receive distributions from,
the Company, but does not include any other rights of a Member including,
without limitation, the right to vote or to participate in the management of the
Company, or, except as specifically provided in this Agreement or required under
the Act, any right to information concerning the business and affairs of the
Company.
2.22 "FUNDAMENTAL CHANGE" means the happening of any of the
following events with respect to a Member (or, in the case of SCPI, with respect
to either SCPI or Summit Care), without receiving the written consent of a
majority in interest of the Unaffected Members:
(a) the sale of substantially all of its assets to a Person or a
group of associated or affiliated Persons who are not affiliated
with such Member (or, in the case of SCPI, with either SCPI or
Summit Care, as the case may be);
(b) the sale, issuance, exchange or other disposition of more than
fifty percent (50%) of any class or series of the outstanding
capital stock of such Member (or, in the case of SCPI, either
SCPI or Summit Care) in one transaction or a series of related
transactions to a Person or a group of associated or affiliated
Persons who are not affiliated with such Member (or, in the case
of SCPI, with either SCPI or Summit Care, as the case may be);
(c) the dissolution or liquidation of such Member (or, in the case
of SCPI, of either SCPI or Summit Care);
(d) a merger or other reorganization with one or more entities in
which such Member (or, in the case of SCPI, either SCPI or
Summit Care) is not the surviving entity, or if such Member (or,
in the case of SCPI, either SCPI or Summit Care) is the
surviving entity, the ownership of fifty percent (50%) or more
of its voting common stock, is held by a Person or entity not
currently holding fifty percent (50%) of such voting common
stock;
(e) such Member (or, in the case of SCPI, either SCPI or Summit
Care) becomes insolvent or makes an assignment for the benefit
of creditors, or voluntary proceedings are instituted by such
Member (or, in the case of SCPI, either SCPI or Summit Care)
under the Bankruptcy Code as amended, or involuntary proceedings
are instituted against such Member (or, in the case of SCPI,
against either SCPI or Summit Care) under the Bankruptcy Code,
as amended and such involuntary proceedings are not dismissed
within sixty (60) days thereafter;
(f) a receiver is appointed for such Member (or, in the case of
SCPI, for either SCPI or Summit Care) or its assets; or
(g) any other event or transaction by which effective control of
such Member (or, in the case of SCPI, of either SCPI or Summit
Care) is transferred to, or vested in, a Person who is not
affiliated with such Member (or, in the case of SCPI, with
either SCPI or Summit Care).
Notwithstanding the foregoing, a public distribution of securities by a
Member (or, in the case of SCPI, by either SCPI or Summit Care) shall not be
deemed a Fundamental Change with respect to such Member (or, in the case of
SCPI, with respect to either SCPI or Summit Care) if a majority of such Member's
directors and principal officers (or, in the case of SCPI, the directors and
principal officers of SCPI and Summit Care) remain in the same positions they
held prior to the public distribution.
5
<PAGE>
2.23 "GROSS ASSET VALUE" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
2.23.1 The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value of
such asset, as determined by a Majority in Interest and the contributing Member.
2.23.2 The Gross Asset Values of all Company Assets
immediately prior to the occurrence of any event described in subsection
(a), subsection (b), subsection (c) or subsection (d) hereof shall be
adjusted to equal their respective gross fair market values, as determined
by a Majority in Interest using such reasonable method of valuation as such
Majority in Interest may adopt, as of the following times:
(a) the acquisition of an additional interest in
the Company (other than in connection with the execution of this
Agreement) by a new or existing Member in exchange for more than
a de minimis Capital Contribution if a Majority in Interest
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative Economic Interests of the
Members in the Company;
(b) the distribution by the Company to a Member
of more than a de minimis amount of Company Assets as
consideration for an interest in the Company, if a Majority in
Interest reasonably determines that such adjustment is necessary
or appropriate to reflect the relative Economic Interests of the
Members in the Company;
(c) the liquidation of the Company within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and
(d) at such other times as a Majority in Interest
shall reasonably determine necessary or advisable in order to
comply with Regulations Sections 1.704-1(b) and 1.704-2.
2.23.3 The Gross Asset Values of Company Assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this Paragraph 2.23.3 to the extent that a Majority in Interest reasonably
determines that an adjustment pursuant to Paragraph 2.23.2 above is
necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this Paragraph 2.23.3.
2.23.4 If the Gross Asset Value of a Company asset has
been determined or adjusted pursuant to Paragraph 2.23.1, Paragraph 2.23.2
or Paragraph 2.23.3 hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such Company
Asset for purposes of computing Net Profits and Net Losses.
6
<PAGE>
2.24 "IMMEDIATE FAMILY" means, and is limited to, an individual
Member's current spouse, parents, parents-in-law, grandparents, children,
siblings, and grandchildren, or a trust or estate, all of the beneficiaries of
which consist of such Member or members of such Member's Immediate Family.
2.25 "INCAPACITY" means the bankruptcy, incompetence, insanity,
death, retirement, resignation, withdrawal, expulsion, or other acts resulting
in dissolution under the Act or termination (other than by merger or
consolidation) of any Person, any such Person being an "Incapacitated Member".
2.26 "INDEMNITEE" is defined in Paragraph 6.5.1.
2.27 "MAJORITY IN INTEREST" means Members holding, in the
aggregate, a majority of the Percentage Interests held by all Members of the
Company.
2.28 "MAJORITY OF REMAINING MEMBERS" means Members other than the
Incapacitated Member owning (a) a majority of the profits interests in the
Company held by all Members other than the Incapacitated Member, determined and
allocated based on any reasonable estimate of profits from the relevant date to
the projected termination of the Company and taking into account present and
future allocations of profits under this Agreement as it is in effect on the
relevant date, and (b) a majority of the capital interests in the Company,
determined as of the relevant date under this Agreement, owned by all the
Members other than the Incapacitated Member.
2.29 "MEMBER MINIMUM GAIN" means an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Regulations Section 1.704-2(i) with respect to "partner
minimum gain."
2.30 "MEMBER NONRECOURSE DEBT" has the meaning set forth in
Regulations Section 1.704-2(b)(4) for the phrase "partner nonrecourse debt."
2.31 "MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i) for the phrase "partner nonrecourse deductions."
2.32 "MEMBERS" means the Persons owning Membership Interests,
including any Substitute Members and Additional Members, with each Member being
referred to, individually, AS A "MEMBER."
2.33 "MEMBERSHIP INTEREST" or "INTEREST" means the entire
ownership interest of a Member in the Company at any particular time, including
without limitation, the Member's Economic Interest, any and all rights to vote
and otherwise participate in the Company's affairs, and the rights to any and
all benefits to which a Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all of the terms and
provisions of this Agreement.
2.34 "NET PROFITS" or "NET LOSSES" means, for each fiscal year or
other period, an amount equal to the Company's taxable income or loss for such
year or period determined in accordance with Code Section 703(a)(for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
7
<PAGE>
2.34.1 Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing Net
Profits or Net Losses pursuant to this Paragraph 2.34 shall be added to such
taxable income or loss;
2.34.2 Any expenditure of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Net Profits or Net Losses pursuant to this
Paragraph 2.34, shall be subtracted from such taxable income or loss;
2.34.3 Gain or loss resulting from any disposition of
Company Assets with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value
of the Company Assets disposed of, notwithstanding that the adjusted tax
basis of such Company Assets differs from its Gross Asset Value;
2.34.4 In lieu of the depreciation, amortization and
other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such
fiscal year;
2.34.5 To the extent an adjustment to the adjusted tax
basis of any asset included in Company Assets pursuant to Code Section
734(b) or Code Section 743(b) is required pursuant to Regulations Section
1.704-1 (b)(2)(iv) (m) (4) to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a
Member's Interest, the amount of such adjustment shall be treated as an item
of gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for the purposes of computing Net
Profits and Net Losses;
2.34.6 If the Gross Asset Value of any Company Asset is
adjusted in accordance with Paragraph 2.23 of this Agreement, the amount of
such adjustment shall be taken into account in the taxable year of such
adjustment as gain or loss from the disposition of such asset for purposes
of computing Net Profits or Net Losses; and
2.34.7 Notwithstanding any other provision of this
Paragraph 2.33, any items that are specially allocated pursuant to Paragraph
5.2 hereof shall not be taken into account in computing Net Profits or Net
Losses.
2.35 "NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Sections 1.704-2(b)(1) and 1.704-2(c).
2.36 "NONRECOURSE LIABILITY" has the meaning set forth in
Regulations Sections 1.704-2(b)(3) and 1.752-1(a)(2).
2.37 "NON-TRANSFERRING MEMBERS" means, in the event an Offer by
Transferor is made, all Members other than the Member making such Offer by
Transferor.
2.38 "OFFERER" is defined in Paragraph 7.10.1
2.39 "OFFER" is defined in Paragraph 7.10.1.
2.40 "OFFER BY TRANSFEROR" is defined in Paragraph 7.9.
8
<PAGE>
2.41 "OPERATING CASH EXPENSES" means, with respect to any fiscal
period, the amount of cash disbursed in the Ordinary Course during the period,
including without limitation, all cash expenses, such as advertising, promotion,
property management, insurance premiums, taxes, utilities, repair, maintenance,
legal, accounting, bookkeeping, computing, equipment use, travel on Company
business, telephone expenses and salaries, and direct expenses of Company
employees (if any) and agents while engaged in Company business. Operating Cash
Expenses shall include fees paid by the Company to any Member or any Affiliate
thereof permitted by this Agreement, and the actual cost of goods, materials and
administrative services used for or by the Company, whether incurred by any
Member, any Affiliate thereof or any non-Affiliate in performing functions set
forth in this Agreement reasonably requiring the use of such goods, materials or
administrative services. Operating Cash Expenses shall not include expenditures
paid from Reserves.
2.42 "ORDINARY COURSE" shall mean the ordinary course of business
of the Business.
2.43 "PERCENTAGE INTEREST" means, with respect to each Member,
the percentage set forth opposite such Member's name on Exhibit A. attached
hereto as it may be modified or supplemented from time to time pursuant to the
provisions of this Agreement.
2.44 "PERSON" means and includes an individual, a corporation, a
general or limited partnership, a limited liability company, a trust, an
unincorporated organization, a government or any department or agency thereof,
or any entity similar to any of the foregoing.
2.45 "RECOURSE LIABILITY" has the meaning set forth in
Regulations Section 1.752-1(a)(1).
2.46 "REGULATIONS" means temporary and final Treasury Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding Treasury Regulations).
2.47 "REGULATORY ALLOCATIONS" is defined in Paragraph 5.2.8.
2.48 "REPRESENTATIVE" is defined in Paragraph 6.1.2.
2.49 "RESERVES" means funds set aside or amounts allocated to
reserves that shall be maintained in amounts deemed sufficient by a Majority in
Interest for working capital, to pay taxes, insurance, debt service, and other
costs or expenses incident to the conduct of business by the Company as
contemplated hereunder.
2.50 "RESPONSIBLE PARTY" is defined in Paragraph 6.5.5.
2.51 "SUBSTITUTE MEMBER" means any Person (a) to whom a Member
(or assignee thereof) Transfers all or any part of its Interest and (b) which
has been admitted to the Company as a Substitute Member pursuant to Paragraph
7.6.
2.52 "SUMMIT CARE" means Summit Care Corporation, a California
corporation.
2.53 "SUPERMAJORITY IN INTEREST" means Members holding, in the
aggregate, sixty-six percent (66%) or more of the Percentage Interests held by
all Members of the Company. Until such time as there are members in addition to
APS and SCPI, "Supermajority in Interest" shall mean 'Majority in Interest."
9
<PAGE>
2.54 "TERMINATING CAPITAL TRANSACTION" means any sale or other
disposition of all or substantially all of the assets of the Company or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the Company Assets.
2.55 "TERMINATION PAYMENT" is defined in Paragraph 7.5.
2.56 "TRANSFER" means, with respect to any interest in the
Company, a sale, conveyance, exchange, assignment, pledge, encumbrance, gift,
bequest, hypothecation or other transfer or disposition by any other means,
whether for value or no value and whether voluntary or involuntary (including,
without limitation, by operation of law), or an agreement to do any of the
foregoing.
2.57 "TRANSFEREE" is defined in Paragraph 7.9.
2.58 "TRANSFEROR" is defined in Paragraph 7.9.
2.59 "UNAFFECTED MEMBERS" means, in the event of a Fundamental
change, all Members other than the Affected Member.
ARTICLE 3
CAPITAL: CAPITAL ACCOUNTS AND MEMBERS
3.1 INITIAL CAPITAL CONTRIBUTIONS OF MEMBERS. The names,
addresses, initial Capital Contributions and Percentage Interests of the Members
are set forth on Exhibit A attached hereto and incorporated herein. All Members
acknowledge and agree that the initial Capital Contributions set forth in
Exhibit A represent the amount of money and the Gross Asset Value of all
property (other than money) initially contributed by the Members.
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS BY MEMBERS.
3.2.1 Except as provided in Paragraphs 3.2.2 and 3.2.3,
no Member shall be permitted or required to make any additional Capital
Contributions to the Company.
3.2.2 If from time to time the Company requires
additional capital or has capital inadequate to pay its liabilities, each as
determined by a Majority in Interest, then the Members constituting such
Majority in Interest shall deliver a notice to each other Member specifying
the aggregate amount of the additional Capital Contribution required, a date
not earlier than thirty (30) days from the date of such notice prior to
which such additional Capital Contribution shall be made, and any other
terms and conditions relating to such additional Capital Contribution. Upon
receipt of such notice, each Member, in its discretion, shall thereafter be
required to make additional Capital Contributions, on a date not later than
the date set forth in the notice, on a pro rata basis in accordance with its
respective Percentage Interests pursuant to such terms and conditions as are
set forth in the notice. The sole remedy against a Member for failure to
make the additional Capital Contribution approved by a Majority in Interest
under this Paragraph 3.2.2 shall be the reduction of such Member's
Percentage Interest as provided in Paragraph 3.2.3.
3.2.3
(a) If any Member fails to make its proportionate
share of an additional Capital Contribution approved by a Majority in
Interest as required under Paragraph 3.2.2, such
10
<PAGE>
Member's Percentage Interest shall be reduced to that percentage arrived at
by dividing the actual Capital Contributions made by such Member by the
total Capital Contributions made by all Members (including additional
Capital Contributions), and there shall be a corresponding increase to the
Percentage Interest of the Members making such additional Capital
Contributions.
(b) In the event that any Member fails to make
its proportionate share of an additional Capital Contribution approved by a
Majority in Interest as required under Paragraph 3.2.2, and such failure
shall continue for a period of thirty (30) days, the Members making such
additional Capital Contribution shall at any time thereafter that such
Capital Contribution has not been paid have the right to contribute (pro
rata in accordance with the Percentage Interests held by those electing to
so contribute) the delinquent Member's share of the additional Capital
Contribution. In the event of such contribution by one or more Members
making such additional Capital Contribution, the Percentage Interest of each
such Member making such Additional Capital Contribution shall be increased
to that percentage arrived at by dividing the sum of the actual Capital
Contributions (including additional Capital Contributions) made by such
Member on its own behalf and one hundred fifty percent (150%) of the total
Capital Contributions made by such Member on behalf of the Member not making
such Additional Capital Contribution, by the total Capital Contribution made
by all Members. The Percentage Interest of the Member not making such
additional Capital Contribution shall be correspondingly decreased.
(c) In the event that a Member's Percentage
Interest is diluted pursuant to this Paragraph 3.2.3, the Tax Matters
Partner shall prepare a revised Exhibit A reflecting the adjusted Percentage
Interests of the Members.
3.3 CAPITAL ACCOUNTS. A Capital Account shall be established and
maintained for each Member in accordance with the terms of this Agreement.
3.4 ADDITIONAL MEMBERS. Following formation of the Company, the
Members may, upon the written consent of a Majority in Interest, issue interests
in the Company directly from the Company, and admit one or more recipients of
such interests as additional Members ("ADDITIONAL MEMBERS") from time to time,
on such terms and conditions and for such Capital Contributions, if any, as a
Majority in Interest may determine. As a condition to being admitted to the
Company, each Additional Member shall execute an agreement to be bound by the
terms and conditions of this Agreement.
3.5 MEMBER CAPITAL. Except as otherwise provided in this
Agreement or with the prior written consent of all of the Members: (a) no Member
shall demand or be entitled to receive a return of or interest on its Capital
Contributions or Capital Account, (b) no Member shall withdraw any portion of
its Capital Contributions or receive any distributions from the Company as a
return of capital on account of such Capital Contributions, and (c) the Company
shall not redeem or repurchase the Interest of any Member.
3.6 MEMBER LOANS. No Member shall be required or permitted to
make any loans or otherwise lend any funds to the Company, except with the
consent of a Majority in Interest. No loans made by any Member to the Company
shall have any effect on such Member's Percentage Interest, such loans
representing a debt of the Company payable or collectible solely from the assets
of the Company in accordance with the terms and conditions upon which such loans
were made.
3.7 LIABILITY OF MEMBERS. Except as otherwise required by any
non-waivable provision of the Act or other applicable law: (a) no Member shall
be personally liable in any manner whatsoever
11
<PAGE>
for any debt, liability or other obligation of the Company, whether such debt,
liability or other obligation arises in contract, tort, or otherwise; and (b) no
Member shall in any event have any liability whatsoever in excess of (i) the
amount of its Capital Contributions, (ii) its share of any assets and
undistributed profits of the Company, (iii) the amount of any unconditional
obligation of such Member to make additional Capital Contributions to the
Company pursuant to this Agreement, and (iv) the amount of any wrongful
distribution to such Member, if, and only to the extent, such Member has actual
knowledge (at the time of the distribution) that such distribution is made in
violation of Section 18-607 of the Act.
ARTICLE 4
DISTRIBUTIONS
4.1 Distributions of Cash Available for Distribution.
4.1.1 Except as otherwise provided in Article 8, Cash
Available for Distribution shall be distributed to the Members only at such
times as may be determined by a Majority in Interest.
4.1.2 Subject to Article 8 hereof, all distributions of
Cash Available for Distribution shall be distributed to the Members pro rata
in accordance with their respective Percentage Interests.
4.1.3 Notwithstanding anything to the contrary contained
herein, the Company shall distribute to APS the amount of One Million Five
Hundred Thousand Dollars ($1,500,000) in immediately available funds on the
date that the Certificate is filed with the Office of the Delaware Secretary
of State.
4.2 Distributions Upon Liquidation. Distributions made in
conjunction with the final liquidation of the Company, including, without
limitation, the net proceeds of a Terminating Capital Transaction, shall be
applied or distributed as provided in Article 8 hereof.
4.3 Withholding. The Company may withhold distributions or
portions thereof if it is required to do so by any applicable rule, regulation,
or law, and each Member hereby authorizes the Company to withhold from or pay on
behalf of or with respect to such Member any amount of federal, state, local or
foreign taxes that a Majority in Interest determines that the Company is
required to withhold or pay with respect to any amount distributable or
allocable to such Member pursuant to this Agreement. Any amount paid on behalf
of or with respect to a Member pursuant to this Paragraph 4.3 shall constitute a
loan by the Company to such Member, which loan shall be repaid by such Member
within fifteen (15) days after notice from the Company that such payment must be
made unless: (i) the Company withholds such payment from a distribution which
would otherwise be made to the Member or (ii) a Majority in Interest determines
that such payment may be satisfied out of Cash Available For Distribution which
would, but for such payment, be distributed to the Member. Any amounts withheld
pursuant to this Paragraph 4.3 shall be treated as having been distributed to
such Member. Each Member hereby unconditionally and irrevocably grants to the
Company a security interest in such Member's Interest to secure such Member's
obligation to pay to the Company any amounts required to be paid pursuant to
this Paragraph 4.3. In the event that a Member fails to pay any amounts owed to
the Company pursuant to this Paragraph 4.3 when due, the remaining Members may,
in their respective sole and absolute discretion, elect to make the payment to
the Company on behalf of such defaulting Member, and in such event shall be
deemed to have loaned such amount to such defaulting Member and shall succeed to
all rights and remedies of the Company as against such defaulting Member
(including, without limitation, the right to receive distributions). Any amounts
payable by a Member hereunder shall bear
12
<PAGE>
interest at a rate equal to two percent (2%) above the "prime rate," as
announced in the Wall Street Journal from time to time, or the successor to such
rate if no longer published, compounded annually from the date such amount is
due (i.e., fifteen (15) days after demand) until such amount is paid in full.
Each Member shall take such actions as the Company shall request in order to
perfect or enforce the security interest created hereunder. A Member's
obligations hereunder shall survive the dissolution, liquidation, or winding up
of the Company.
4.4 Distributions in Kind. No right is given to any Member to
demand or receive property other than cash as provided in this Agreement. The
Members may, upon the written consent of a Majority in Interest, cause the
Company to make a distribution in kind of Company Assets to the Members, and
such Company Assets shall be distributed in such a fashion as to ensure that the
fair market value thereof is distributed and allocated in accordance with this
Article 4 and Articles 5 and 8 hereof; provided, however, that no Member may be
compelled to accept a distribution consisting, in whole or in part, of any
Company Assets in kind unless the ratio that the fair market value of such
distribution in kind bears to such Member's total distribution does not exceed
the ratio that the fair market value of similar distributions in kind bear to
the total distributions of other Members receiving distributions concurrently
therewith (if any), except upon a dissolution and winding up of the Company.
4.5 Limitations on Distributions. Notwithstanding any provision
to the contrary contained in this Agreement, neither the Company nor any Member,
on behalf of the Company, shall knowingly make a distribution to any Member or
the holder of any Economic Interest on account of its Membership Interest or
Economic Interest (as applicable) in violation of Section 18-607 of the Act.
ARTICLE 5
ALLOCATIONS OF NET PROFITS AND NET LOSSES
5.1 General Allocation of Net Profits and Losses.
5.1.1 Net Profits and Net Losses shall be determined and
allocated with respect to each fiscal year of the Company as of the end of
such fiscal year. Subject to the other provisions of this Agreement, an
allocation to a Member of a share of Net Profits or Net Losses shall be
treated as an allocation of the same share of each item of income, gain,
loss or deduction that is taken into account in computing Net Profits or Net
Losses.
5.1.2 Subject to the other provisions of this Article 5,
Net Profits, Net Losses and any other items of income, gain, loss and
deduction for any fiscal year shall be allocated in proportion to the
Members' respective Percentage Interests.
5.2 Regulatory Allocations. Notwithstanding the any other
provision of this Article 5, the following special allocations shall be made in
the following order of priority:
5.2.1 If there is a net decrease in Company Minimum Gain
during a Company taxable year, then each Member shall be allocated items of
Company income and gain for such taxable year (and, if necessary, for
subsequent years) in an amount equal to such Member's share of the net
decrease in Company Minimum Gain, determined in accordance with Regulations
Section 1.704-2(g)(2). Allocations made pursuant to the previous sentence
shall be made in proportion to the amounts required to be allocated to each
Member pursuant thereto. This Paragraph 5.2.1 is
13
<PAGE>
intended to comply with the minimum gain chargeback requirement of
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
5.2.2 If there is a net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt during any Company taxable year,
each Member who has a share of the Member Minimum Gain attributable to such
Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain
for such taxable year (and, if necessary, subsequent years) in an amount
equal to such Member's share of the net decrease in Member Nonrecourse Debt,
determined in a manner consistent with the provisions of Regulations Section
1.704-(i)(4). Allocations made pursuant to the previous sentence shall be
made in proportion to the amounts required to be allocated to each Member
pursuant thereto. This Paragraph 5.2.2 is intended to comply with the
partner nonrecourse debt minimum gain chargeback requirement of Regulations
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
5.2.3 If any Members unexpectedly receive an adjustment,
allocation, or distribution of the type contemplated by Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of income and gain shall be
allocated to all such Members (in proportion to the amounts of their
respective Adjusted Capital Account Deficits) in an amount and manner
sufficient to eliminate, to the extent required by the Regulation, the
Adjusted Capital Account Deficit of such Members as quickly as possible. It
is intended that this Paragraph 5.2.3 qualify and be construed as a
"qualified income offset" within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(d).
5.2.4 If the allocation of Net Loss to a Member as
provided in Paragraph 5.1 hereof would create or increase an Adjusted
Capital Account Deficit, there shall be allocated to such Member only that
amount of Net Loss as will not create or increase an Adjusted Capital
Account Deficit. The Net Loss that would, absent the application of the
preceding sentence, otherwise be allocated to such Member shall be allocated
to the other Members in accordance with their relative Percentage Interests,
subject to the limitations of this Paragraph 5.2.4.
5.2.5 To the extent that an adjustment to the adjusted
tax basis of any Company Asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of its Interest, the amount
of such adjustment to the Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company
in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to
the Members to whom such distribution was made in the event that Regulations
Section 1.704-1(b)(2)(iv)(m)(4) applies.
5.2.6 The Nonrecourse Deductions for each taxable year of
the Company shall be allocated to the Members in proportion to their
Percentage Interests.
5.2.7 The Member Nonrecourse Deductions shall be
allocated each year to the Member that bears the economic risk of loss
(within the meaning of Regulations Section 1.752-2) for the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(1).
14
<PAGE>
5.2.8 The allocations set forth in Paragraphs 5.2.1,
5.2.2, 5.2.3, 5.2.4, 5.2.5, 5.2.6 and 5.2.7 hereof (the "REGULATORY
ALLOCATIONS") are intended to comply with certain requirements of
Regulations Sections 1.704-1(b) and 1.704-2(i). Notwithstanding the
provisions of Paragraph 5.1.2, the Regulatory Allocations shall be taken
into account in allocating other items of income, gain, loss and deduction
among the Members so that, to the extent possible, the net amount of such
allocations of other items and the Regulatory Allocations to each Member
shall be equal to the net amount that would have been allocated to each such
Member if the Regulatory Allocations had not occurred. In the event that the
Code or any Regulations require allocations of items of income, gain, loss,
deduction or credit different from those set forth in this Article 5, the
Company is hereby authorized to make new allocations in reliance on the Code
and such Regulations, provided that such new allocations shall be subject to
the prior written approval of a Majority in Interest. Furthermore, to the
extent permitted by the Code or Regulations, any such new allocations shall
be considered Regulatory Allocations subject to this Paragraph 5.2.8.
5.3 TAX ALLOCATIONS.
5.3.1 Except as provided in Paragraph 5.3.2 hereof, for
income tax purposes under the Code and the Regulations each Company item of
income, gain, loss and deduction shall be allocated between the Members as
its correlative item of "book" income, gain, loss or deduction is allocated
pursuant to this Article 5.
5.3.2 Tax items with respect to Company Assets that are
contributed to the Company with a Gross Asset Value that varies from its
basis in the hands of the contributing Member immediately preceding the date
of contribution shall be allocated between the Members for income tax
purposes pursuant to Regulations promulgated under Code Section 704(c) so as
to take into account such variation. The Company shall account for such
variation under any method approved under Code Section 704(c) and the
applicable Regulations as chosen by a Majority in Interest including,
without limitation, the 'traditional method" as described in Regulations
Section 1.704-3(b). If the Gross Asset Value of any Company Asset is
adjusted pursuant to Paragraph 2.23, subsequent allocations of income, gain,
loss and deduction with respect to such Company Asset shall take account of
any variation between the adjusted basis of such Company Asset for federal
income tax purposes and its Gross Asset Value in the same manner as under
Code Section 704(c) and the Regulations promulgated thereunder under any
method approved under Code Section 704(c) and the applicable Regulations as
chosen by a Majority in Interest. Allocations pursuant to this Paragraph
5.3.2 are solely for purposes of federal, state and local taxes and shall
not affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Net Profits, Net Losses and any other items or
distributions pursuant to any provision of this Agreement.
5.4 OTHER PROVISIONS.
5.4.1 For any fiscal year during which any part of a
Membership Interest or Economic Interest is transferred between the Members
or to another Person, the portion of the Net Profits, Net Losses and other
items of income, gain, loss, deduction and credit that are allocable with
respect to such part of a Membership Interest or Economic Interest shall be
apportioned between the transferor and the transferee under any method
allowed pursuant to Section 706 of the Code and the applicable Regulations
as determined by a Majority in Interest.
15
<PAGE>
5.4.2 For purposes of determining a Member's proportional
share of the Companys' "excess nonrecourse liabilities" within the meaning
of Regulations Section 1.752-3(a)(3), each Member's interest in Net Profits
shall be such Member's Percentage Interest.
5.4.3 The Members acknowledge and are aware of the income
tax consequences of the allocations made by this Article 5 and hereby agree
to be bound by the provisions of this Article 5 in reporting their shares of
Net Profits, Net Losses and other items of income, gain, loss, deduction and
credit for federal, state and local income tax purposes.
ARTICLE 6
OPERATIONS
6.1 MANAGEMENT.
6.1.1 The Company shall be a member-managed limited liability
company within the meaning of the Act. All Members shall be entitled to
participate in the management and control of the day-to-day operation and
business affairs of the Company. Each Member shall have the authority to
bind the Company, and, except as otherwise provided herein, shall have the
power, on behalf of the Company, to do all things necessary or convenient to
carry out the business and affairs of the Company. Notwithstanding anything
to the contrary contained herein, any action taken by any Member on behalf
of the Company without the requisite approval of the other Members as
required herein, shall constitute a breach of this Agreement by such Member.
6.1.2 Each of APS and SCPI is a duly organized and validly
existing corporation, acting by and through its respective Board of
Directors and elected and authorized officers. Each of APS and SCPI may
delegate a single officer to serve as its representative with respect to the
matters and affairs of the Company (each, a "Representative" and together,
"Representatives"). Each Representative shall be provided with copies of any
and all papers, documents and correspondences to or from the Company,
including, without limitation, financial statements, balance sheets,
contracts, reports, filings, tax returns, legal notices and notices from any
governmental authority or agency. As its initial Representative, SCPI
designates Jesse Martinez. APS designates Terry Davis as its initial
Representative.
6.1.3 Subject to Paragraph 6.1.l and the limitations set forth
in Paragraph 6.1.5,and except as otherwise expressly provided in this
Agreement, all actions by or on behalf of the Company may be taken upon the
prior written approval of a Majority in Interest. By way of illustration and
not by way of limitation, and subject to the limitations set forth in the
preceding sentence, the Company shall have the power and authority from time
to time, upon the prior written approval of a Majority in Interest, to do
the following:
(a) to oversee the operations of the Business and to manage
and maintain all personal and real property in which the
Company has an interest;
(b) to incur expenditures on behalf of the Company in
connection with the operation of the Business;
(c) to employ and dismiss from employment employees, agents
and consultants of the Business in the Ordinary Course;
16
<PAGE>
(d) to enter into, execute, amend, supplement,
acknowledge and deliver contracts, agreements,
leases or other instruments in connection with
the operation of the Business;
(e) to establish and maintain one or more bank
accounts for the Company in such bank or banks
having assets of at least Twenty-five Million
Dollars ($25,000,000);
(f) to the extent that funds of the Company are
available, to pay expenses, debts and
obligations of the Company; and
(g) to perform all normal business functions, and
otherwise operate and manage the business and
affairs of the Company, in accordance with and
as limited by this Agreement.
6.1.4 The Company may, from time to time, hire such employees
as are deemed necessary by the Members for the efficient operation of
the Company's day-to-day business operations, which employees shall be
granted such powers and authority as determined by the Members.
6.1.5 Notwithstanding the provisions of Paragraphs 6.1.2,
6.1.3 and 6.1.4 or any other provision of this Agreement (but subject to
Paragraph 6.1.1) the Company may not take any of the following actions
without the written consent of a Supermajority in Interest:
(a) approve any Terminating Capital Transaction;
(b) sell, mortgage, encumber, pledge as security for
borrowing, lease or otherwise transfer or
dispose of (i) the Business or any portion
thereof or (ii) any of the assets of the Company
or the Business except in the Ordinary Course;
(c) incur any indebtedness other than trade
indebtedness to vendors and suppliers in the
Ordinary Course;
(d) employ or compensate any Person in connection
with the business of the Company, except in the
Ordinary Course;
(e) lend money or give credit on behalf of the
Company or release or discharge any debt or
liability owing to the Company, except in the
Ordinary Course;
(f) cause the Company to become a surety, guarantor
or endorser for any Person;
(g) enter into, amend or otherwise modify any
agreement, oral or written, including without
limitation any employment agreement, consulting
agreement or other similar agreement, on behalf
of the Company with any Member or any Affiliate
of any Member, and including, without
limitation, this Agreement or the Certificate;
or
17
<PAGE>
(h) participate in a reorganization, merger or
consolidation with one or more entities in which
the Company is not the surviving entity, or if
Company is the surviving entity, if the
ownership of fifty percent (50%) or more of its
membership interest is held by entities other
than the Company, or the acquisition of
beneficial ownership of fifty percent (50%) or
more of the voting stock or other ownership
interest in any Member (or, in the case of SCPI,
of either SCPI or Summit Care) by any person or
entity not currently holding fifty percent (50%)
or more of such interest.
6.2 RELIANCE BY THIRD PARTIES. Any Person dealing with the Company
or any Member may rely upon a certificate signed by any Member as to:
(a) the identity of any Member of the Company;
(b) the existence or non-existence of any fact or
facts which constitute a condition precedent to
acts by a Member or in any other manner germane
to the affairs of the Company;
(c) the Persons who are authorized to execute and
deliver any instrument or document for or on
behalf of the Company; or
(d) any act or failure to act by the Company or as
to any other matter whatsoever involving the
Company or any Member.
6.3 COMPENSATION.
6.3.1 Except for the reimbursements provided for in Paragraph
6.3.2, no Member shall be entitled to compensation for actions taken on
behalf of the Company or in connection with this Agreement.
6.3.2 Subject to the approval of a Majority in Interest, to be
obtained on a monthly basis, to the extent not otherwise provided for in any
agreement contemplated in Paragraph 6.3.1, each Member shall be entitled to
reimbursement on a monthly basis from the Company for all out-of-pocket
costs and expenses incurred by it, in its reasonable discretion, for or on
behalf of the Company.
6.3.3 Compensation for the Representatives and any office
created under Paragraph 6.1.3 shall be determined by a Supermajority in
Interest.
6.4 RECORDS AND REPORTS.
6.4.1 The Members shall cause to be kept, at the principal
place of business of the Company, or at such other location as a Majority in
Interest shall reasonably deem appropriate, full and proper ledgers, other
books of account, and records of all receipts and disbursements, other
financial activities, and the internal affairs of the Company for at least
the current and past four fiscal years.
6.4.2 The Members shall also cause to be sent to each Member
of the Company, the following:
18
<PAGE>
(a) within ninety (90) days following the end of
each fiscal year of the Company, a report that
shall include all necessary information required
by the Members for preparation of their federal,
state and local income or franchise tax or
information returns, including each Member's pro
rata share of Net Profits, Net Losses and any
other items of income, gain, loss and deduction
for such fiscal year; and
(b) a copy of the Company's federal, state and local
income tax or information returns for each
fiscal year, concurrent with the filing of such
returns.
6.4.3 Members (personally or through an authorized
representative) may, for purposes reasonably related to their Interests,
examine and copy (at their own cost and expense) the books and records of
the Company at all reasonable business hours.
6.5 INDEMNIFICATION AND LIABILITY OF THE MEMBERS.
6.5.1 The Company shall indemnify and hold harmless each
Member, its Affiliates, and subsidiaries, and all officers, directors,
employees, shareholders and agents of any of the foregoing (individually, an
"INDEMNITEE") to the full extent permitted by law from and against any and
all losses, claims, demands, costs, damages, liabilities, expenses of any
nature (including attorneys' fees and disbursements), judgments, fines,
settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or
investigative, in which the Indemnitee may be involved, or threatened to be
involved as a party or otherwise, relating to the performance or
nonperformance of any act concerning the activities of the Company, if (i)
the Indemnitee acted in good faith and in a manner he believed to be in, or
not contrary to, the best interests of the Company, and (ii) the
Indemnitee's conduct did not constitute gross negligence or willful
misconduct. The termination of an action, suit or proceeding by judgment,
order, settlement, or upon a plea of nolo contendere or its equivalent,
shall not, in and of itself, create a presumption or otherwise constitute
evidence that the Indemnitee acted in a manner contrary to that specified in
clauses (i) or (ii) above.
6.5.2 Any indemnification provided hereunder shall be
satisfied solely out of the assets of the Company, as an expense of the
Company. No Member shall be subject to personal liability by reason of these
indemnification provisions.
6.5.3 The provisions of this Paragraph 6.5 are for the benefit
of the Indemnitees and shall not be deemed to create any rights for the
benefit of any other Person.
6.5.4 Neither a Member, nor the subsidiaries nor Affiliates of
any Member nor the officers, directors, employees or agents of any of the
foregoing shall be liable to the Company or to any other Member for any
losses sustained or liabilities incurred as a result of any act or omission
of any Member or any such other Person if (i) the act or failure to act of
the Member or such other Person was in good faith and in a manner he
believed to be in, or not contrary to, the best interests of the Company,
and (ii) the conduct of the Member or such other Person did not constitute
gross negligence or willful misconduct.
6.5.5 To the extent that a Member, or any Affiliate or
subsidiary of any Member, or any officer, director, employee or agent of any
of the foregoing (each, a "RESPONSIBLE PARTY")
19
<PAGE>
has, at law or in equity, duties (including, without limitation, fiduciary
duties) to the Company, or to any other Member or other Person bound by the
terms of this Agreement, such Responsible Parties acting in accordance with
this Agreement shall not be liable to the Company, any Member, or any such
other Person for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they
restrict the duties of a Responsible Party otherwise existing at law or in
equity, are agreed by all parties hereto to replace such other duties to the
greatest extent permitted under applicable law.
6.5.6 Whenever a Responsible Party is required or permitted to
make a decision, take or approve an action, or omit to do any of the
foregoing: (a) in its discretion, under a similar grant of authority or
latitude, or without an express standard of behavior (including, without
limitation, standards such as "reasonable" or "good faith"), then such
Responsible Party shall be entitled to consider only such interests and
factors, including its own, as it desires, and shall have no duty or
obligation to consider any other interests or factors whatsoever, or (b)
with an express standard of behavior (including, without limitation,
standards such as "reasonable" or "good faith"), then such Responsible Party
shall comply with such express standard but shall not be subject to any
other, different or additional standard imposed by this Agreement or
otherwise applicable law.
6.6 COVENANT NOT TO COMPETE. No Member (for the purposes of this
Paragraph 6.6, the term "Member" shall include Summit Care) shall (and each
Member shall cause each of its officers, directors, partners, shareholders, and
owners not to), directly or indirectly, (i) engage in a business concerned in
whole or part with providing pharmacy services in competition with the Business
of the Company in the County of Travis, State of Texas, or (ii) be or become
interested in any Person engaged in a business concerned in whole or part with
providing pharmacy services in competition with the Business of the Company in
the County of Travis, State of Texas as a partner, shareholder, principal,
trustee, employee, consultant or in any other relationship or capacity. Members
agree to maintain in confidence, and not to disclose to any third party, any
ideas, methods, developments, inventions, improvements and business plans and
information which are the confidential information of the Company. In the event
the agreement in this Paragraph 6.6 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over too great a geographical area or by reason of its
being too extensive in any other respect, it shall be interpreted to extend only
over the maximum period of time for which it may be enforceable and/or over the
maximum geographical area as to which it may be enforceable and/or to the
maximum extent in all other respects as to which it may be enforceable, all as
determined by such court in such action.
Members acknowledge that a breach of the covenants contained in this
Paragraph 6.6 will cause irreparable damage to the Company, the exact amount of
which will be difficult to ascertain, and that the remedies at law for any such
breach will be inadequate. Accordingly, the Members agree that if any Member
breaches the covenant contained in this Paragraph 6.6, in addition to any other
remedy which may be available at law or in equity, the Company shall be entitled
to specific performance and injunctive relief, without posting bond or other
security.
Except as set forth below, the provisions of this Paragraph 6.6 shall
survive for so long as the Company is in existence and no longer.
Notwithstanding the preceding sentence, the provisions of this Paragraph 6.6
shall terminate and cease to apply (i) immediately upon the withdrawal of either
APS or SCPI as a Member with the consent of the other, as contemplated by the
second sentence of Paragraph 7.4 hereof and (ii) on November 30, 1998 in the
event that either APS or SCPI withdraws from the Company (A) prior to November
30, 1998 and (B) without the consent of the other party; provided, however, that
in the event either APS or SCPI exercises its buy/sell right under Paragraph
7.10 hereof,
20
<PAGE>
the provisions of the first two paragraphs of this Paragraph 6.6 shall apply to
the selling party only (as though the buying party were the Company) and shall
terminate on the date that is the second (2nd) anniversary of the closing of the
sale contemplated by Paragraph 7.10 hereof
6.7 SERVICES. Subject to the other provisions of this Article VI,
APS shall provide to the Company without charge administrative support services
reasonably requested by the Company to maintain operations in the ordinary
course of business, including, without limitation, payroll, accounting and risk
management services.
ARTICLE 7
INTERESTS AND TRANSFERS OF INTERESTS
7.1 TRANSFERS. No Member or Assignee may Transfer all or any portion
of its Membership Interest or Economic Interest (or beneficial interest therein)
without the prior written consent of a Majority in Interest. Any purported
Transfer which is not in accordance with this Agreement shall be null and void.
7.2 FURTHER RESTRICTIONS. Notwithstanding any contrary provision in
this Agreement, any otherwise permitted Transfer shall be null and void if:
(a) such Transfer would cause a technical termination of the
Company for federal or state, if applicable, income tax purposes;
(b) such Transfer would, in the opinion of counsel to the
Company, cause the Company to cease to be classified as a partnership for
federal or state income tax purposes;
(c) such Transfer requires the registration of such Interest
to be transferred pursuant to any applicable federal or state securities
laws;
(d) such Transfer causes the Company to become a "Publicly
Traded Partnership," as such term is defined in Sections 469(k)(2) or
7704(b) of the Code;
(e) such Transfer subjects the Company to regulation under
the Investment Company Act of 1940, the Investment Advisers Act of 1940 or
the Employee Retirement Income Security Act of 1974, each as amended;
(f) such Transfer results in a violation of applicable laws
or any applicable regulation, rule or policy of any federal, state or local
entity;
(g) such Transfer causes the revaluation or reassessment of
the value of any Company Asset resulting in a material amount of federal,
state or local tax liability;
(h) all approvals and authorizations required in connection
with such Transfer have not been obtained;
(i) such Transfer is made to any Person who lacks the legal
right, power or capacity to own such Interest to be transferred; or
21
<PAGE>
(j) the Company does not receive written instruments
(including, without limitation, copies of any instruments of Transfer and
such Assignee's consent to be bound by this Agreement as an Assignee) that
are in a form satisfactory to a Majority in Interest on or prior to the
closing of such Transfer.
7.3 RIGHTS OF ASSIGNEES. Until such time, if any, as a transferee of
any permitted Transfer pursuant to this Article 7 is admitted to the Company as
a Substitute Member pursuant to Paragraph 7.6: (i) such transferee shall be an
Assignee only, and only shall receive, to the extent transferred, the
distributions and allocations of income, gain, loss, deduction, credit, or
similar item to which the Member which transferred its Interest would be
entitled, and (ii) such Assignee shall not be entitled or enabled to exercise
any other rights or powers of a Member, such other rights, including, without
limitation, management and voting rights, remaining with the transferring
Member. In such a case, the transferring Member shall remain a Member even if it
has transferred its entire Economic Interest to one or more Assignees. In the
event any Assignee desires to make a further assignment of any Economic
interest, such Assignee shall be subject to all of the provisions of this
Agreement to the same extent and in the same manner as any Member desiring to
make such an assignment.
7.4 ADMISSIONS AND WITHDRAWALS. No Person shall be admitted to the
Company as a Member except in accordance with Paragraph 3.4 (in the case of
Persons obtaining an interest in the Company directly from the Company) or
Paragraph 7.6 (in the case of transferees in a permitted Transfer of an interest
in the Company from another Person). Except as otherwise specifically set forth
in Paragraph 7.7, no Member shall be entitled to retire or withdraw from being a
Member of the Company without the written consent of a Majority in Interest. Any
purported admission or withdrawal which is not in accordance with this Agreement
shall be null and void.
7.5 PAYMENT UPON WITHDRAWAL OF MEMBER. If any Member withdraws from
the Company with the consent of a Majority in Interest (other than pursuant to
Paragraph 7.7), then such Member automatically shall receive from the Company a
payment equal to the Member's Capital Account balance as adjusted as of the
effective date of the written election of withdrawal (the "TERMINATION
PAYMENT"). The Termination Payment shall be paid on the effective date of the
written election of withdrawal. If any Member attempts to withdraw from the
Company (other than pursuant to Paragraph 7.7) without the consent of a Majority
in Interest, such withdrawing Member shall not be entitled to any Termination
Payment or any other compensation whatsoever in consideration for its terminated
Membership Interest.
7.6 ADMISSION OF ASSIGNEES AS SUBSTITUTE MEMBERS.
7.6.1 An Assignee shall become a Substitute Member only if and
when each of the following conditions are satisfied:
(a) the assignor of the Interest transferred sends
written notice to each Member requesting the
admission of the Assignee as a Substitute Member
and setting forth the name and address of the
Assignee, the Percentage Interest transferred,
and the effective date of the Transfer;
(b) a Majority in Interest consents in writing to
such admission; and
(c) the Members receive from the Assignee (i) such
information concerning the Assignee's financial
capacities and investment experience as may
22
<PAGE>
reasonably be requested by the Members, and (ii)
written instruments (including, without
limitation, copies of any instruments of
Transfer and such Assignee's consent to be bound
by this Agreement as a Substitute Member) that
are in a form satisfactory to the Members.
(d) at the request of a Majority in Interest, an
opinion of counsel to Assignee is delivered,
acceptable to a Majority in Interest, with
respect to the validity, binding effect and
enforceability of the assignment, of this
Agreement against such Assignee and such other
matters as a Majority in Interest shall
reasonably request.
7.6.2 Upon the admission of any Substitute Member, the Tax
Matters Partner shall amend Exhibit A to reflect the name, address and
Percentage Interest, corresponding to such Substitute Member and to
eliminate or adjust, if necessary, the name, address and Percentage Interest
corresponding to the predecessor of such Substitute Member.
7.7 WITHDRAWAL OF MEMBERS. If a Member has transferred all of its
Membership Interest to one or more Assignees, then such Member shall
automatically be deemed withdrawn from the Company, with no further action by
any party required, if and when all such Assignees have been admitted as
Substitute Members in accordance with this Agreement.
7.8 CONVERSION OF MEMBERSHIP INTEREST. Upon the Incapacity of a
Member (and the subsequent continuation of the business of the Company pursuant
to Paragraph 8.2(c), such Incapacitated Member's Membership Interest shall
automatically be converted to an Economic Interest only, and such Incapacitated
Member (or its executor, administrator, trustee or receiver, as applicable)
shall thereafter be deemed an Assignee for all purposes hereunder, with the same
Economic Interest as was held by such Incapacitated Member prior to its
Incapacity, but without any other rights of a Member unless the holder of such
Economic Interest is admitted as a Substitute Member pursuant to Paragraph 7.6.
7.9 RIGHT OF FIRST REFUSAL.
7.9.1 RECEIPT OF BONA FIDE OFFER. If any Member shall receive
a Bona Fide Offer to purchase any or all of its Membership Interest, and it
is willing to accept such Bona Fide Offer, then such Member shall make the
offer described in Paragraph 7.9.2 (the "Offer by Transferor").
7.9.2 OFFER BY TRANSFEROR. The Offer by Transferor shall
consist of a written offer to Transfer all of the Membership Interest
proposed to be Transferred by the transferor (the "Transferor") and shall be
given to the Company and to the remaining Members. The Offer by Transferor
shall include a statement of intention to Transfer and shall disclose all
the terms of the proposed Transfer, including the name and address of the
transferee under the Bona Fide Offer (the "Transferee"), and shall be
accompanied by a copy of the Bona Fide Offer.
7.9.3 ACCEPTANCE OF OFFER BY TRANSFEROR. Within thirty (30)
days after its receipt of the Offer by Transferor, the Company may, at its
option, elect to purchase all of the Membership Interest proposed to be
Transferred. The decision of the Company as to the acceptance or non-
acceptance of said offer shall be determined by a majority in interest of
the Non-Transferring Members. If the Company does not elect to purchase the
Membership Interest proposed to be Transferred pursuant to the Offer by
Transferor, the Company shall, within five (5) business days following
delivery of written notice of its election to the Transferor, or within five
(5) days following
23
<PAGE>
the expiration of the above-described thirty (30)-day period, deliver
written notice of its election to the Non-Transferring Members. The Non-
Transferring Members may, within forty-five (45) days after the receipt of
said notice from the Company, at the Non-Transferring Members' option,
purchase all of the Membership Interests proposed to be Transferred pursuant
to the Offer by Transferor, pro rata in accordance with the Percentage
Interests held by the Members electing to purchase such Membership
Interests. The Non-Transferring Members shall exercise their election to
purchase by giving written notice of such election to the Transferor and to
the Company. In either event, such notice of election shall specify a date
for the closing of the purchase, which shall be not more than thirty (30)
days after the date of such notice. If any consideration to be received by
the Transferor under the Bona Fide Offer is property other than cash, the
time periods for acceptance of the Offer by Transferor by the Company, or
the Non-Transferring Members, and the closing date shall be extended and
shall begin running effective the day after the fair market value of such
consideration is determined in accordance with Paragraph 7.9.4.
7.9.4 PURCHASE PRICE. The purchase price for the Membership
Interest proposed to be Transferred pursuant to the Offer by Transferor
shall in no event exceed the purchase price stated in the Bona Fide Offer.
If any consideration to be received by the Transferor under the Bona Fide
Offer is property other than cash, the value shall be computed on the basis
of the fair market value of such non-cash consideration. Such fair market
value shall be determined by agreement among the Transferor and either the
Non-Transferring Members purchasing such Interest, or the Company, as
applicable, or if they are unable to agree, as determined by the average of
the appraisals of two (2) independent qualified appraisers, one being
selected by the Transferor and the other by the Non-Transferring Members
purchasing such Interest, the cost of such appraisal being shared equally by
Transferor and the Company.
7.9.5 CLOSING OF PURCHASE. The closing of the purchase
contemplated by Paragraph 7.9.3 shall take place at the principal office of
the Company. The Company or the Non-Transferring Members shall have the
option of paying the purchase price on the same terms as the Bona Fide Offer
or as follows: ten percent (10%) down payment in cash at closing and the
balance by a promissory note, payable in twelve (12) equal, quarterly annual
installments of principal, plus interest on the unpaid balance, with the
first installment due ninety (90) days after the closing, and each
successive installment paid on the first (lst) day of every third month
thereafter. The promissory note shall bear interest at a rate equal to two
percent (2%) above the "prime rate," as announced in the Wall Street Journal
from time to time, or the successor to such rate if such rate is no longer
published, and shall provide that: (i) the maker shall have the privilege of
prepaying all or any part thereof, at any time, without penalty; and (ii) a
default in any payment shall cause the remaining unpaid balance to become
due and payable immediately. The promissory note shall be secured by a
pledge of all of the Membership Interests being purchased. If the maker of
the promissory note is the Company, such promissory note shall be personally
endorsed by the remaining Members.
7.9.6 TRANSFER AFTER OFFER. If the Membership Interests are
not purchased by the Company or the Non-Transferring Members as provided in
this Article 7, the Transferor shall, for a period of three (3) months after
the earlier to occur of (i) the date of any written notice given by all Non-
Transferring Members of their election not to purchase such Membership
Interest and (ii) the date on which the period during which the Non-
Transferring Members may elect to purchase such Membership Interest expires,
be free to Transfer the Membership Interests to the Transferee, upon the
terms disclosed in the Offer by Transferor.
7.9.7 PROHIBITED TRANSFERS VOID.
24
<PAGE>
(i) Any purported Transfer in violation of this Agreement
shall be null and void and shall not transfer any interest in, or title
to, the Membership Interests transferred to the purported Transferee.
The Company shall not be required to treat as owner of the Membership
Interests, or to pay distributions to, any Transferee to whom any of
such Membership Interests shall have been purportedly sold or
Transferred.
(ii) In addition, and without in any way intending to
validate, approve or otherwise render a Transfer in violation of this
Agreement other than null and void, the Company first, and the remaining
Members (pro rata in accordance with the Percentage Interests held by
those electing the option to purchase hereinafter described) second,
shall have the option to purchase all or any portion of the Membership
Interests attempted to be transferred to a Transferee in violation of a
restriction on Transfer contained in this Agreement for the price and on
the same terms and conditions described in Paragraphs 7.9.4 and 7.9.5;
provided, however, that the Company and the Non-Transferring Members may
pay the purchase price by delivery of a promissory note representing the
entire purchase price. To exercise this option, the Company must give
the Transferee written notice within thirty (30) days after the Company
is notified of the purported Transfer. In the event the Company does not
elect to exercise this option, the Company shall, within ten (10)
business days following the expiration of the foregoing thirty (30)-day
period, notify the Non-Transferring Members of its election. The Non-
Transferring Members must give the Transferee written notice, within
thirty (30) days following the receipt of notice from the Company, of
their election to purchase all or any portion of the Membership Interest
purportedly held by the Transferee. The Transferee's sale obligation
pursuant to this paragraph may be specifically enforced by the Company
or any Non-Transferring Member.
7.10 BUY AND SELL RIGHTS.
7.10.1 Any Member (the "Offeror") may, at any time, make a buy-
sell offer (the "Offer") to any other Member (the "Offeree") by notifying
the Offeree in writing of the exercise of this right, and stating in such
notice the gross sales price for the Company, as determined by the Offeror
(the "Company Price"), which Company Price shall be used in the calculation
procedures set forth in Paragraph 7.10.2 hereof, and the terms under which
the Offeror is willing either to buy all of the Membership Interest owned by
the Offeree or to sell to the Offeree all of the Membership Interest owned
by the Offeror, with the price and any terms being the same for both the
purchase and the sale. Except as set forth in Paragraph 7.10.2, the Offer
shall not be revocable once the aforesaid notice has been delivered to the
Offeree.
7.10.2 Within thirty (30) days after receipt by the Offeree of
the Offeror's written notice of the Offer, the Offeree shall send the
Offeror a written notice stating whether the Offeree elects (i) to purchase
from the Offeror all of the Offeror's Membership Interest, at the price (as
determined pursuant hereto) and under the terms stated in the Offer, or (ii)
to sell to the Offeror all of the Offeree's Membership Interest at the price
(as determined pursuant hereto) and under the terms stated in the Offer. If
the Offeree shall fail to notify the Offeror whether he elects to buy or
sell within the time period specified above, such failure shall be deemed to
be an election to sell all Membership Interest owned by the Offeree to the
Offeror at the price (as determined pursuant hereto) and under the terms
specified in the Offer. The Offeror shall be entitled to revoke the Offer by
giving the Offeree written notice of the withdrawal prior to the earlier of
(i) the date the Offeree gives the Offeror written notice of his election to
purchase or to sell pursuant to this Paragraph, or (ii) the date on which
the Offeree shall be deemed to have elected to sell his Membership Interest
to
25
<PAGE>
the Offeror. The price payable to the Offeror or the Offeree, as the case
may be, shall be the product of the Company Price and the Percentage
Interest held by the selling Member.
7.10.3 The closing of the sale contemplated by this Paragraph
7.10 shall be held at the principal office of the Company (or at such other
place as the Offeror and the Offeree may in writing agree) no later than
thirty (30) days after the expiration of the notice period specified in
Paragraph 7.10.2. Unless otherwise stated in the Offer, the purchasing
Member shall deliver payment in full in cash for the purchase of the
Membership Interest. A Member selling its Interest pursuant to 7.10.2 hereof
shall deliver all appropriate documents of transfer at closing and shall
convey its Membership Interest to the buying Member, or its nominee, free
and clear of all liens, claims, encumbrances or other charges of any kind
whatsoever. In the event the Membership Interest is conveyed to a nominee of
the buying Member, the admission of such nominee to the Company as a
successor to the selling Member shall occur, and for all purposes shall be
deemed to have occurred immediately prior to the transfer by the selling
Member of its Membership Interest.
7.11 OPTION TO PURCHASE UPON FUNDAMENTAL CHANGE.
7.11.1 In the event of the occurrence of a Fundamental Change
with respect to a Member (the "Affected Member"), the Company shall have the
option to purchase from the Affected Member, and the Affected Member shall
sell to the Company upon the exercise of such option, all of the Membership
Interest owned by the Affected Member. The Company may exercise such option
upon the consent of a majority in interest of the Unaffected Members. If the
Company does not elect to exercise the option provided herein, the
Unaffected Members may, at the option of such Unaffected Members purchase
all Membership Interest of the Affected Member which the Company does not
elect to purchase. Such options shall be exercised by either the Company or
the Unaffected Members by giving written notice to the Affected Member
within ninety (90) days after the receipt of notice to the Company and the
Unaffected Members of the occurrence of such Fundamental Change.
7.11.2 PURCHASE PRICE. The purchase price of the Membership
Interest to be purchased pursuant to Paragraph 7.11.1 shall be the book
value of such Membership Interest, including previous adjustments
contemplated by the definition of Gross Asset Value, as of the last day of
the month preceding the date of the Fundamental Change, as determined by the
regularly employed outside accountant serving the Company at such time, or
if none, by a public accountant selected by the Company and the Affected
Member, or if they are unable to agree, by a public accountant chosen by two
public accountants, one being selected by the Affected Member and one by the
Company. At any time after the date of this Agreement, the Members shall
have the right to agree unanimously upon the value of the Membership
Interest of each Member and determine the purchase price of each Membership
Interest for purposes of Paragraph 7.11.1, in which event, the Tax Matters
Partner shall place the purchase price of each Membership Interest on
Exhibit A attached hereto, which shall be initialed by all of the Members.
The purchase price so determined shall be reviewed by the Members each year
or at any other time determined by all of the Members and shall either be
confirmed or adjusted by the unanimous agreement of all Members. If all
Members are unable to agree with respect to the purchase price of any
Membership Interest, the Tax Matters Partner shall delete such purchase
price from Exhibit A. In the event the Members allow a period of eighteen
(18) months to lapse without either revaluing or confirming such purchase
price or are unable to unanimously agree on the revaluing or confirmation of
such purchase price, the purchase price shall then become the book value of
the Membership Interest as appraised by the Company's
26
<PAGE>
regularly employed outside accountant or such other accountant as may be
selected pursuant to the above-described procedure.
7.11.3 PAYMENT OF PURCHASE PRICE. The purchase price under this
Paragraph 7.11 shall be payable in cash at closing.
7.11.4 CLOSING. The closing of any purchase and sale under
Paragraph 7.11.1 shall take place at the office of the Company at a date
designated by the Company, or the Unaffected Members, as applicable, which
shall not be more than ninety (90) days after the date of determination of
the purchase price of the Membership Interest as set forth in Paragraph
7.11.2.
ARTICLE 8
DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY
8.1 LIMITATIONS. The Company may be dissolved, liquidated, and
terminated only pursuant to the provisions of this Article 8, and the parties
hereto do hereby irrevocably waive any and all other rights they may have to
cause a dissolution of the Company or a sale or partition of any or all of the
Company Assets.
8.2 EXCLUSIVE CAUSES. Notwithstanding the Act, the following and
only the following events shall cause the Company to be dissolved, liquidated,
and terminated:
(a) Any transaction the result of which is the ownership of
one hundred percent (100%) of all the Membership
Interests of the Company by a single Member, unless such
Member elects to continue the business of the Company by
admitting another Member within thirty (30) days
thereafter;
(b) The occurrence of a Terminating Capital Transaction;
(c) The Incapacity of any Member, unless a Majority of
Remaining Members votes to continue the Company within
ninety (90) days following the occurrence of any such
Incapacity;
(e) The written consent of a Majority in Interest;
(f) Judicial dissolution; or
(g) Upon the seventh (7th) anniversary of the date of this
Agreement.
Any dissolution of the Company other than as provided in this Paragraph 8.2
shall be a dissolution in contravention of this Agreement.
8.3 EFFECT OF DISSOLUTION. The dissolution of the Company shall be
effective on the day on which the event occurs giving rise to the dissolution,
but the Company shall not terminate until it has been wound up and its assets
have been distributed as provided in Paragraph 8.5 of this Agreement.
Notwithstanding the dissolution of the Company, prior to the termination of the
Company, the business of the Company and the affairs of the Members, as such,
shall continue to be governed by this Agreement.
27
<PAGE>
8.4 NO CAPITAL CONTRIBUTION UPON DISSOLUTION. Each Member shall look
solely to the assets of the Company, its Capital Contribution thereto, its
Capital Account and its share of Net Profits or Net Losses for all distributions
with respect to the Company, and shall have no recourse therefor (upon
dissolution or otherwise) against any other Member. Accordingly, in the event
the Company is "liquidated" within the meaning of Regulations Section 1.704-
1(b)(2)(H)(g), if any Member has a deficit balance in its Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which the liquidation occurs), then
such Member shall have no obligation to make any Capital Contribution with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other person for any purpose whatsoever.
8.5 LIQUIDATION.
8.5.1 Upon dissolution of the Company, the Members shall
liquidate the assets of the Company, and after allocating (pursuant to
Article 5 of this Agreement) all income, gain, loss and deductions resulting
therefrom, shall apply and distribute the proceeds thereof as follows:
(a) First, to the payment of the obligations of the Company,
to the expenses of liquidation, and to the setting up of
any Reserves for contingencies which a Majority in
Interest may consider necessary.
(b) Thereafter, to the Members in accordance with the
positive balances in the Members' respective Capital
Accounts, determined after taking into account all
Capital Account adjustments for the Company taxable year
during which such liquidation occurs (other than those
made as a result of the distributions set forth in this
Paragraph 8.5.1(b) of this Agreement), by the end of the
taxable year in which such liquidation occurs or, if
later, within 90 days after the date of the liquidation.
8.5.2 Notwithstanding Paragraph 8.5.1 of this Agreement, in
the event that a Majority in Interest determines that an immediate sale of
all or any portion of the Company Assets would cause undue loss to the
Members, in order to avoid such loss to the extent not then prohibited by
the Act, the Members may either defer liquidation of and withhold from
distribution for a reasonable time any Company Assets except those necessary
to satisfy the Company's debts and obligations, or distribute the Company
Assets to the Members in kind.
ARTICLE 9
MISCELLANEOUS
9.1 AMENDMENTS.
9.1.1 Each Additional Member and Substitute Member shall
become a signatory hereto by signing such number of counterpart signature
pages to this Agreement, and such other instruments, in such manner, as the
Members shall determine. By so signing, each Additional Member and
Substitute Member, as the case may be, shall be deemed to have adopted and
to have agreed to be bound by all of the provisions of this Agreement.
28
<PAGE>
9.1.2 Amendments to this Agreement may be made only as set
forth in Paragraph 6.1.15.
9.1.3 In making any amendments, there shall be prepared and
filed by, or for, the Members such documents and certificates as may be
required under the Act and under the laws of any other jurisdiction
applicable to the Company.
9.2 ACCOUNTING AND FISCAL YEAR. Subject to Code Section 448, the
books of the Company shall be kept on such method of accounting for tax and
financial reporting purposes as may be determined by a Majority in Interest. The
fiscal year of the Company shall end on September 30 of each year, or on such
other date permitted under the Code as a Majority in Interest shall determine.
9.3 MEETINGS. At any time, and from time to time, a Majority in
Interest may, but shall not be required to, call meetings of the Members.
Written notice of any such meeting shall be given to all Members not less than
five (5) nor more than forty-five (45) days prior to the date of such meeting.
Each Member may authorize any other Person (whether or not such other Person is
a Member) to act as a proxy for it or on its behalf on all matters in which the
Member is entitled to participate. Each proxy must be signed by the Member or
such Member's attorney-in-fact. All other provisions governing, or otherwise
relating to, the holding of meetings of the Members, shall from time to time be
established by a Majority in Interest.
9.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and fully
supersedes any and all prior or contemporaneous agreements or understandings
between the parties hereto pertaining to the subject matter hereof.
9.5 FURTHER ASSURANCES. Each of the parties hereto does hereby
covenant and agree on behalf of itself, its successors, and its assigns, without
further consideration, to prepare, execute, acknowledge, file, record, publish,
and deliver such other instruments, documents and statements, and to take such
other action as may be required by law or reasonably necessary to effectively
carry out the purposes of this Agreement.
9.6 NOTICES. Any notice, consent, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be (a) delivered personally to the Person or to an officer of
the Person to whom the same is directed, or (b) sent by facsimile or registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows: if to the Company, to the Company at the address set forth in Paragraph
1.3 hereof, or to such other address as the Company may from time to time
specify by notice to the Members; if to a Member, to such Member at the address
set forth in Exhibit A, or to such other address as such Member may from time to
time specify by notice to the Company. Any such notice shall be deemed to be
delivered, given and received for all purposes as of: (i) the date so delivered,
if delivered personally, (ii) upon receipt, if sent by facsimile, or (iii) on
the date of receipt or refusal indicated on the return receipt, if sent by
registered or certified mail, return receipt requested, postage and charges
prepaid and properly addressed.
9.7 TAX MATTERS.
9.7.1 APS shall be designated and shall operate as the "Tax
Matters Partner" (as defined in Code Section 6231).
29
<PAGE>
9.7.2 The Member designated as "Tax Matters Partner" may make
all elections for federal income and all other tax purposes (including,
without limitation, pursuant to Section 754 of the Code) except as expressly
provided otherwise in this Agreement; provided, however, that upon the
reasonable request of any Member transferring its Membership Interest as
permitted hereunder, the Tax Matters Partner, on behalf of the Company,
shall make the election pursuant to Section 754 of the Code requested by
such Member, as permitted by the Code.
9.7.3 Income tax returns of the Company shall be prepared by
the accountant selected by a Majority in Interest. Such income tax returns
shall be prepared at the Company's expense.
9.8 GOVERNING LAW. This Agreement, including its existence, validity,
construction, and operating effect, and the rights of each of the parties
hereto, shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to otherwise governing principles of conflicts
of law.
9.9 ARBITRATION. The parties hereto agree to submit to arbitration
any and all matters in dispute and in controversy among them concerning the
terms and provisions of this Agreement. All such disputes and controversies
shall be resolved, determined and adjudged by the arbitrators, all pursuant to
the rules of the American Arbitration Association. The selection of arbitrators
and the arbitration procedure shall be according to the Rules of the American
Arbitration Association; however, the arbitrators shall have no authority to
grant any relief which is inconsistent with this Paragraph 9.9 or any other
provision of this Agreement.
9.10 CONSTRUCTION. This Agreement shall be construed as if all parties
prepared this Agreement.
9.11 CAPTIONS - PRONOUNS. Any titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the text of
this Agreement. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as appropriate.
9.12 BINDING EFFECT. Except as otherwise expressly provided herein,
this Agreement shall be binding on and inure to the benefit of the Members,
their heirs, executors, administrators, successors and all other Persons
hereafter holding, having or receiving an interest in the Company, whether as
Assignees, Substitute Members or otherwise.
9.13 SEVERABILITY. In the event that any provision of this Agreement
as applied to any party or to any circumstance, shall be adjudged by a court of
competent jurisdiction to be void, unenforceable or inoperative as a matter of
law, then the same shall in no way affect any other provision in this Agreement,
the application of such provision in any other circumstance or with respect to
any other party, or the validity or enforceability of this Agreement as a whole.
9.14 CONFIDENTIALITY. Each Party hereto agrees that the provisions of
this Agreement, all understandings, agreements and other arrangements between
and among the parties, and all other nonpublic information received from or
otherwise relating to, the Company shall be confidential, and shall not be
disclosed or otherwise released to any other Person (other than another party
hereto), without the written consent of a Majority in Interest. The obligations
of the parties hereunder shall not apply to the extent that the disclosure of
information otherwise determined to be confidential is required by applicable
law, provided that, prior to disclosing such confidential information, a party
shall notify the Company
30
<PAGE>
thereof, which notice shall include the basis upon which such party believes the
information is required to be disclosed.
9.15 COUNTERPARTS. This Agreement may be executed in any number of
multiple counterparts, each of which shall be deemed to be an original copy and
all of which shall constitute one agreement, binding on all parties hereto.
9.16 NO REFERRALS. There exists no agreement or understanding between
the Company and any Member, or among any Members, or any affiliates of any
Member, that any Member shall order, refer or purchase goods or services from
the Company, or arrange for the ordering, referring or purchasing of such goods
or services from the Company. Likewise, there exists no agreement or
understanding between the Company and any Member, or among any Members, or any
affiliates of any Member, that the Company shall order, refer or purchase goods
or services from any Member, or arrange for the ordering referring or purchasing
of such goods or services from any Member.
[SIGNATURE PAGE FOLLOWS)
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
AMERICAN PHARMACEUTICAL SERVICES,
INC.
By: /s/ WILLIAM R. KORSLIN
-----------------------------------
William R. Korslin
SUMMIT CARE PHARMACY, INC.
By:____________________________________
--------------------
Its:
------------------------------------
ACKNOWLEDGED AND AGREED THIS ___
DAY OF __________, 1996 FOR THE
PURPOSES OF PARAGRAPH 6.6 HEREOF.
SUMMIT CARE CORPORATION
By:
---------------------------
---------------------------
Its:
---------------------------
S-1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AMERICAN PHARMACEUTICAL SERVICES,
INC.
By:
------------------------------------
William R. Korslin
SUMMIT CARE PHARMACY, INC.
By: /s/ DERWIN L. WILLIAMS
------------------------------------
Derwin L. Williams
Its: Sr. Vice President, Finance
------------------------------------
ACKNOWLEDGED AND AGREED THIS 30th
DAY OF NOVEMBER, 1996 FOR THE
PURPOSES OF PARAGRAPH 6.6 HEREOF.
SUMMIT CARE CORPORATION
By: /s/ DERWIN L. WILLIAMS
----------------------------
Derwin L. Williams
----------------------------
Its: Sr. Vice President, Finance
---------------------------
S-1
<PAGE>
EXHIBIT A
MEMBERS, CAPITAL CONTRIBUTIONS,
AND PERCENTAGE INTERESTS
<TABLE>
<CAPTION>
Purchase Price for
each Membership
Initial Capital Interest (Pursuant Percentage
Member Contribution to Paragraph 7.11) Interest
------ --------------- ------------------- ----------
<S> <C> <C> <C>
American Pharmaceutical Services, Inc. Those assets that American 50%
1771 W. Diehl Road, Suite 210 Pharmaceutical Services, Inc.
Naperville, Illinois 60563 uses in the conduct of its
business of providing drugs,
pharmaceutical supplies and
pharmacy consulting to long term
care facilities in the Austin,
Texas area from the pharmacy
located at 2324 Ridgepoint
Drive, Suite G-1, Austin, Texas
78754 (Gross Asset Value =
$3,000,000 (1)
Summit Care Pharmacy, Inc. $1,500,000 50%
22607 Old Canal Road
Yorba Linda, California 92887
</TABLE>
- ----------
(1) APS's Capital Account will be adjusted in accordance with Paragraph 2.10
hereof to reflect the distribution provided for in Paragraph 4.1.3 hereof.
<PAGE>
SCHEDULE I
STATE OF DELAWARE
CERTIFICATE OF FORMATION
OF
APS-SUMMIT CARE PHARMACY, L.L.C.
FIRST: The name of the limited liability company is:
APS-SUMMIT CARE PHARMACY, L.L.C.
SECOND: Its registered office in the State of Delaware is to be located at:
1209 Orange Street
Wilmington, DE 19801
The county of New Castle and its registered agent at such address is:
The Corporation Trust Company
In Witness Whereof, the undersigned has executed this Certificate of Formation
of APS-SUMMIT CARE PHARMACY, L.L.C. this 27th day of November, 1996.
AMERICAN PHARMACEUTICAL SERVICES,
INC., a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
SUMMIT CARE PHARMACY, INC., a California
corporation
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
===============================================
ASSET CONTRIBUTION AGREEMENT
BY AND BETWEEN
AMERICAN PHARMACEUTICAL SERVICES, INC.,
a Delaware Corporation
AND
APS - SUMMIT CARE PHARMACY, L.L.C.,
a Delaware Limited Liability Company
===============================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ASSET CONTRIBUTION AGREEMENT............................................. 1
RECITALS................................................................. 1
AGREEMENT................................................................ 1
ARTICLE I - CONTRIBUTION OF ASSETS....................................... 1
1.1 Contributed Assets...................................... 1
(a) Leasehold Interests............................... 2
(b) Purchased Contracts............................... 2
(c) Inventories....................................... 2
(d) Personal Property, Fixtures and Equipment......... 2
(e) Governmental Licenses and Permits................. 3
(f) Intangible Assets................................. 3
(g) Names............................................. 3
(h) Goodwill.......................................... 3
(i) Facility Records.................................. 3
(j) Customer Lists.................................... 3
(k) Noncompetition Covenant........................... 3
1.2 Excluded Assets......................................... 3
1.3 Nonassumption of Agreements............................. 4
ARTICLE II - ASSUMED LIABILITIES......................................... 4
2.1 Assumed Liabilities..................................... 4
2.2 Unassumed - Liabilities................................. 4
ARTICLE III - FINANCIAL ARRANGEMENTS AND CLOSING......................... 4
3.1 Asset Value............................................. 4
3.2 Capital Account Balance................................. 5
3.3 Payment to APS.......................................... 5
3.4 Allocation.............................................. 5
3.5 Closing................................................. 5
3.6 Closing Deliveries...................................... 5
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV - CLOSING CONDITIONS AND DOCUMENTS............................ 6
4.1 Conditions to Obligations of LLC............................ 6
4.2 Conditions to Obligations of APS............................ 8
ARTICLE V - NONCOMPETITION COVENANT...................................... 9
5.1 Covenant................................................ 9
5.2 Modification............................................ 9
5.3 Remedies................................................ 9
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF APS....................... 10
6.1 Title to Contributed Assets............................. 10
6.2 Compliance With Licensing Requirements................. 10
6.3 Compliance With Laws.................................... 10
6.4 Condition of Personal Property.......................... 11
6.5 Books and Records....................................... 11
6.6 Leases and Other Material Agreements.................... 11
6.7 Taxes................................................... 11
6.8 Governmental Investigations and Proceedings............. 11
6.9 No Conflict or Violation................................ 11
6.10 Material Misstatements.................................. 11
6.11 No Condemnation......................................... 12
6.12 No Assessments.......................................... 12
6.13 Financial Statements................................... 12
6.14 Hazardous Material...................................... 12
6.15 Insurance............................................... 13
6.16 Zoning.................................................. 13
6.17 Litigation.............................................. 13
6.18 Authorization........................................... 13
6.19 Corporate Existence and Qualification................... 13
6.20 Access to Records....................................... 13
ARTICLE VII - REPRESENTATIONS AND WARRANTIES OF LLC...................... 14
7.1 No Conflict or Violation................................ 14
7.2 Litigation.............................................. 14
7.3 Authorization........................................... 14
7.4 Corporate Existence and Qualification................... 14
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII - POSTCLOSING AGREEMENTS.................................... 14
8.1 Books and Records and Financial Information............. 14
8.2 Sales and Use Taxes..................................... 15
ARTICLE IX - INDEMNIFICATION............................................. 15
9.1 Indemnification by APS.................................. 15
9.2 Indemnification by LLC.................................. 16
ARTICLE X - MISCELLANEOUS................................................ 17
10.1 Notices................................................. 17
10.2 Referrals............................................... 18
10.3 Counterparts............................................ 18
10.4 Construction............................................ 18
10.5 Gender and Number....................................... 18
10.6 Waiver.................................................. 18
10.7 Further Assurances...................................... 18
10.8 Confidentiality......................................... 18
10.9 Time of Essence......................................... 19
10.10 Survival................................................ 19
10.11 Supersedes Agreement.................................... 19
10.12 Commissions............................................. 19
10.13 Attorneys' Fees and Costs............................... 19
10.14 Arbitration............................................. 19
10.15 Interpretation.......................................... 20
10.16 Severability............................................ 20
10.17 Binding................................................. 20
10.18 Facsimile Copies........................................ 20
10.19 Force Majeure........................................... 20
10.20 No Obligations To Third Parties......................... 21
</TABLE>
iii
<PAGE>
ASSET CONTRIBUTION AGREEMENT
This Asset Contribution Agreement (the "Agreement") is entered into as
of November 27, 1996 (the "Execution Date"), by and between American
Pharmaceutical Services, Inc., a Delaware corporation ("APS"), and APS - Summit
Care Pharmacy, L.L.C., a Delaware limited liability company ("LLC"). APS and
LLC are sometimes hereinafter referred to collectively as "Parties" and
individually as "Party".
RECITALS
A. APS is the owner and operator of a pharmacy (the "Facility")
located at 2324 Ridgepoint Drive, Suite G-1, Austin, Texas 78754 (the
"Premises").
B. APS owns certain "Contributed Assets" (as defined in Section 1. 1
of this Agreement) which are used or usable in connection with the operation of
the Facility.
C. APS and Summit Care Pharmacy, Inc., a California corporation
("Summit Care") (a) have formed LLC for the purpose of engaging in the business
of operating a pharmacy to provide pharmacy and IV therapy services and (b) have
entered into that certain Limited Liability Company Agreement, of even date
herewith (the "LLC Agreement"), to govern the ownership and operations of LLC.
D. Pursuant to the LLC Agreement, APS will contribute to LLC, as its
initial capital contribution, the Contributed Assets, on the terms and
conditions set forth in this Agreement.
E. APS desires to contribute the Contributed Assets to LLC, and LLC
desires to receive the Contributed Assets from APS, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the terms and conditions set forth
herein, the Parties agree as follows:
AGREEMENT
ARTICLE I
CONTRIBUTION OF ASSETS
1.1 Contributed Assets. At the Closing (as defined in Section 3.5
hereof) of the transactions contemplated by this Agreement, in
reliance upon the representations and warranties and agreements
of APS herein, APS shall contribute to LLC, and LLC shall accept
from APS, all right, title and interest
1
<PAGE>
of APS in the following assets, rights and interests of APS
relating to the Facility, all of which are to be contributed by
APS at Closing in accordance with the provisions of Section 3.5
hereof, excluding only the "Excluded Assets" defined in Section
1.2 hereof. (All of the assets, rights and interests to be
contributed and delivered by APS to LLC pursuant to Section 3.6
are hereinafter collectively referred to as the "Contributed
Assets"):
(a) Leasehold Interests. All of APS's leasehold interest
(including all security deposits, and any options to extend
such leasehold, to expand the leased premises, to purchase
such premises or otherwise) as lessee of the Facility
pursuant to the lease (the "Lease") under which APS, as
lessee, has been granted the leasehold interest by the owner
of the Premises as lessor, and all improvements owned by APS
on the Closing Date, if any, to real property and the
buildings leased by APS with respect to the Facility
(collectively, the "Leasehold Interests"). To effectuate the
transfer of the Leasehold Interests hereunder, APS agrees to
execute and deliver at Closing (i) an Assignment of Lease
executed by APS in substantially the form attached as
Exhibit A hereto; and (ii) a "Consent to Assignment of
Lease" executed by the lessor of the Premises in
substantially the form attached as Exhibit B hereto.
(b) Purchased Contracts. All right, title and interest of APS
in, to and under the contracts relating exclusively to the
operations of the Facility (collectively, the "Purchased
Contracts"), including but not limited to (i) all assignable
agreements between APS and third-party payors (collectively,
the "Payor Contracts"), (ii) all assignable agreements with
suppliers to which APS is a party (collectively, the
"Supplier Contracts"), (iii) all assignable agreements with
nursing homes (collectively, the "Facility Contracts") and
(iv) the contracts (including the Payor Contracts, the
Supplier Contracts, and the Facility Contracts) listed on
Schedule 1.1(b) hereto.
(c) Inventories. All of APS's inventories held for use in
connection with the Facility on the Closing Date and
maintained in the ordinary course of the business of the
Facility, including, without limitation, all medical
supplies, equipment and drugs (all such items, collectively,
the "Inventory").
(d) Personal Property, Fixtures and Equipment. All right, title
and interest of APS in and to all furniture, fixtures,
furnishings, tools, machinery, equipment including, without
limitation, all computer hardware, computer software,
supplies, billing and office support equipment,
telecommunications equipment and records necessary to
operate, prepare and collect bills and maintain the
Facility, appliances and all other tangible personal
property of every kind and description
2
<PAGE>
and any interest therein necessary to the operations of the
Facility and owned or leased by APS and exclusively used in
or related to the operation of the Facility on the Closing
Date, whether or not located at the Facility, and whether or
not reflected as capital assets on the accounting records of
APS (all such items, collectively, the "Personal Property"),
including, but not limited to, those items listed on
Schedule 1.1(d) hereto.
(e) Governmental Licenses and Permits. All right, title and
interest of APS in, to and under all agreements, licenses,
permits, consents, authorizations, certificates and other
rights of every kind and character relating exclusively to
the Facility of any regulatory, administrative or other
governmental agency or body issued to or held by APS
necessary or incidental to the operations of the Facility as
of the Closing Date, to the extent the same are transferable
(all such items, collectively the "Governmental Licenses and
Permits"). A listing of the Facility's license and permit
numbers is set forth on Schedule 1.1(e) hereto.
(f) Intangible Assets. All right, title and interest of APS in,
to and under the technology, data, symbols, copyrights and
registrations thereof, trade names, trademarks, trademark
registrations, trademark applications, service marks,
service mark registrations, service mark applications,
telephone numbers, licenses, and other intangible rights and
privileges used by APS exclusively in connection with the
operation of the Facility on the Closing Date.
(g) Names. A license to use the name set forth on Schedule
1.1(g).
(h) Goodwill. The goodwill and going concern value of APS's
interest in the Facility.
(i) Facility Records. Copies of all books and records, computer
tapes, disks and data relating exclusively to the Facility
and the Contributed Assets, (collectively, the "Facility
Records"), as listed on Schedule 1.1(i) hereto.
(j) Customer Lists. All right, title and interest of APS in all
customer lists relating to the operation of the Facility.
(k) Noncompetition Covenant. The Noncompetition Covenant
described in Article V of this Agreement.
1.2 Excluded Assets. Notwithstanding any other provision of this
Agreement, the Contributed Assets shall include only the assets,
rights and interests of APS specifically described in this
Agreement and expressly shall not include (and APS does not
hereby contribute to LLC) any other assets, rights or interests
3
<PAGE>
of APS, including, without limitation: (i) any cash, securities,
bank accounts or safe deposit boxes; or (ii) any accounts
receivable arising with respect to goods sold or services
rendered by APS prior to the Closing Date.
1.3 Nonassumption of Agreements. Except for the obligations under the
Purchased Contracts accruing on and after the Closing Date, LLC
shall not assume any agreements or obligations, whether express
or implied, that exist between APS and any of APS's current or
former employees, or any third party, and nothing in this
Agreement is intended to be or shall be construed as an
assumption by LLC of any rights, obligations or liabilities of
any kind under any such agreements.
ARTICLE II
ASSUMED LIABILITIES
2.1 Assumed Liabilities. Except as specified in Section 2.2 hereof,
as of the Closing Date, LLC hereby agrees to assume, satisfy or
perform when due all sums owed to trade vendors and service
providers for goods and services purchased in the ordinary course
of operations of the Facility (the "Accounts Payable") for goods
delivered to LLC or services performed for LLC after the Closing
Date (the "Assumed Liabilities").
2.2 Unassumed Liabilities. Other than the Assumed Liabilities, LLC
shall not assume, nor shall LLC or any of its affiliates be
deemed to have assumed or guaranteed, any other liability or
obligation of any nature of APS, or claims of such liability or
obligation, whether accrued, matured or unmatured, liquidated or
unliquidated, fixed or contingent, known or unknown arising out
of (i) acts or occurrences prior to the Closing, (ii) liabilities
or obligations relating to the Contributed Assets prior to the
Closing, or (iii) any other liability or obligation of APS (all
such items (i) through (iii) of this Section 2.2, collectively,
the "Unassumed Liabilities"). The Unassumed Liabilities
specifically include, without limitation, all Accounts Payable
for goods delivered to APS or services performed for APS prior to
the Closing Date and also include any liabilities or obligations
of APS with respect to APS's employees earned prior to the
Closing Date, whether or not any of APS's employees become
employees of LLC.
ARTICLE III
FINANCIAL ARRANGEMENTS AND CLOSING
3.1 Asset Value. The Parties agree that the fair market value of the
Contributed Assets is Three Million Dollars ($3,000,000.00). In
exchange for APS's contribution of the Contributed Assets to LLC
pursuant to the terms and
<PAGE>
conditions of this Agreement, APS will receive from LLC the
consideration described in Sections 3.2 and 3.3 of this
Article.
3.2 Capital Account Balance. In exchange for the Contributed
Assets contributed by APS to LLC in accordance with this
Agreement, in addition to the consideration described in
initial capital account credit in LLC equal to One Million
Five Hundred Thousand Dollars ($1,500,000.00) and (b) a
membership interest in LLC that represents a fifty percent
(50%) ownership interest in LLC.
3.3 Payment to APS. In exchange for the Contributed Assets
contributed by APS to LLC in accordance with this Agreement,
in addition to the consideration described in Section 3.2
above, APS will receive payment from LLC in the amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00), to be
paid in immediately available funds on the Closing Date
described below.
3.4 Allocation. The Three Million Dollar ($3,000,000.00) value of
the Contributed Assets agreed upon by the Parties shall be
applied and allocated as set forth on Schedule 3.4 hereto. As
an inducement for APS and LLC to enter into this Agreement,
the Parties agree that the values assigned to the items
included in this Agreement and set forth on Schedule 3.4 are
fair and equitable and have been bargained for separately. In
addition, the Parties agree to cooperate in filing reports
relating to such allocation, as and when required by law,
including IRS Form 8594. Furthermore, the Parties acknowledge
and agree that APS and LLC shall report to federal and state
tax authorities any additionally required information relating
to the noncompetition covenant described herein or other
agreements between APS and LLC. APS and LLC agree to cooperate
with each other in the preparation of any such additional
reports.
3.5 Closing. The closing of the transactions contemplated under
this Agreement (the "Closing") shall take place by mail on or
prior to November 30, 1996 (the "Closing Date"). The Closing
Date may be extended upon the mutual agreement of the Parties
hereto. The transfer of the Contributed Assets by APS to LLC
shall be deemed to be effective as of 11:59 p.m., Texas time,
on the Closing Date.
3.6 Closing Deliveries. At the Closing, APS shall execute and
deliver to LLC all instruments, documents and records set
forth in Section 4.1 hereof required by that Section to be
delivered by APS as a condition to LLC's obligation to accept
the Contributed Assets; and LLC shall execute and deliver to
APS all instruments, documents and records set forth in
Section 4.2 hereof required by that Section to be delivered by
LLC as a condition to APS's obligation to accept the
Contributed Assets. For purposes of this Agreement, the term
"Transaction Documents" shall refer to this Agreement and to
the Assignment
5
<PAGE>
of Lease and Consent to Assignment of Lease, the General
Conveyance and Assignment of Interests described below and
such other instruments of transfer necessary to vest title and
possession in and to the Contributed Assets in LLC as of the
Closing Date.
ARTICLE IV
CLOSING CONDITIONS AND DOCUMENTS
4.1 Conditions to Obligations of LLC. LLC's obligation to accept
the Contributed Assets shall be expressly conditioned upon
satisfaction, or, in the alternative, waiver by LLC of the
following conditions:
(a) All of the terms, covenants and conditions of this
Agreement to be complied with and performed by APS on
or before the Closing Date shall have been duly
complied with and performed by APS in all material
respects.
(b) The representations and warranties made by APS herein
shall be correct in all material respects as of the
Closing Date, with the same force and effect as
though such representations and warranties had been
made as of the Closing Date.
(c) On or before the Closing Date, the Board of Directors
of APS shall have voted to authorize the Transaction
Documents, and the transactions described therein,
and the Secretary or Assistant Secretary of APS shall
have delivered to LLC a certified copy of the
resolutions of its Board of Directors to such effect;
APS shall have executed the Assignment of Lease and
obtained the executed Consent to Assignment of Lease,
in substantially the forms attached hereto as
Exhibits A and B, respectively, on or before the
Closing Date.
(d) On or before the Closing Date, APS shall have
executed an Employee Services Agreement in
substantially the form attached as Exhibit D hereto.
(e) The Facility shall not have been adversely affected
in any material way as the result of any fire,
accident or other casualty (whether or not insured)
or by any act of God.
(f) There shall not have been material adverse change in
the operations, financial condition, or regulatory or
licensing status of APS since the Execution Date of
this Agreement nor shall APS have received any
reports, surveys, citations or correspondence from
licensing authorities (collectively, "Reports")
affecting the Facility for the period prior to the
6
<PAGE>
Closing Date, except such Reports as to which LLC has had a
reasonable opportunity to review and not disapprove.
(g) APS shall have delivered to LLC a certificate to the
effect that, as of the Closing Date, the conditions
set forth in subsections (a) and (b) of this Section
4.1 have been satisfied.
(h) On or before the Closing Date, APS shall have and
Acceptance and Assignment of Interests and Assumption
of Liabilities in substantially the form attached
hereto as Exhibit C and incorporated herein by this
reference (the "General Conveyance"), which General
Conveyance shall be effective to transfer to LLC the
Contributed Assets free and clear of all liens and
encumbrances, other than the Permitted Encumbrances
set forth on Schedule 6.1.
(i) On or before the Closing Date, APS and Summit Care
shall have executed and delivered to LLC that certain
LLC Agreement by and between APS and Summit Care.
Additionally, on or before the Closing Date, Summit
Care shall have contributed cash in the amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00)
to LLC in accordance with the LLC Agreement.
(j) APS shall have made available for delivery at the
Facility the Purchased Contracts.
(k) APS shall have made available for delivery at the
Facility the Facility Records.
(l) No action, suit, or proceeding before any court or
transactions described in this Agreement or to the
consummation thereof as provided herein, shall have
been instituted or threatened on or before the
Closing Date.
(m) APS shall have delivered to LLC any additional
instruments, signed and properly acknowledged by APS,
if appropriate, as may be necessary for APS to comply
with this Agreement.
(n) To the extent required herein, APS shall have
obtained all necessary consents or approvals of all
third parties (except parties to nursing home
contracts) whose consent or approval is required in
order for APS to consummate the transactions
contemplated by the Transaction Documents.
(o) On or before the Closing Date, APS shall assign or
cause to be assigned to LLC all of APS's existing
warranties of any contractors and
7
<PAGE>
suppliers who have provided either labor, services,
equipment and/or materials to the Facility to the
extent assignable.
4.2 Conditions to Obligations of APS. APS's obligation to
contribute the Contributed Assets shall be expressly
conditioned upon satisfaction, or in the alternative, waiver
by APS, of the following conditions:
(a) All of the terms, covenants and conditions of this
Agreement to be complied with and performed by LLC on
or before the Closing Date shall have been duly
complied with and performed in all material respects.
(b) The representations and warranties made by LLC herein
shall be correct in all material respects as of the
Closing Date, with the same force and effect as
though such representations and warranties had been
made as of the Closing Date.
(c) LLC shall have executed and delivered all documents
and agreements which it is obligated hereby to
execute.
(d) On or before the Closing Date, LLC shall have
executed an Employee Services Agreement in
substantially the form attached as Exhibit D hereto.
(e) The Facility shall not have been adversely affected
in any material way as the result of any fire,
accident or other casualty (whether or not insured)
or by any act of God.
(f) LLC shall have delivered to APS a certificate to the
effect that, as of the Closing Date, the conditions
set forth in subsections (a) and (b) of this Section
4.2 have been satisfied.
(g) On or before the Closing Date, LLC shall have
executed and delivered to APS the General Conveyance.
(h) On or before the Closing Date, APS and Summit Care
shall have executed and delivered to LLC that certain
LLC Agreement by and between APS and Summit Care.
Additionally, on or before the Closing Date, Summit
Care shall have contributed cash in the amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00)
to LLC in accordance with the LLC Agreement.
(i) No action, suit, or proceeding before any court or
any governmental body or authority pertaining to the
transactions described in this Agreement or to the
consummation thereof as provided herein, shall have
been instituted or threatened on or before the
Closing Date.
8
<PAGE>
LLC shall have delivered to APS any additional
instruments, signed and properly acknowledged by LLC,
if appropriate, as may be necessary for LLC to comply
with this Agreement.
ARTICLE V
NONCOMPETITION COVENANT
5.1 Covenant. APS shall not directly or indirectly carry on or
engage in the business of providing pharmacy services or
otherwise compete with LLC at or in connection with any
location in the County of Travis, State of Texas, whether on
its own account, or solely or jointly with others as an agent,
consultant, stockholder, member, investor, or general or
limited partner of any corporation, general partnership,
limited partnership, limited liability company or any other
entity, or in any other relationship or capacity. Except as
set forth below, the provisions of this Article V shall
survive for so long as LLC is in existence and no longer.
Notwithstanding the preceding sentence, the provisions of this
Article V shall terminate and cease to apply (i) immediately
upon the withdrawal of either APS or Summit Care as a "Member"
of LLC (as "Member" is defined in the LLC Agreement) with the
consent of the other, as contemplated by the second sentence
of Paragraph 7.4 of the LLC Agreement and (ii) on November 30,
1998 in the event that either APS or Summit Care withdraws
from LLC (A) prior to November 30, 1998 and (B) without the
consent of the other party; provided, however, that in the
event either APS or Summit Care exercises its buy/sell right
under Paragraph 7. 10 of the LLC Agreement, the provisions of
this Article V shall apply to the selling party only (as
though the buying party were LLC) and shall terminate on the
date that is the second (2nd) anniversary of the closing of
the sale contemplated by Paragraph 7.10 of the LLC Agreement.
5.2 Modification. Although APS and LLC consider the restrictions
contained herein to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction
that the time or geographical territory or any other
restriction contained in this Article is an unreasonable or
otherwise unenforceable restriction, the above provisions
shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such other
extent as such court may determine or indicate to be
reasonable.
5.3 Remedies. The Parties to this Agreement further acknowledge
and agree that LLC's remedy at law for a breach or threatened
breach of any of the provisions of the above covenant not to
compete would be inadequate and, in recognition of that fact,
in the event of a breach or threatened breach by APS of the
provisions of this Article, LLC shall be entitled to, without
posting any bond, and APS agrees not to oppose any request
for, equitable relief in the form of specific performance, a
temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may be
9
<PAGE>
available. Nothing contained herein shall be construed as
prohibiting LLC from pursuing any other remedies available to
LLC for such breach or threatened breach until any such
injunction is granted.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF APS
APS hereby makes the following representations and warranties
to LLC as of the Execution Date and the Closing Date:
6.1 Title to Contributed Assets. Except as disclosed on Schedule
6.1 (collectively, the "Permitted Encumbrances"), no claims,
liens, imperfections of title, security interests or other
encumbrances have attached to any of the Contributed Assets,
nor has any action or event occurred which will impair APS's
ability to deliver valid and marketable title to the
Contributed Assets. APS has taken all reasonably necessary
action to maintain and protect any trademarks or trade names
used in connection with the Facility. Set forth on Schedule 6.
1A hereto are lien search results showing certain UCC
Financing Statements listing APS as debtor which APS believes
were filed against it in error, but for which APS specifically
indemnifies and holds harmless LLC pursuant to the provisions
of Section 9.1 hereof.
6.2 Compliance With Licensing Requirements. Except as specified in
Schedule 6.2 hereof, the Facility has been operated in
substantial compliance with the applicable laws, rules,
requirements, and regulations of the State of Texas and of the
federal government for licensing and certification of the
Facility. Except as set forth on Schedule 6.2 hereof, all
requirements or recommendations of all applicable licensing or
certification authorities regarding the Facility have been or
at the Closing shall have been fully complied with. As of the
Closing, all material State licenses, permits and Medicare and
Medicaid billing agreements and certification necessary to
operate the Facility and to obtain payment shall have been
obtained by APS, shall be in full force and effect, and shall
not be the subject of any revocation or termination action by
the issuing agencies.
6.3 Compliance With Laws. To the knowledge of APS, no action or
event has occurred which would cause the Facility to be out of
substantial compliance with any applicable federal, state or
local laws, rules and regulations, including without
limitation, all federal, state or local health, fire and
safety, seismic safety, zoning, or labor laws, ordinances,
rules or regulations applicable to the Facility, all
requirements of the Occupational Safety and Health Act and its
Texas equivalent and regulations promulgated under such
legislation and all orders, judgments and decrees of any
tribunal under such legislation that apply to the Facility,
the consequences of violation of which could have a material
adverse effect on the operations of the Facility.
10
<PAGE>
6.4 Condition of Personal Property. AU Personal Property has been
maintained and repaired by APS in the ordinary course of APS's
business operations.
6.5 Books and Records. APS's Financial Statements and other
financial books and records for the Facility have been
maintained in accordance with APS's usual and customary
accounting practices applied on a consistent basis and are
true and correct in all material aspects.
6.6 Leases and Other Material Agreements. Except as disclosed on
Schedule 6.6 hereto, APS has not entered into any leases,
subleases, management agreements or management contracts
affecting the Facility, other than the Lease. To the knowledge
of APS, nothing has occurred which would cause any of the
Purchased Contracts listed on Schedule 1.1(b) not to be legal,
valid, binding, enforceable and in full force and effect. APS
has not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the Lease other than to
LLC.
6.7 Taxes. All federal, state and local taxes (other than real and
personal property taxes and any transfer taxes arising out of
the transfer contemplated herein), fees and assessments of
whatever nature upon the Contributed Assets being sold to LLC
hereunder which are due and payable by reason of the
transactions contemplated by this Agreement have been or shall
be paid by APS.
6.8 Governmental Investigations and Proceedings. Except as
disclosed on Schedule 6.8 hereto, there is no current or
pending litigation, proceeding, vendor hold or similar lien on
state or federal payments to APS, or arbitration or
governmental investigation with respect to APS and relating to
the Facility, which, if decided adversely to APS, could have a
material and adverse impact on the operations of the Facility.
6.9 No Conflict or Violation. The execution, delivery and
performance of the Transaction Documents by APS will not
result in any breach or violation or constitute a default
under any material agreement or other instrument to which APS
is a party or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the
maturity of any such material agreement or other instrument.
6.10 Material Misstatements. No representation or warranty by APS
contained in this Agreement and no records, writing,
certificate, list or other instrument furnished or to be
furnished to LLC pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any
untrue statement of a material fact.
11
<PAGE>
6.11 No Condemnation. No condemnation action has been taken or to
APS's knowledge has been threatened with respect to the
Facility or any part thereof.
6.12 No Assessments. The Facility has not been the subject of any
assessments for work or improvements either completed or to be
completed, and APS has no knowledge or belief that there is
any pending or contemplated assessment or other specified tax
or assessment relating to the Facility.
6.13 Financial Statements. Schedule 6.13 attached hereto sets forth
the profit and loss statements of APS for APS's two (2) most
recent fiscal years for the Facility (the "Financial
Statements"). The Financial Statements have been prepared in
accordance with APS's usual and customary accounting practices
consistently followed by APS throughout the periods indicated,
and fairly present the financial position and results of
operations of APS for the respective periods indicated. In
addition, on or before the Closing, APS shall promptly provide
LLC with all such additional monthly profit and loss
statements for the Facility through September 1996 as are
prepared by APS in APS's normal course of business in
accordance with APS' usual and customary accounting practices
consistently followed by APS throughout the periods indicated.
6.14 Hazardous Material. APS has not placed any underground storage
tanks on the real property upon which the Facility is located
in which any Hazardous Material (as defined below) has been or
is being stored, nor has APS spilled, disposed of, discharged,
or released any Hazardous Material into, upon, from, or over
such real property or into or upon ground or surface water on
such real property. APS has not incorporated any asbestos-
containing materials into the buildings or interior
improvements that are part of such real property, nor has it
located any electrical transformer, fluorescent light fixture
with ballasts, or other equipment containing PCBs on such real
property. As used in this paragraph, "Hazardous Material"
means any hazardous or toxic substance, material, or waste
that is regulated by any federal authority or by any state or
local governmental authority where the substance, materials,
or waste is located. Except as set forth on Schedule 6.14
hereto, APS has operated the Facility in material compliance
with all federal, state and local environmental protection
laws and regulations and has not received any notice of nor
has been cited for any violation of any such law or regulation
and is aware of no such pending or threatened citation. There
is no pending audit with respect to the Facility known to APS
by any federal, state, or local governmental authority with
respect to groundwater, soil, or air monitoring; the storage,
burial, release, transportation, or disposal of Hazardous
Materials; or the use of underground storage tanks by APS,
related to the Facility. APS has no agreement with any third
party or federal, state, or local governmental authority
relating to any such environmental matter or any environmental
cleanup.
12
<PAGE>
6.15 Insurance. APS has maintained and now maintains (1) insurance
on all of the assets of the Facility of a type customarily
insured, covering property damage and loss of income by fire
and other casualty, and (2) adequate insurance protection
against all liabilities, claims, and risks against which it is
customary to insure. APS is not in default with respect to
payment of premiums on any such policy. No claim is pending
under any such policy which if decided adversely to APS would
materially and adversely effect the business, condition,
operations (financially or otherwise), or results of
operations of the Facility.
6.16 Zoning. APS has not commenced, nor received notice of the
commencement of, any proceeding that would affect the present
zoning or other land use classification of the property where
the Facility is located.
6.17 Litigation. Except as set forth on Schedule 6.17 attached
hereto, APS (a) is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge or (b) is not a
party nor to APS's knowledge is threatened to be made a party
to any action, suit, proceeding, hearing, audit or
investigation relating to the Facility or the Purchased Assets
of, in or before any court or quasijudicial or administrative
agency of any federal, state, local or foreign jurisdiction or
before any arbitrator that is reasonably likely to result in a
material adverse change with respect to the business,
condition, operations (financial or otherwise) or results of
operation of the Facility or the Contributed Assets.
6.18 Authorization. APS has full power and authority to execute and
deliver the Transaction Documents and to perform its
obligations thereunder. The Transaction Documents constitute
the valid and legally binding obligation of APS, enforceable
against APS in accordance with their respective terms, except
as may be limited by bankruptcy, insolvency, or similar laws
relating to creditors' rights and to principles of equity
generally.
6.19 Corporate Existence and Qualification. APS is a corporation
duly organized, validly existing, and in good standing under
the laws of the State of Delaware, and has all necessary
corporate powers to own its properties and to carry on its
business as now owned and operated by it.
6.20 Access to Records. APS shall have provided LLC, its agents,
counsel, and accountants, through APS's counsel, reasonable
access to all records maintained by APS at the Facility
applicable to the Contributed Assets and the Facility and
necessary to enable LLC to consummate the transactions
described herein.
13
<PAGE>
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF LLC
LLC hereby represents and warrants to APS as follows:
7.1 No Conflict or Violation. To the actual knowledge of LLC,
there is no impediment or reason, including threatened or
pending litigation, which would preclude LLC from executing
and delivering the Transaction Documents, from performing its
obligations thereunder or from consummating the transactions
contemplated hereunder.
7.2 Litigation. LLC (a) is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge or (b)
is not a party nor to LLC's knowledge is threatened to be made
a party to any action, suit, proceeding, hearing, audit or
investigation in or before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator that is reasonably
likely to result in a material adverse change with respect to
the business, condition, operations (financial or otherwise)
or results of operation of the Facility or the Contributed
Assets.
7.3 Authorization. LLC has all necessary power and authority and
has taken all action necessary to enter into this Agreement
and to consummate the transactions contemplated hereby and to
perform its obligations hereunder. The Transaction Documents
have been duly executed and delivered by LLC and are the
legal, valid and binding obligations of LLC enforceable
against LLC in accordance with their terms, except as may be
limited by bankruptcy, insolvency, or similar laws relating to
creditors' rights and to principles of equity generally.
7.4 Corporate Existence and Qualification. LLC is a limited
liability company duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and has
all necessary corporate power to own its properties and to
carry on its business as now owned and operated by it.
ARTICLE VIII
POSTCLOSING AGREEMENTS
8.1 Books and Records and Financial Information. Following the
Closing Date, APS agrees to provide, promptly upon reasonable
request by LLC, access to any books, records, computer tapes,
disks and data related to the Contributed Assets and the
Facility, which were not purchased by LLC as Facility Records,
and such financial information of APS related to the
Contributed Assets and the Facility with respect to any period
prior to the Closing Date as LLC or its auditors shall request
in connection with any filings or reports LLC and its
14
<PAGE>
affiliates are required to file, or any tax inquiry or audit,
as a result of the transactions contemplated hereby.
8.2 Sales and Use Taxes. All sales and use taxes arising out of the
transfer of the Contributed Assets imposed by any local, state
or federal agency shall be paid by the party required to
collect them under the statute imposing such taxes.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by APS.
(a) APS shall indemnify and hold LLC (including, for
purposes of this Article IX, any members, officers,
affiliates, agents and employees of LLC, and its or
their successors and assigns) harmless against any
claims, demands, damages, losses, expenses and
liabilities, including without limitation, reasonable
attorneys' fees (collectively, the "Liabilities")
suffered by LLC, arising out of or resulting from (i)
any breach by APS (including, for purposes of this
Article IX, any officers, directors, affiliates,
agents and employees of APS, and its or their
successors and assigns) of this Agreement, (ii) any
inaccuracy or misrepresentation in or breach of any of
the representations, warranties, covenants or
agreements made by APS herein, (iii) any inaccuracy or
misrepresentation in any certificate or document
delivered by APS in accordance with the provisions of
this Agreement, (iv) any Unassumed Liabilities, or (v)
any citation violations issued by the State of Texas
which relate to surveys of the Facility, if any,
conducted prior to the Closing. APS shall indemnify
and hold LLC harmless from and against any and all
liabilities arising out of the acts or omissions of
APS in connection with the operation of the Facility
prior to the Closing. For purposes of this Section
9.1(a), the indemnification by APS provided herein
shall be in force and effect for a period of two (2)
years from the Closing Date, or until the expiration
of the statute of limitations applicable to the
specific matter indemnified against, whichever is
greater. The obligation of APS to indemnify LLC shall
be limited to the amount of One Million Five Hundred
Thousand Dollars ($1,500,000.00).
(b) Upon obtaining knowledge thereof, LLC shall promptly
notify APS of any claim or demand which such party has
determined has given or could give rise to a right of
indemnification under this Agreement. If such claim or
demand relates to a claim or demand asserted by a
third party against such party and if APS acknowledges
APS's obligations to indemnify and hold harmless
hereunder, APS shall have the right to employ such
counsel as is reasonably acceptable to LLC to defend
any
<PAGE>
such claim or demand asserted against such party. LLC
shall have the right at its own expense to
participate in the defense of any such claim or
demand. So long as APS is defending in good faith any
such claim or demand, LLC shall not settle such claim
or demand, without the consent of APS, which shall
not be unreasonably withheld. LLC shall make
available to APS all records and other materials
required by APS for its use in contesting any claim
or demand asserted by a third party against LLC.
Whether or not APS so elects to defend any such claim
or demand, LLC shall not have any obligation to do so
and LLC shall not waive any right that LLC may have
against APS hereunder with respect to any such claim
or demand by electing or failing to elect to defend
any such claim or demand.
9.2 Indemnification by LLC.
(a) LLC shall indemnify and hold APS harmless from and
against any and all Liabilities arising out of or
resulting from (i) any breach by LLC of this
Agreement; (ii) the acts or omissions of LLC after
the Closing; (iii) the failure by LLC to pay or
otherwise discharge any Assumed Liabilities or any
obligation incurred or accrued subsequent to the
Closing relating to the Facility or the Purchased
Assets; (iv) any inaccuracy or misrepresentation in
or breach of any of the representations, warranties,
covenants or agreements made by LLC herein; or (v)
any inaccuracy or misrepresentation in any
certificate or document delivered by LLC in
accordance with the provisions of this Agreement. For
purposes of this Section 9.2(a), the indemnification
by LLC provided herein shall be in force and effect
for a period of two (2) years from the Closing Date,
or until expiration of the statute of limitations
applicable to the specific matter indemnified
against, whichever is greater. The obligation of LLC
to indemnify APS shall be limited to the amount of
One Million Five Hundred Thousand Dollars
($1,500,000.00).
(b) Upon obtaining knowledge thereof, APS shall promptly
notify LLC of any claim or demand which such party
has determined has given or could give rise to a
right of indemnification under this Agreement. If
such claim or demand relates to a claim or demand
asserted by a third party against such party and if
LLC acknowledges LLC's obligations to indemnify and
hold harmless hereunder, LLC shall have the right to
employ such counsel as is reasonably acceptable to
APS to defend any such claim or demand asserted
against such party. APS shall have the right at its
own expense to participate in the defense of any such
claim or demand. So long as LLC is defending in good
faith any such claim or demand, APS shall not settle
such claim or demand, without the consent of LLC,
which shall not be unreasonably withheld. APS shall
make available to LLC all records and other materials
required by
16
<PAGE>
LLC for its use in contesting any claim or demand
asserted by a third party against APS. Whether or not
LLC so elects to defend any such claim or demand, APS
shall not have any obligation to do so and APS shall
not waive any right that APS may have against LLC
hereunder with respect to any such claim or demand by
electing or failing to elect to defend any such claim
or demand.
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices required or permitted to be given
hereunder shall be personally delivered or sent by registered
or certified mail, return receipt requested, or sent by
overnight courier, or sent by both facsimile and mail,
addressed to the Parties as follows:
If to LLC: APS - Summit Care Pharmacy, L.L.C.
2324 Ridgepoint Drive, Suite G-1
Austin, Texas 78754
Attention: President
With a copy to: Hooper, Lundy & Bookman, Inc.
1875 Century Park East, Suite 1600
Los Angeles, CA 90067-2799
Telephone: (310) 551-8111
Telecopier: (310) 551-8181
If to APS: American Pharmaceutical Services, Inc.
1771 W. Diehl Road, Suite 210
Naperville, Illinois 60563
Attn: William Korslin, President
Telephone: (630) 305-8000
Telecopier: (630) 305-8190
With a copy to: American Pharmaceutical Services, Inc.
1771 W. Diehl Road, Suite 210
Naperville, Illinois 60563
Attn: Chris Mollet, Vice President
and General Counsel
Telephone: (630) 305-8000
Telecopier: (630) 305-8190
17
<PAGE>
With a copy to: Latham & Watkins
233 So. Wacker Drive, Suite 5800
Chicago, Illinois 60606
Telephone: (312) 876-7700
Telecopier:(312) 993-9767
If mailed, notices shall be deemed received as of the date of
receipt indicated by the postal service, or, if the addressee
refuses to accept delivery, as of the date of such refusal of
attempted delivery. If personally delivered, notices shall be
deemed received as of the date of delivery. Either Party may
change its address for purposes of this Agreement by giving
notice thereof in accordance with this Section 10.1.
10.2 Referrals. Neither Party shall have any obligation to make
referrals to the other Party. The potential for referrals
between the Parties has played no role in determining the
consideration described in Sections 3.2 and 3.3 of this
Agreement or in the decision to enter into this Agreement.
10.3 Counterparts. This Agreement may be executed simultaneously or
in any number of counterparts, each of which shall be deemed
to be an original, but all of which together shall constitute
one and the same agreement.
10.4 Construction. APS and LLC acknowledge that each Party and its
counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement.
10.5 Gender and Number. The masculine, feminine and neuter gender
and the singular or plural number shall each be deemed to
include the other whether the context so indicates.
10.6 Waiver. Waiver by a Party of the performance of any covenant,
condition or promise of any Party shall not invalidate this
Agreement, nor shall it be considered to be a waiver by such
Party of any other covenant, condition or promise contained
herein. The waiver of either or both Parties of the time for
performing any act shall not be construed as a waiver of any
other act required to be performed at a later date.
10.7 Further Assurances. APS and LLC agree to execute such further
documents and instruments as shall be necessary to fully carry
out the terms of this Agreement or to vest, perfect or confirm
in LLC the title to the Contributed Assets as of the Closing
Date.
10.8 Confidentiality. The Parties agree to keep all information
contained in this Agreement confidential. Additionally, the
Parties agree to keep confidential all nonpublic information
provided by one Party to the other Party including,
18
<PAGE>
but not limited to, information of both a technical and
financial nature relating to the business operations of the
Parties and subsidiary or other affiliated entities. Provided,
however, that the information to be kept confidential shall
not include (i) information which has come within the public
domain through no fault or action of either Party; (ii)
information which rightfully becomes available to a Party on a
nonconfidential basis prior to its disclosure in relation to
this Agreement and the transactions contemplated hereunder; or
(iii) information which rightfully becomes available to a
Party on a nonconfidential basis from any third party, the
disclosure of which to that Party did not violate any
contractual or legal obligation the third party has to the
other Party, its members, subsidiaries or other affiliated
entities with respect to such information. For purposes of
this Section only, the term "Party" shall include Summit Care.
Notwithstanding the above, nothing in this Section shall
prohibit a Party from providing information when legally
required to do so by a law enforcement, licensing, or other
governmental agency or entity.
10.9 Time of Essence. Time is of the essence of each and every
provision of this Agreement.
10.10 Survival. The representations and warranties in this Agreement
shall survive the Closing for a period of two (2) years.
10.11 Supersedes Agreement. This Agreement and the Schedules and
Exhibits attached hereto express the complete agreement of the
Parties and supersede all prior written or oral agreements
between APS and LLC regarding the Facility and the Contributed
Assets, except that the Agreement shall be entered into and
construed in compliance with the LLC Agreement.
10.12 Commissions. No fees or commissions are due or payable to any
brokers, finders or other agents of the Parties hereto.
10.13 Attorneys' Fees and Costs. In the event either Party commences
legal action or arbitration to interpret or enforce this
Agreement, or for damages for any alleged breach hereof, the
prevailing party in such action shall be entitled to recover
from the nonprevailing party reasonable attorney's fees and
costs as awarded by the court.
10.14 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach hereof, shall be
settled by arbitration in accordance with the Rules of the
American Arbitration Association, at its Austin, Texas office,
or at its office nearest to Austin. Notwithstanding the
foregoing, LLC and APS shall endeavor to agree on an
arbitrator within ten (10) business days (the "Arbitrator
Selection Period") after the initiation of the arbitration
proceeding (the "Proceeding"), the cost and expenses of which
shall be shared fifty percent (50%) by APS and fifty percent
(50%) by the other members of LLC, collectively. If APS and
LLC are unable to agree on an arbitrator, then
19
<PAGE>
within ten (10) business days after the expiration of the
Arbitrator Selection Period, each of APS and LLC shall select
an arbitrator (together, the "Chosen Arbitrators"), the costs
and expenses of each of which shall be paid solely by the
Party that selected such Chosen Arbitrator. Within 5 business
days after the Chosen Arbitrators have been selected, they
shall together choose a third arbitrator (together with the
Chosen Arbitrators, the "Panel"), the costs and expenses of
which shall be shared fifty percent (50%) by APS and fifty
percent (50%) by the other members of LLC, collectively. Each
Party shall submit its case in writing, setting forth the
facts and its arguments with respect to the matter or matters
that are the subject of the Proceeding, to the Arbitrator or
the Panel, as the case may be, within thirty (30) days after
the initiation of the Proceeding. Hearings in the Proceeding
shall commence within thirty (30) days after the last such
submission. The Arbitrator or the Panel, as the case may be,
shall deliver its opinion within thirty (30) days after the
completion of the arbitration hearings. Judgment upon the
award rendered by the Arbitrator or the Panel, as the case may
be, may be entered in any court having jurisdiction thereof.
10.15 Interpretation. This agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
10.16 Severability. If any provision of this Agreement or any
application thereof to any person or circumstances shall to
any extent be invalid, the remainder of this Agreement
(including the application of such provision to persons or
circumstances other than those to which it is held invalid)
shall not be affected thereby, and each provision of this
Agreement shall be valid and enforced to the fullest extent
permitted by law.
10.17 Binding. This Agreement shall be binding upon, and inure to
the benefit of the Parties hereto and their respective heirs,
executors, administrators, successors in interest and
permitted assigns.
10.18 Facsimile Copies. Signed, faxed documents shall constitute
originals.
10.19 Force Majeure. In the event that either Party is unable to
consummate the transactions contemplated herein by the Closing
Date or within any extension of the Closing Date granted
hereunder due to (i) losses to the Facility by reason of
strike, fire, flood, earthquake, accident or other calamity of
such character as to interfere materially with the conduct of
the business and operations of the Facility regardless of
whether or not such loss shall have been insured, (ii) the
outbreak or escalation of hostilities between the United
States and any foreign power or of any other insurrection or
armed conflict involving the United States or the declaration
by the United States of a national emergency which makes it
impracticable or inadvisable to consummate the transactions
contemplated hereby, then either Party may extend the Closing
Date until such condition no longer makes it impracticable
20
<PAGE>
or inadvisable to consummate the transactions contemplated
hereby but in any event, the Closing Date shall not be
extended pursuant to this section for a period longer than 30
days.
10.20 No Obligations To Third Parties. The execution and delivery of
this Agreement shall not be deemed to confer any rights or
benefits upon any person or entity other than as specified
herein.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the Execution Date first written above.
APS: AMERICAN PHARMACEUTICAL
SERVICES, INC., a Delaware corporation
By: [SIG]
-------------------------------------
Its: President
------------------------------------
LLC: APS-SUMMIT CARE PHARMACY, L.L.C.,
a Delaware limited liability company
By: American Pharmaceutical Services, Inc.,
a Delaware corporation, its member
By: [SIG]
---------------------------------
Its: President
--------------------------------
By: Summit Care Pharmacy, Inc., a
California corporation, its member
By:
---------------------------------
Its:
--------------------------------
Acknowledged and Agreed
this ___ day of _____________,
1996, for the purposes of Sections 5.1
and 10.8 hereof only.
SUMMIT CARE PHARMACY, INC., a
California corporation
By:
--------------------------
Its:
-------------------------
21
<PAGE>
or inadvisable to consummate the transactions contemplated
hereby but in any event, the Closing Date shall not be
extended pursuant to this section for a period longer than 30
days.
10.20 No Obligations To Third Parties. The execution and delivery of
this Agreement shall not be deemed to confer any rights or
benefits upon any person or entity other than as specified
herein.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the Execution Date first written above.
APS: AMERICAN PHARMACEUTICAL
SERVICES, INC., a Delaware corporation
By:
-------------------------------------
Its:
------------------------------------
LLC: APS-SUMMIT CARE PHARMACY, L.L.C.,
a Delaware limited liability company
By: American Pharmaceutical Services, Inc.,
a Delaware corporation, its member
By:
---------------------------------
Its:
--------------------------------
By: Summit Care Pharmacy, Inc., a
California corporation, its member
By: DERWIN L. WILLIAMS
---------------------------------
Its: Sr. Vice President, Finance
--------------------------------
Acknowledged and Agreed
this 30th day of November
1996, for the purposes of Sections 5.1
and 10.8 hereof only.
SUMMIT CARE PHARMACY, INC., a
California corporation
By: DERWIN L. WILLIAMS
----------------------------
Its: Sr. Vice President, Finance
---------------------------
21
<PAGE>
EXHIBIT A
ASSIGNMENT OF LEASE
[SEE ATTACHED]
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
This ASSIGNMENT AND ASSUMPTION OF LEASE (the "Assignment") is made as
of November 30,1996 by AMERICAN PHARMACEUTICAL SERVICES, INC., a Delaware
corporation ("Assignor"), APS-SKILLED CARE PHARMACY, L.L.C., a Delaware limited
liability company ("Assignee"), and PROMONTORY INVESTORS, LTD., a Texas limited
partnership ("Landlord"), as successor in interest to Pension Realty Income
Trust A.
RECITALS
A. Lease. Pursuant to that certain Lease, dated as of April 11,
1994 (the "Lease"), by and between Landlord, as lessor, and Assignor, as
successor in interest to Abbey Pharmaceutical Services, Inc., as lessee,
Landlord leased to Assignor certain real property located at 2324 Ridgepoint
Drive, Suite G-1, Austin, Texas, 78754 (the "Property"). The entire right, title
and interest of Assignor under the Lease is referred to herein as the "Leasehold
Estate."
B. Purpose. Pursuant to (i) that certain Limited Liability
Company Agreement of APS-Summit Care Pharmacy, L.L.C., dated as of the date
hereof, by and between Assignor and Summit Care Pharmacy, Inc. a California
corporation ("SCPI"), and (ii) that certain Asset Contribution Agreement, dated
as of the date hereof, by and between Assignor and Assignee, Assignor and SCPI
have formed Assignee and provided for the contribution of all of the assets of
Assignor's pharmacy business that is conducted at the Property to Assignee, and
Assignee wishes to assume the obligations of the Lease and have all of
Assignor's rights under the Lease assigned to Assignee.
AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Assignor, Assignee and Landlord
mutually agree as follows:
1. Assignment. Assignor hereby sets over, transfers and assigns
unto Assignee, effective as of the date hereof, all of Assignor's right, title
and interest in and to the Leasehold Estate, for the balance of the term
thereof, with the full benefit of all the powers and of all the covenants and
provisions contained therein. This assignment includes an assignment of all
right, title and interest of Assignor in and to the improvements at the
Property. The execution of this Assignment shall not release Assignor from
Assignor's obligations as lessee under the Lease.
2. Assumption. In consideration of the foregoing assignment,
Assignee hereby accepts the foregoing assignment and agrees to make all of the
payments and to otherwise observe, keep and perform all the terms, covenants and
conditions to be made, observed, kept and performed by Assignor, as lessee under
the Lease, as fully as though Assignee were originally named in the Lease as the
lessee.
<PAGE>
3. Consent. Landlord hereby consents to the terms of this
Assignment and acknowledges that Assignee shall forthwith be the lessee under
the Lease.
4. Assignor's Warranties. Assignor hereby represents and warrants
to Assignee that:
(a) At the time of this Assignment, Assignor is the lawful owner
of that interest in and to the Leasehold Estate assigned
hereby and Assignor has the right, power and authority to
assign the same to Assignee.
(b) Assignor has not previously assigned, transferred or conveyed
any of its right, title or interest in or to the Leasehold
Estate.
(c) The Lease is free and clear of any and all liens, charges,
encumbrances and claims whatsoever.
5. Landlord's Warranties. Landlord hereby represents and warrants
to Assignee that:
(a) The term of the Lease began June 1, 1994 and will expire May
31, 1999.
(b) The current minimum rent in the amount of $5,156.02 per month
and all other sums due thereunder, have been paid in
accordance with the terms of the Lease through the date
hereof, and Landlord holds no security deposit with respect to
the Lease.
(c) To the best of Landlord's knowledge, as of the date hereof,
Landlord is entitled to no penalties, interest or offset under
the Lease.
(d) As of the date hereof, the Lease is in full force and effect
and, to the best of Landlord's knowledge, no default exists
thereunder.
(e) Landlord has not assigned, hypothecated, pledged or otherwise
transferred all or any portion of its interest under the Lease
except to Equitable of Iowa or its affiliate under a first
mortgage loan.
(f) The copy of the Lease attached hereto as Exhibit A is a true
and correct copy of the Lease. The Lease has not been modified
or amended except as indicated on Exhibit A. The Lease
constitutes the only agreement relating to the lease of the
Leasehold Estate from Landlord to Assignor.
6. Tenant's Sign. Assignee agrees that it will remove its sign
from the exterior facade of the Property within thirty (30) days after the date
hereof. If Assignee replaces such sign, the new sign will comply with Landlord's
sign specifications, a copy of which has been delivered to Assignee prior to the
execution of this document.
2
<PAGE>
7. Miscellaneous. Each party agrees that it will execute and
deliver such additional documents as are necessary or reasonable to give effect
to this Assignment or any provisions hereof If any party refers this Assignment
to an attorney to assist in its enforcement, the prevailing party in any action
on the dispute shall be entitled to an award of its costs and attorneys' fees
incurred in connection therewith. This Assignment shall be governed by the law
of the State of Texas. This Assignment shall be binding upon, and shall inure to
the benefit of, the heirs, successors, assigns and personal representatives of
the parties. This Assignment may be executed in one or more counterparts, each
of which is an original and all of which constitute one agreement.
[SIGNATURE PAGE FOLLOWS]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as
of the date first above written.
"Assignor"
AMERICAN PHARMACEUTICAL SERVICES,
INC., a Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
"Assignee"
APS-SKILLED CARE PHARMACY, L.L.C., a
Delaware limited liability company
By: American Pharmaceutical Services,
Inc., a Delaware corporation, Member
By:_____________________________
Name:___________________________
Title:__________________________
By: Summit Care Pharmacy, Inc., a
California corporation, Member
By:_____________________________
Name:___________________________
Title:__________________________
"Landlord"
PROMONTORY INVESTORS, LTD., a Texas
limited partnership
By: Cameron Road Investors, Ltd., a Texas
limited liability company
By:_____________________________
Name: Mark S. Scher
Title: Director
S-1
<PAGE>
EXHIBIT A
THE LEASE
Attached.
<PAGE>
A-1
EXHIBIT B
CONSENT TO ASSIGNMENT OF LEASE
[SEE EXHIBIT A]
<PAGE>
EXHIBIT C
GENERAL CONVEYANCE AND ACCEPTANCE
AND ASSIGNMENT OF INTERESTS AND ASSUMPTION OF LIABILITIES
[SEE ATTACHED]
<PAGE>
GENERAL CONVEYANCE AND ACCEPTANCE
AND ASSIGNMENT OF INTERESTS AND ASSUMPTION OF LIABILITIES
This General Conveyance and Acceptance and Assignment of Interests and
Assumption of Liabilities (the "General Conveyance") is hereby entered into and
delivered by and between American Pharmaceutical Services, Inc., a Delaware
corporation ("APS"), and APS-Summit Care Pharmacy, L.L.C., a Delaware limited
liability company ("LLC"), effective as of November 30, 1996, in connection with
that certain Asset Contribution Agreement of even date herewith (the "Asset
Contribution Agreement"). The terms of the Asset Contribution Agreement are
hereby incorporated herein by this reference.
For valuable consideration, the receipt and adequacy of which are
hereby acknowledged, APS hereby contributes, transfers and assigns to LLC, in
accordance with the terms of the Asset Contribution Agreement, all of APS's
rights, title and interest in and to the Contributed Assets (as defined in
Article I of the Asset Contribution Agreement). In accordance with the terms of
the Asset Contribution Agreement, LLC hereby accepts the Contributed Assets and
assumes the Assumed Liabilities (as defined in Article II of the Asset
Contribution Agreement).
APS hereby covenants and agrees to take all steps reasonably necessary
to establish the record of LLC's title to the Contributed Assets contributed,
transferred and assigned in accordance with this General Conveyance.
This General Conveyance is executed in, and shall be governed by, the
laws of the State of Texas.
IN WITNESS WHEREOF, the parties have executed this General Conveyance
effective as of the date first written above.
AMERICAN PHARMACEUTICAL APS-SUMMIT CARE PHARMACY, L.L.C.,
SERVICES, INC., a a Delaware limited liability company
Delaware corporation
By: American Pharmaceutical Services, Inc.
a Delaware corporation, its member
By:_____________________________
By:_________________________________
Its:____________________________
Its:________________________________
By: Summit Care Pharmacy, Inc., a
California corporation, its member
By:_________________________________
Its:________________________________
<PAGE>
EXHIBIT D
EMPLOYEE SERVICES AGREEMENT
[SEE ATTACHED]
<PAGE>
EMPLOYEE SERVICES AGREEMENT
This Employee Services Agreement (the "Agreement") is made as of this
30th day of November, 1996 by and between APS-Summit Care Pharmacy, L.L.C., a
Delaware limited liability company ("Joint Venture"), and American
Pharmaceutical Services, Inc., a Delaware corporation ("APS").
RECITALS
A. Joint Venture was formed pursuant to that certain Limited
Liability Agreement, dated as of the date hereof (the "LLC Agreement"), by and
between APS and Summit Care Pharmacy, Inc., a California corporation.
B. Joint Venture owns and operates a pharmacy located at 2324
Ridgepoint Drive, Suite G-1, Austin, Texas (the "Pharmacy") providing
pharmaceutical supplies and services to long-term care facilities that are
located in the Austin, Texas area (the "Business").
C. Joint Venture desires that APS provide, and APS desires to
provide, employee services to operate the Business in the ordinary course of
business according to the terms and provisions of this Agreement.
AGREEMENT
1. Provision of Employee Services. APS shall make commercially
reasonable efforts to provide to Joint Venture, at the request of Joint Venture,
the services of APS employees that are reasonably necessary to operate the
Business in a manner consistent with its past operation and with its reasonable
business needs (the "Employee Services"). The employees providing the Employee
Services (the "Leased Employees") shall work on-site at the Pharmacy during its
regular business hours and shall also be available during non-business hours,
consistent with APS personnel policies, with the past operation of the Business
and with its reasonable business needs. The Leased Employees shall hold all such
licenses or other professional qualifications as are reasonably necessary for
the operation of the Business in the ordinary course of business.
2. Compensation for Employee Services. APS shall be solely
responsible for paying the costs of providing the Employee Services (the
"Employee Costs"), including, without limitation, (i) the salaries or wages, as
applicable, of the Leased Employees, including, without limitation, vacation
pay, sick pay, payroll taxes and severance costs, (ii) the cost of employee
benefits programs for the Leased Employees, to the extent such benefits are
customarily provided to APS employees, including, without limitation, health
insurance, life insurance, disability insurance, worker's compensation
insurance, malpractice insurance, other customary insurance, retirement programs
and profit sharing plans, and (iii) a reasonable allocation for the overhead
costs of APS in employing the Leased Employees. Joint Venture shall reimburse to
APS the amount of all Employee Costs during the term of this Agreement. As soon
as practicable after the end of each calendar month, APS shall deliver to Joint
Venture a statement setting forth the Employee Costs that are attributable to
such month. Joint Venture shall pay the Employee Costs reflected on such
statement on or before the fifth (5th) day after receipt of such statement.
1
<PAGE>
3. Employee Management. Subject to the provisions of Section I
hereof and except as otherwise required by applicable law, Joint Venture shall
supervise and manage the day-to-day duties of the Leased Employees and be liable
for their actions in such capacity. Joint Venture hereby agrees to comply with
all applicable laws and regulations and to follow APS personnel policies with
respect to the Leased Employees. APS, in its sole discretion, shall make all
hiring and termination decisions, establish and pay all wages, salaries and
compensation, determine staffing levels, individual work hours, personnel
policies and employee benefit programs for all of the Leased Employees, all
consistent with APS's personnel policies. APS shall consult with Joint Venture
on such matters, but all final decisions shall be those of APS, in its sole
discretion.
4. Ownership of Employee Records. All records and information
relating to the Leased Employees shall remain the property of APS.
5. Term. This Agreement shall commence on the date hereof and
shall terminate on the date that APS ceases to hold at least fifty percent (50%)
of the membership interests in Joint Venture.
6. Indemnity by Joint Venture. Joint Venture hereby indemnifies,
saves and holds harmless APS, its affiliates and subsidiaries, and its and its
affiliates' and subsidiaries' respective officers, directors, principals,
attorneys, agents or other representatives (collectively, "APS Indemnified
Parties") from and against all costs, losses, liabilities, damages, lawsuits,
deficiencies, claims and expenses (whether or not arising out of third party
claims), including, without limitation, interest, penalties, reasonable
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing incurred in connection with or arising out of the actions
of the Leased Employees while leased to Joint Venture pursuant hereto or the
Leased Employees' employment on-site at the Clinic, including, without
limitation, claims for discrimination, harassment and workplace injury. Nothing
contained herein is intended to relieve any APS Indemnified Party of its
respective obligations arising as a result of APS's status as a member in Joint
Venture.
7. Indemnity by APS. APS hereby indemnifies, saves and holds
harmless Joint Venture, its affiliates and subsidiaries, and its and its
affiliates' and subsidiaries' respective officers, directors, principals,
attorneys, agents or other representatives (collectively, "Joint Venture
Indemnified Parties") from and against all costs, losses, liabilities, damages,
lawsuits, deficiencies, claims and expenses (whether or not arising out of third
party claims), including, without limitation, interest, penalties, reasonable
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing incurred in connection with or arising out of the failure
by APS to timely pay any Employee Costs as contemplated by the first sentence of
Section 2 hereof or any decisions by APS to fire or otherwise discipline Leased
Employees to the extent that a Majority in Interest (as defined in the "LLC
Agreement") did not agree with such decision to fire or discipline.
8. No Liability. In no event shall APS, or its successors and
assigns, representatives, agents, advisors, partners, consultants, affiliates,
contractors, counsel, shareholders, directors, officers and employees, be liable
to Joint Venture under or in connection
2
<PAGE>
with this Agreement under any theory of tort, contract, strict liability or
other legal or equitable theory for any damages, direct or indirect,
consequential or otherwise except for such damages that result from the
recklessness or willful misconduct of APS and except for the intentional
repudiation by APS of its obligations hereunder when such intentional
repudiation is not reasonable under the existing circumstances. Nothing
contained herein is intended to relieve any APS Indemnified Party of its
respective obligations arising as a result of APS's status as a member in Joint
Venture.
9. Assignment and No Third Party Beneficiaries. Neither this
Agreement nor any of the rights or obligations hereunder may be assigned by any
party without the prior written consent of the other party. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, and no
other person shall have any right, benefit or obligation under this Agreement as
a third party beneficiary or otherwise.
10. Choice of Law. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of Texas (without reference to the choice of law provisions of Texas law).
11. Entire Agreement; Amendments and Waivers. This Agreement
together with all exhibits to be attached hereto constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes or will supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties. To the extent that the
provisions of the exhibits to be attached hereto conflict with the provisions of
this Agreement, the provisions of this Agreement shall control. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
12. Notices. All notices, requests, and other communications which
may be given under this Agreement (other than orders hereunder, which shall be
placed as provided herein) shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if
transmitted by telecopy; the day after being sent, if sent for next day delivery
by recognized overnight delivery service (e.g., FedEx); and upon receipt, if
sent by certified or registered mail, return receipt requested. In each case
notice shall be given as follows:
If to Joint Venture, addressed to:
APS-Summit Care Pharmacy, L.L.C.
2324 Ridgepoint Drive, Suite G-1
Austin, TX 78754
Telecopy Number:__________________
3
<PAGE>
Attention: Terry Davis
with a copy to the same address:
Attention: Jesse Martinez
If to APS, addressed to:
American Pharmaceutical Services, Inc.
Diehl Road, Suite 210
Naperville, IL 60563
Telecopy Number: (708) 305-0824
Attention: President
with a copy to the same address:
Attention: General Counsel
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. Relationship. Nothing herein shall be deemed to create a
partnership, joint venture or other similar relationship. Joint Venture and APS
shall not be construed as partners of each other by reason of this Agreement,
and neither shall have the power to bind or obligate the other except as
specifically set forth herein.
[SIGNATURE PAGE FOLLOWS]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AMERICAN PHARMACEUTICAL SERVICES,
INC., a Delaware corporation
By:_____________________________
Name:___________________________
Title:__________________________
APS-SKILLED CARE PHARMACY, L.L.C., a
Delaware limited liability company
By: American Pharmaceutical Services,
Inc., a Delaware corporation, Member
By:_____________________________
Name:___________________________
Title:__________________________
By: Summit Care Pharmacy, Inc., a
California corporation, Member
By:_____________________________
Name:___________________________
Title:__________________________
S-1
<PAGE>
SCHEDULE 1.1(b)
PURCHASED CONTRACTS
[SEE ATTACHED]
<PAGE>
CUSTOMER/SERVICE SEGMENTS
9/30/96
<TABLE>
<CAPTION>
----------
Area/Reg. Territ. Facility Name City SL AFFIL. C RX
- --------- ------- ------------------- ---------------- -- ------ --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
C/MS P-CONS Aldwyche Group Austin TX LCA X X
C/MS CTX Alexander CC Austin TX LCA X X
C/MS P-PHRM Arbor Austin TX PCA X
C/MS CTX Arboretum S. Marcos TX X X
C/MS P-PHRM Austin Manor Austin TX 3927 X X
C/MS CTX Austin NC Austin TX X X
C/MS CTX B. Gardens Austin TX Mart X X
C/STX P-PHRM Barton House Austin TX X
C/MS CTX Bastrop Nursing Bastrop TX LCA X X
C/MS CTX Brazos Valley Geri College Station TX LCA X X
C/MS P-PHRM Canon Oaks Austin TX PCA X
C/MS P-PHRM Capital City Austin TX PCA X
C/MS P-PHRM Cent Tx Treatment Austin TX X
C/MS CTX CI-Lagrange Lagrange TX LCA X X
C/MS CTX CI-Liano Liano TX LCA X X
C/MS P-PHRM Clairmont Austin TX X
C/MS P-PHRM Concept Six Austin TX X X
C/MS Crestview Methodist Brian TX
C/MS CTX Crestview Manor Belton TX LCA X X
C/STX SAN Deer Creek Nursing Wimberly TX LCA X X
C/STX P-PHRM Four Seasons Austin TX X
C/MS CTX Gracy Woods Austin TX X
C/MS Gracy Woods II Austin TX LCA X
C/STX P-PHRM Heartland Austin YX HCR X X
C/MS CTX Heritage Park Austin TX HCCI X X
C/MS Home Patients Austin TX X
C/MS P-PHRM Indian Wells Austin TX X X
C/MS P-PHRM Lalla Austin TX X
C/MS P-PHRM M. Johnson N C Austin TX X X
C/MS P-CONS M.L. Southpointe Austin TX X X
C/MS CTX Marbridge Manchaca TX X X
C/MS P-PHRM Mary Lee Res Ctr Austin TX X
C/MS P-CONS Marywood Group Austin TX LCA X
C/MS P-PHRM Mason CC Mason TX 3927 X
C/MS P-PHRM Monte Siesta Austin TX X
C/MS CTX Oak Manor NC Flatonia TX Summit
C/MS CTX Oakland Manor Giddings TX Summit
C/MS P-CONS Parkfield Group Austin TX LCA X X
C/MS CTX Pecan Grove Austin TX X X
C/MS P-CONS Pendleton Group Austin TX LCA X X
C/MS CTX Pflugerville HC Pflugerville TX X
C/MS P-PHRM Regency Village Austin TX X X
C/MS P-PHRM Renaissance Georgetown TX X
C/MS CTX Retirement & NC Austin TX X X
C/MS P-PHRM River Gardens New Brauniels TX X X
C/MS CTX River Haven Georgetown TX X X
C/MS P-PHRM Scissortail Austin TX X X
C/MS P-PHRM Settlement Home Austin TX X
C/MS CTX Sierra Health Austin TX Sierra X
C/MS P-CONS Silverway Group Austin TX LCA X X
C/MS P-PHRM Skyview Austin TX X X
C/MS CTX Southwood Austin TX Summit X
C/MS P-PHRM Stratford House Austin TX X
C/MS P-PHRM Summit HCC Austin TX X X
C/MS CTX Sweetbriar Taylor Taylor TX LCA X X
C/MS CTX The Hearthstone Roundrock TX LCA X X
??? CT ???????? TX X X
C/MS P-CONS Wagon Crossing Austin TX LCA X X
C/STX P-PHRM Walnut Hills Austin TX X X
C/MS CTX Westminster HC Austin TX X X
</TABLE>
<PAGE>
SCHEDULE 1.1(d)
PERSONAL PROPERTY, FIXTURES AND EQUIPMENT
[SEE ATTACHED]
<PAGE>
November 19, 1996 Page 1
9:23 AM
American Pharmamceutical Services
DEPRECIATION EXPENSE REPORT
as of 09/30/1996
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
In Svc Acquired Dep P Est Salvage/ Depreciable Thru Prior Acc
SYS No Ext Date Value Meth T Life Sect 179 Basis Date Depreciati
- --------------------------------------------------------------------------------------
Book: Book 6 FY: September
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
000085 000 10/01/94 4206.02 SLMM P 04 07 0.00 4206.02 08/96 917.
000086 000 10/01/94 3923.73 SLMM P 04 08 0.00 3923.73 08/96 840.
000087 000 10/01/94 2376.87 SLMM P 04 10 0.00 2376.87 08/96 491.
000088 000 10/01/94 4632.48 SLMM P 04 11 0.00 4632.48 08/96 942.
000089 000 07/01/94 69600.00 SLMM P 04 10 0.00 69600.00 08/96 14400.
000090 000 10/01/94 18191.29 SLMM P 04 09 0.00 18191.29 08/96 3829.
000091 000 10/01/94 3062.40 SLMM P 04 10 0.00 3062.40 08/96 633.
000092 000 10/01/94 905.91 SLMM P 04 11 0.00 905.91 08/96 184.
000093 000 10/01/94 7440.00 SLMM P 02 03 0.00 7440.00 08/96 3288.
000094 000 10/01/94 16137.00 SLMM P 02 09 0.00 16137.00 08/96 5868.
000095 000 10/01/94 1095.56 SLMM P 02 10 0.00 1095.56 08/96 386.
000370 000 10/01/94 276.98 SLMM P 04 06 0.00 276.98 08/96 61.
000371 000 10/01/94 34.88 SLMM P 04 06 0.00 34.88 08/96 7.
000372 000 10/01/94 2.78 SLMM P 04 08 0.00 2.78 08/96 0.
000373 000 10/01/94 133.90 SLMM P 04 06 0.00 133.90 08/96 29.
000374 000 10/01/94 56.84 SLMM P 04 07 0.00 56.84 08/96 12.
000375 000 10/01/94 226.24 SLMM P 04 06 0.00 226.24 08/96 50.
000376 000 10/01/94 138.22 SLMM P 04 06 0.00 138.22 08/96 30.
000377 000 10/01/94 988.20 SLMM P 04 06 0.00 988.20 08/96 219.
000378 000 10/01/94 1312.20 SLMM P 04 06 0.00 1312.20 08/96 291.
000379 000 10/01/94 2102.26 SLMM P 04 06 0.00 2102.26 08/96 467.
000380 000 10/01/94 1341.19 SLMM P 04 06 0.00 1341.19 08/96 298.
000381 000 10/01/94 6268.75 SLMM P 04 03 0.00 6268.75 08/96 1475.
000663 000 10/01/94 97.90 SLMM P 04 06 0.00 97.90 08/96 21.
000664 000 10/01/94 144.96 SLMM P 04 06 0.00 144.96 08/96 32.
000666 000 10/01/94 4291.50 SLMM P 02 03 0.00 4291.50 08/96 1907.
000667 000 10/01/94 5922.50 SLMM A 01 02 0.00 5922.50 11/95 2369.
000668 000 10/01/94 3742.99 SLMM A 02 06 0.00 3742.99 08/96 1497.
000669 000 10/01/94 6742.35 SLMM A 02 06 0.00 6742.35 08/96 2696.
000670 000 10/01/94 3240.00 SLMM A 02 03 0.00 3240.00 07/96 1440.
000671 000 10/01/94 5359.50 SLMM A 02 03 0.00 5359.50 07/96 2382.
001103 000 03/01/95 1495.30 SLMM P 05 00 0.00 1495.30 08/96 174.
001104 000 05/01/95 1674.00 SLMM P 05 00 0.00 1674.00 08/96 139.
001105 000 12/01/94 3122.00 SLMM P 05 00 0.00 3122.00 08/96 520.
001106 000 10/01/94 17426.80 SLMM P 04 00 0.00 17426.80 08/96 0.
001107 000 10/01/94 1561.00 SLMM P 04 00 0.00 1561.00 08/96 0.
001108 000 10/01/94 5855.00 SLMM P 04 00 0.00 5855.00 08/96 0.
001109 000 10/01/94 3155.34 SLMM P 05 00 0.00 3155.34 08/96 105.
001110 000 10/01/94 43.38 SLMM P 05 00 0.00 43.38 08/96 1.
001111 000 08/01/95 2550.00 SLMM P 05 00 0.00 2550.00 08/96 85.
001112 000 10/01/94 4152.80 SLMM P 05 00 0.00 4152.80 08/96 622.
001113 000 01/01/95 3141.61 SLMM P 05 00 0.00 3141.60 08/96 471.
001114 000 05/01/95 1475.74 SLMM P 05 00 0.00 1475.74 08/96 122.
001115 000 07/01/95 3190.32 SLMM P 05 00 0.00 3190.32 08/96 159.
001116 000 10/01/94 1595.16 SLMM P 05 00 0.00 1595.16 08/96 26.
001117 000 10/01/94 187.89 SLMM P 02 00 0.00 187.89 08/96 0.
002811 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00 08/96 0.
002812 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00 08/96 0.
</TABLE>
<PAGE>
November 19, 1996
9:23 A.M. Page 2
American Pharmaceutical Services
DEPRECIATION EXPENSE REPORT
as of 09/30/1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
In Svc Acquired Dep P Est Salvage/ Depreciable
SYS No. Ext Date Value Meth T Life Sect 179 Basis
- --------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
002814 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002815 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002816 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002817 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002818 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002819 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002820 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002821 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002822 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002823 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002824 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002825 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002826 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002837 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002842 000 10/01/94 0.00 SLMM P 01 00 0.00 0.00
002843 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002844 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002845 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002846 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002847 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002848 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002849 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002850 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002854 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002855 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
002856 000 10/01/94 0.00 SLMM P 10 00 0.00 0.00
003042 000 10/01/94 16308.48 SLMM A 03 02 0.00 16308.48
003091 000 10/01/94 17190.22 SLMM A 03 04 0.00 17190.22
003338 000 10/01/94 15859.49 SLMM R 04 10 0.00 15859.49
003339 000 10/01/94 1497.37 SLMM P 04 10 0.00 1497.37
003340 000 10/01/94 7947.31 SLMM P 04 10 0.00 7947.31
003341 000 10/01/94 8475.38 SLMM P 04 10 0.00 8475.38
003342 000 10/01/94 1489.63 SLMM P 05 00 0.00 1489.63
003343 000 10/01/94 4632.48 SLMM P 04 11 0.00 4632.48
003344 000 02/01/95 444.18 SLMM A 02 00 0.00 444.18
003345 000 04/01/95 17466.81 SLMM A 04 00 0.00 17466.81
003346 000 09/09/95 17722.38 SLMM A 03 04 0.00 17722.38
003347 000 12/01/95 15885.61 SLMM A 03 04 0.00 15885.61
003348 000 10/01/94 6850.25 SLMM P 02 09 0.00 6850.25
003349 000 10/01/94 4067.91 SLMM P 02 09 0.00 4067.91
003350 000 10/01/94 252.96 SLMM P 02 10 0.00 252.96
003351 000 10/01/94 760.77 SLMM P 02 10 0.00 760.77
003358 000 02/01/96 584.00 SLMM P 05 00 0.00 584.00
003359 000 10/01/95 2954.00 SLMM P 05 00 0.00 2954.00
003360 000 12/01/95 5866.00 SLMM P 05 00 0.00 5866.00
003361 000 01/01/96 722.86 SLMM P 05 00 0.00 722.86
003662 000 10/01/94 2395.88 SLMM P 01 02 0.00 2395.88
003664 000 10/01/94 19.51 SLMM P 01 01 0.00 19.51
003665 000 10/01/94 68.23 SLMM P 01 01 0.00 68.23
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------
Current Year Curr Accum
to Date Depreciation Key
- -------------------------------------------------
<S> <C> <C>
002814 0.00 0.00
002815 0.00 0.00
002816 0.00 0.00
002817 0.00 0.00
002818 0.00 0.00
002819 0.00 0.00
002820 0.00 0.00
002821 0.00 0.00
002822 0.00 0.00
002823 0.00 0.00
002824 0.00 0.00
002825 0.00 0.00
002826 0.00 0.00
002837 0.00 0.00
002842 0.00 0.00
002843 0.00 0.00
002844 0.00 0.00
002845 0.00 0.00
002846 0.00 0.00
002847 0.00 0.00
002848 0.00 0.00
002849 0.00 0.00
002850 0.00 0.00
002854 0.00 0.00
002855 0.00 0.00
002856 0.00 0.00
003042 5150.04 10300.09
003091 5157.11 10314.18
003338 3281.28 6562.55
003339 309.84 619.64
003340 1644.26 3288.53
003341 1753.56 3507.09
003342 306.46 614.66
003343 942.24 1884.44
003344 222.12 370.18
003345 4411.06 6550.04
003346 5759.77 5759.77
003347 3971.40 3971.40
003348 2491.00 4982.00
003349 1479.24 2958.48
003350 89.28 178.56
003351 268.55 537.06
003358 77.87 77.87
003359 590.80 590.80
003360 977.70 977.70
003361 108.45 108.45
003662 319.44 1277.79 d
003664 1.44 5.78 d
003665 5.04 20.20 d
</TABLE>
<PAGE>
November 19, 1996 Page 3
9:23 AM
American Pharmaceutical Services
DEPRECIATION EXPENSE REPORT
as of 09/30/1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Depre- D
In Svc Acquired Dep P Est Salvage/ ciable Thru Prior Accum c
SYS No Ext Date Value Meth T Life Sec 179 Basis Date Depreciation T
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
003666 000 10/01/94 61.71 SLMM P 01 01 0.00 61.71 10/95 13.71
003667 000 10/01/94 784.80 SLMM P 01 01 0.00 784.80 10/95 174.40
003668 000 10/01/94 162.34 SLMM P 01 01 0.00 162.34 10/95 36.08
003671 000 06/01/96 1821.08 SLMM P 10 00 0.00 1821.08 08/96 0.00
003687 000 09/30/96 16900.65 SLMM A 03 04 0.00 16900.65 00/00 0.00
003807 000 09/30/96 1431.41 SLMM P 05 00 0.00 1431.41 00/00 0.00
003808 000 09/30/96 1554.00 SLMM P 05 00 0.00 1554.00 00/00 0.00
Count= 104 --------- ---- --------- -------- --
Grand Total 396799.44 0.00 396799.44 75867.46 76
Less disposals
and transfers 18014.47 0.00 18014.47 7393.04
--------- ---- --------- -------- --
Net 378784.97 0.00 378784.97 68474.42 76
========= ==== ========= ======== ==
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------Calculation Assumptions---------------------------------
Book Short Years Midquarter Convention Adjustment Convention
------ ----------- --------------------- ---------------------
<S> <C> <C> <C>
Book 6 [N] [N] Immediate
</TABLE>
- -----------------------------Asset Grouping/Sorting----------------------------
Group: Location 125
Include Assets that meet the following conditions:
Location is 125
Sort Assets by:
- --------------------------------------Key--------------------------------------
d: Asset has been disposed of.
<PAGE>
SCHEDULE 1.1 (e)
LICENSES AND PERMITS
1. Texas Pharmacy License No.: 15974, expires 05/31/97
2. Medicaid No.: 350045
3. DEA No.: BA-4304109, expires 06/30/97
4. NABP No.: 4591637
5. NHIC No.: VP3500457
6. Texas Controlled Substances
Registration Certificate No.: X0088579, expires 08/31/97
<PAGE>
SCHEDULE 1.1(g)
LICENSED NAME
AMERICAN PHARMACEUTICAL SERVICES
<PAGE>
SCHEDULE 1.1 (i)
FACILITY RECORDS
Copies of all books and records, computer tapes, disks and data located at the
Facility that relate exclusively to the Facility and the Contributed Assets.
<PAGE>
SCHEDULE 3.4
ALLOCATION
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
- ----------- ------
<S> <C>
Inventories $ 388,403
Fixed Assets 198,214
Capital Leases (46,036)
----------
Total Net Assets $ 540,581
==========
Goodwill $2,459,419
----------
Total Value of Contributed Assets $3,000,000
==========
</TABLE>
<PAGE>
SCHEDULE 6.1
PERMITTED ENCUMBRANCES
NONE.
<PAGE>
EXHIBIT 6.1A
FINANCING STATEMENT FILINGS
<TABLE>
<CAPTION>
Debtor Name Records Searched Type of Secured Party
Search
============================================================================
<S> <C> <C> <C>
American Secretary of State UCC Cash Flow
Pharmaceutical State of Texas Management,
Services, Inc. Inc.
American Secretary of State Federal Internal
Pharmaceutical State of Texas Tax Revenue
Services, Inc., a Lien Service,
Corporation Dallas, Texas
American Secretary of State Federal
Pharmaceutical State of Texas Tax Internal
Services, Inc., a Lien Revenue
Corporation Service,
Dallas, Texas
</TABLE>
<TABLE>
<CAPTION>
Debtor Name Scope of Lien Date Conti
Filed Assi
=================================================================================================================
<S> <C> <C> <C>
American All accounts, instruments, 4/3/92 N/A
Pharmaceutical documents, inventory, equipment,
Services, Inc. intangibles, all goods and inventory,
books, records, etc.
N/A
American Taxes due for periods ending 1/29/93
Pharmaceutical 6/30/92 and 9/30/92 in the total
Services, Inc., a amount of $109,239.48 plus interest
Corporation and penalties
American
Pharmaceutical Taxes due for periods ending 5/26/93 N/A
Services, Inc., a 6/30/92, 9/30/92 and 12/31/92 in the
Corporation total amount of $161,528.71 plus
interest and penalties
</TABLE>
<PAGE>
SCHEDULE 6.2
NONCOMPLIANCE WITH LICENSING REQUIREMENTS
NONE.
<PAGE>
SCHEDULE 6.6
LEASES AND OTHER MATERIAL AGREEMENTS
[SEE ATTACHED]
<PAGE>
American Pharmaceutical Services
Vehicle Lease Schedule
As of September 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PURCH TRM ORIGINAL
UNIT# BR YR MAKE MODEL SERIAL NUMBER DATE MOS COST
- ------ -- -- ---- ----- ------------- ---- --- ----
9409 #025 1994 FORD VAN IFTDA14U9RZB34046 08/10/94 40 17,166.84
9411 #025 1995 FORD VAN IFTDA14U8SZA00733 09/13/94 40 17,190.22
9516 #025 1995 FORD VAN IFTDA14UXSZA91066 07/24/95 40 17,722.39
9506 #025 1995 FORD VAN IFTDA14U4SZA35043 03/20/95 40 17,466.81
9528 #025 1995 FORD VAN IFTDA14U7SZC21093 12/25/95 36 15,885.61
96018 #025 1996 FORD ESCORT IFASP1536TW148995 06/30/96 13,318.91
-----------
AUSTIN TOTAL 98,750.78
------------
</TABLE>
<TABLE>
<CAPTION>
NET ORGNL MNTHLY REMN PRIN LEASE
BOOK INT PRN PYMT MOS ON OBLGTN CUR LT
UNIT# VALUE RATE (DEPR) LEASE 12/31/94 PRTN PRTN
------ ----- ---- ------ ----- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
9409 6,624.09 414.01 16 6,624.16 4,968.12 1,656.04
9411 7,616.91 400.85 19 7,616.15 4,810.20 2,805.95
9516 12,521.48 417.38 30 12,521.40 5,008.56 7,512.84
9506 10,457.86 418.31 25 10,457.75 5,019.72 5,438.03
9528 12,955.67 417.92 31 12,955.52 5,015.04 7,940.48
96018 13,318.91 0.00 1 0.00 0.00 0.00
--------- -------- --------- --------- ---------
AUSTIN TOTAL 63,494.20 2,068.47 50,174.98 24,821.64 25,353.34
- ------------
</TABLE>
<PAGE>
DUPLICATE
[ARI LOGO] MOTOR VEHICLE LEASE AGREEMENT
AUTOMOTIVE RENTALS, INC. (ARI) hereby leases to AMERICAN PHARMACEUTICAL
SERVICES, INC. (Lessee), the vehicle referred to herein for the rental set forth
herein. This Lease Agreement and any assignment hereof is subject to all the
terms and conditions of the Agreement dated 10/13/94 between ARI and Lessee
covering the leasing of vehicles to Lessee all of which are incorporated herein
by reference.
ARI hereby assigns to CORESTATES BANK NA AGENT (Assignee) all right, title and
interest of ARI in and to all moneys due and to become due under this Lease
Agreement and ARI hereby authorizes Assignee to collect all such moneys when
due, either in the name of Assignee or ARI. Lessee hereby agrees to this
assignment.
To induce Assignee to accept on assignment of ARI's rights hereunder, Lessee
agrees that upon such assignment all rights and remedies of ARI hereunder shall
vest in and be exercisable by Assignee that Lessee will render performance of
Lessee's obligation hereunder to Assignee rather than ARI and that the rights of
Assignee to rentals and other sums due hereunder shall not be subject to any
defense (except payment), off-set, counter-claim or recoupment of Lessee
whatsoever arising from the breach of warranty or representation relating to the
motor vehicle whether made by the manufacturer thereof, ARI or any other person,
or arising from the breach or failure of ARI to observe or perform the
provisions of this Lease Agreement or any other agreement between ARI and Lessee
or arising from any course whatsoever. Lessee also agrees that nothing
(including termination of this Lease Agreement) except full payment to Assignee
of the Capitalized Value set forth below, with interest to date of such payment
as specified below, shall be sufficient to terminate liability of Lessee to make
payment to Assignee under this Lease Agreement. Lessee also agrees to continue
to make prompt payment to Assignee of the rentals due hereunder even if
bankruptcy, reorganization, arrangement, insolvency, liquidation or dissolution
proceedings are instituted by or against ARI and regardless whether a trustee or
receiver in any such proceedings shall assume or reject this Lease Agreement or
other agreement between ARI and Lessee. Lessee also agrees that Assignee does
not assume any obligations arising hereunder and Lessee will look solely to ARI
for the performance of any such obligations.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
VEHICLE INFORMATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
YR & MAKE - 1995 FORD MODEL - A14 C VAN VEHICLE # - 0025-09528
ENGINE - 6 CYL. 3.0 LITER EXT COLOR - OXFORD WHITE LESSEE # - 0647-00
SERIAL # - 1FTDA14U7SZC21093 DELIVERY DATE - 12/25/95 REVISION DATE:02/13/96 REVISION NO: 02
- ----------------------------------------------------------------------------------------------------------
S = SIDEBILLED D = DEALER INSTALLED EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
VINYL INT
DUAL BUCKETS
P215/75R14 BSW
FXD SD DOOR GLS
SWING LOCK MIRR
MANUAL AIR COND
RADIO AM/FM CAS D
000000
- ----------------------------------------------------------------------------------------------------------
COST
- ----------------------------------------------------------------------------------------------------------
CAPPED CAPPED CAPPED
DESCRIPTION AMOUNT DESCRIPTION AMOUNT DESCRIPTION AMOUNT
- ----------------------------------------------------------------------------------------------------------
BASE COST 14,783.35
P&H 150.00
SIDEBILL 225.00-
MODAGRAFICS BODY CST1 14.24
DLR INSTL ITEMS 225.00
SALES TAX 938.02
TOTAL COST 15,885.61
- ----------------------------------------------------------------------------------------------------------
LEASE INFORMATION
- ----------------------------------------------------------------------------------------------------------
OPEN END LEASE - PERIOD BEGINS: 01/96 TOTAL CAPITALIZATION: 15,885.61
* * * * * * RATES BELOW REFLECT DEPRECIATION AND ADMINISTRATIVE FEE ONLY * * * * * *
RATE AMT
1ST-12TH MONTH .02868 $455.60 PER MONTH DEPRECIATION PERIOD 36 MONTHS @ $441.30
13TH-24TH MONTH .02868 $455.60 PER MONTH
25TH-36TH MONTH .02868 $455.60 PER MONTH
FINANCIAL INFO
INT-TYPE: FLOAT INDEX: COMM PAPER FACTOR-SCHEDULE: 107
- ----------------------------------------------------------------------------------------------------------
CENTMARTINE
</TABLE>
MAILING AMERICAN PHARMACEUTICAL DRIVER NAME: TERRY DAVIS
ADDRESS: ATTN: LISA DILLON ADDRESS: AMERICAN PHARMACEUTICALS
1771 W DIEHL ROAD 2524 RIDGEPOINT DR.
SUITE 210 SUITE R1
NAPERVILLE IL 60563 AUSTIN TX 78754
Date 02/05/96 By [SIG]
------------ --------------------------
Authorized Signature
<PAGE>
DUPLICATE
MOTOR VEHICLE LEASE AGREEMENT
[ARI LOGO]
AUTOMOTIVE RENTALS, INC. (ARI) hereby leases to AMERICAN PHARMACEUTICAL
SERVICES, INC. (Lessee), the vehicle referred to herein for the rental set forth
herein. This Lease Agreement and any assignment hereof is subject to all the
terms and conditions of the Agreement dated 10/13/94 between ARI and Lessee
covering the leasing of vehicles to Lessee all of which are incorporated herein
by reference.
ARI hereby assigns to CORESTATES BANK NA AGENT (Assignee) all right, title and
interest of ARI in and to all moneys due and to become due under this Lease
Agreement and ARI hereby authorizes Assignee to collect all such moneys when
due, either in the name of Assignee or ARI. Lessee hereby agrees to this
assignment.
To induce Assignee to accept on assignment of ARI's rights hereunder, Lessee
agrees that upon such assignment all rights and remedies of ARI hereunder shall
vest in and be exercisable by Assignee that Lessee will render performance of
Lessee's obligation hereunder to Assignee rather than ARI and that the rights of
Assignee to rentals and other sums due hereunder shall not be subject to any
defense (except payment), off-set, counter-claim or recoupment of Lessee
whatsoever arising from the breach of warranty or representation relating to the
motor vehicle whether made by the manufacturer thereof, ARI or any other person,
or arising from the breach or failure of ARI to observe or perform the
provisions of this Lease Agreement or any other agreement between ARI and Lessee
or arising from any course whatsoever. Lessee also agrees that nothing
(including termination of this Lease Agreement) except full payment to Assignee
of the Capitalized Value set forth below, with interest to date of such payment
as specified below, shall be sufficient to terminate liability of Lessee to make
payment to Assignee under this Lease Agreement. Lessee also agrees to continue
to make prompt payment to Assignee of the rentals due hereunder even if
bankruptcy, reorganization, arrangement, insolvency, liquidation or dissolution
proceedings are instituted by or against ARI and regardless whether a trustee or
receiver in any such proceedings shall assume or reject this Lease Agreement or
other agreement between ARI and Lessee. Lessee also agrees that Assignee does
not assume any obligations arising hereunder and Lessee will look solely to ARI
for the performance of any such obligations.
<TABLE>
- ----------------------------------------------------------------------------------------------------------
VEHICLE INFORMATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
YR & MAKE - 1995 FORD MODEL - AEROSTAR VEHICLE # - 0043-09601
ENGINE - 6 CYL. 3.3 LITER EXT COLOR - WHITE LESSEE # - 0647-00
SERIAL # - 1FTDA14U2SZC22734 DELIVERY DATE - 01/27/96 REVISION DATE:04/17/96 REVISION NO: 02
- ----------------------------------------------------------------------------------------------------------
S = SIDEBILLED D = DEALER INSTALLED EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
CLOTH INT 004200
STD AIR COND
TINT GLASS ALL
AM-FM STEREO
PWR STEERING
PWR DISC BRAKES
CRUISE/TILT
DUAL BUCKETS
FRT LIC PLATE
FXD SD DOOR GLS
- ----------------------------------------------------------------------------------------------------------
COST
- ----------------------------------------------------------------------------------------------------------
CAPPED CAPPED CAPPED
DESCRIPTION AMOUNT DESCRIPTION AMOUNT DESCRIPTION AMOUNT
- ----------------------------------------------------------------------------------------------------------
BASE COST 16,940.35
P&H 150.00
MODAGRAFICS BODY CST1 14.15
FLEET INCENTIVE 1,000.00-
TOTAL COST 16,104.50
- ----------------------------------------------------------------------------------------------------------
LEASE INFORMATION
- ----------------------------------------------------------------------------------------------------------
OPEN END LEASE - PERIOD BEGINS: 02/96 TOTAL CAPITALIZATION: 16,104.50
* * * * * * RATES BELOW REFLECT DEPRECIATION AND ADMINISTRATIVE FEE ONLY * * * * * *
RATE AMT
1ST-12TH MONTH .02868 $461.88 PER MONTH DEPRECIATION PERIOD 36 MONTHS @ $447.38
13TH-24TH MONTH .02868 $461.88 PER MONTH
25TH-36TH MONTH .02868 $461.88 PER MONTH
FINANCIAL INFO
INT-TYPE: FLOAT INDEX: COMM PAPER FACTOR-SCHEDULE: 107
- ----------------------------------------------------------------------------------------------------------
CENTMARTINE
</TABLE>
MAILING AMERICAN PHARMACEUTICAL DRIVER NAME: JOHN KEELING
ADDRESS: ATTN: LISA DILLON ADDRESS: 34921 US HWY 19 NORTH
1771 W DIEHL ROAD PALM HARBOR FL 34684
SUITE 210
NAPERVILLE IL 60563
Date 02/02/96 By [SIG]
------------ --------------------------
Authorized Signature
<PAGE>
DUPLICATE
[ARI LOGO] MOTOR VEHICLE LEASE AGREEMENT
AUTOMOTIVE RENTALS, INC. (ARI) hereby leases to AMERICAN PHARMACEUTICAL
SERVICES, INC. (Lessee), the vehicle referred to herein for the rental set forth
herein. This Lease Agreement and any assignment hereof is subject to all the
terms and conditions of the Agreement dated 10/13/94 between ARI and Lessee
covering the leasing of vehicles to Lessee all of which are incorporated herein
by reference.
ARI hereby assigns to CORESTATES BANK NA AGENT (Assignee) all right, title and
interest of ARI in and to all moneys due and to become due under this Lease
Agreement and ARI hereby authorizes Assignee to collect all such moneys when
due, either in the name of Assignee or ARI. Lessee hereby agrees to this
assignment.
To induce Assignee to accept on assignment of ARI's rights hereunder, Lessee
agrees that upon such assignment all rights and remedies of ARI hereunder shall
vest in and be exercisable by Assignee that Lessee will render performance of
Lessee's obligation hereunder to Assignee rather than ARI and that the rights of
Assignee to rentals and other sums due hereunder shall not be subject to any
defense (except payment), off-set, counter-claim or recoupment of Lessee
whatsoever arising from the breach of warranty or representation relating to the
motor vehicle whether made by the manufacturer thereof, ARI or any other person,
or arising from the breach or failure of ARI to observe or perform the
provisions of this Lease Agreement or any other agreement between ARI and Lessee
or arising from any course whatsoever. Lessee also agrees that nothing
(including termination of this Lease Agreement) except full payment to Assignee
of the Capitalized Value set forth below, with interest to date of such payment
as specified below, shall be sufficient to terminate liability of Lessee to make
payment to Assignee under this Lease Agreement. Lessee also agrees to continue
to make prompt payment to Assignee of the rentals due hereunder even if
bankruptcy, reorganization, arrangement, insolvency, liquidation or dissolution
proceedings are instituted by or against ARI and regardless whether a trustee or
receiver in any such proceedings shall assume or reject this Lease Agreement or
other agreement between ARI and Lessee. Lessee also agrees that Assignee does
not assume any obligations arising hereunder and Lessee will look solely to ARI
for the performance of any such obligations.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
VEHICLE INFORMATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
YR & MAKE - 1995 FORD MODEL - A14 C VAN VEHICLE # - 0025-09516
ENGINE - 6 CYL. 3.0 LITER EXT COLOR - OXFORD WHITE LESSEE # - 0647-00
SERIAL # - 1FTDA14UXSZA91066 DELIVERY DATE - 07/24/95 REVISION DATE:00/00/00 REVISION NO: 00
- ----------------------------------------------------------------------------------------------------------
S = SIDEBILLED D = DEALER INSTALLED EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
VINYL INT
DUAL BUCKETS
P215/75R14 BSW
FXD SD DOOR GLS
MANUAL AIR COND
AM/FM STEREO
0053000
- ----------------------------------------------------------------------------------------------------------
COST
- ----------------------------------------------------------------------------------------------------------
CAPPED CAPPED CAPPED
DESCRIPTION AMOUNT DESCRIPTION AMOUNT DESCRIPTION AMOUNT
- ----------------------------------------------------------------------------------------------------------
BASE COST 16,191.35
P&H 150.00
MODAGRAFICS BODY CST1 14.08
DLR INSTL ITEMS 355.00
SALES TAX 1,011.95
TOTAL COST 17,722.38
- ----------------------------------------------------------------------------------------------------------
LEASE INFORMATION
- ----------------------------------------------------------------------------------------------------------
OPEN END LEASE - PERIOD BEGINS: 08/95 TOTAL CAPITALIZATION: 17,722.38
* * * * * * RATES BELOW REFLECT DEPRECIATION AND ADMINISTRATIVE FEE ONLY * * * * * *
RATE AMT
1ST-12TH MONTH .02590 $459.01 PER MONTH DEPRECIATION PERIOD 40 MONTHS @ $443.06
13TH-24TH MONTH .02590 $459.01 PER MONTH
25TH-36TH MONTH .02590 $459.01 PER MONTH
FINANCIAL INFO
INT-TYPE: FLOAT INDEX: COMM PAPER FACTOR-SCHEDULE: 107
- ----------------------------------------------------------------------------------------------------------
CENTMARTINE
</TABLE>
MAILING AMERICAN PHARMACEUTICAL DRIVER NAME: TERRY DAVIS
ADDRESS: ATTN: LISA DILLON ADDRESS: 2324 RIDGEPOINT DR.
1771 W DIEHL ROAD SUITE 41
SUITE 210 AUSTIN TX 78754
NAPERVILLE IL 60563
Date 09/21/95 By [SIG]
------------ --------------------------
Authorized Signature
<PAGE>
DUPLICATE
MOTOR VEHICLE LEASE AGREEMENT
[ARI LOGO]
AUTOMOTIVE RENTALS, INC. (ARI) hereby leases to AMERICAN PHARMACEUTICAL
SERVICES, INC. (Lessee), the vehicle referred to herein for the rental set forth
herein. This Lease Agreement and any assignment hereof is subject to all the
terms and conditions of the Agreement dated 10/13/94 between ARI and Lessee
covering the leasing of vehicles to Lessee all of which are incorporated herein
by reference.
ARI hereby assigns to CORESTATES BANK NA AGENT (Assignee) all right, title and
interest of ARI in and to all moneys due and to become due under this Lease
Agreement and ARI hereby authorizes Assignee to collect all such moneys when
due, either in the name of Assignee or ARI. Lessee hereby agrees to this
assignment.
To induce Assignee to accept on assignment of ARI's rights hereunder, Lessee
agrees that upon such assignment all rights and remedies of ARI hereunder shall
vest in and be exercisable by Assignee that Lessee will render performance of
Lessee's obligation hereunder to Assignee rather than ARI and that the rights of
Assignee to rentals and other sums due hereunder shall not be subject to any
defense (except payment), off-set, counter-claim or recoupment of Lessee
whatsoever arising from the breach of warranty or representation relating to the
motor vehicle whether made by the manufacturer thereof, ARI or any other person,
or arising from the breach or failure of ARI to observe or perform the
provisions of this Lease Agreement or any other agreement between ARI and Lessee
or arising from any course whatsoever. Lessee also agrees that nothing
(including termination of this Lease Agreement) except full payment to Assignee
of the Capitalized Value set forth below, with interest to date of such payment
as specified below, shall be sufficient to terminate liability of Lessee to make
payment to Assignee under this Lease Agreement. Lessee also agrees to continue
to make prompt payment to Assignee of the rentals due hereunder even if
bankruptcy, reorganization, arrangement, insolvency, liquidation or dissolution
proceedings are instituted by or against ARI and regardless whether a trustee or
receiver in any such proceedings shall assume or reject this Lease Agreement or
other agreement between ARI and Lessee. Lessee also agrees that Assignee does
not assume any obligations arising hereunder and Lessee will look solely to ARI
for the performance of any such obligations.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
VEHICLE INFORMATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
YR & MAKE - 1995 FORD MODEL - A14 C VAN VEHICLE # - 0025-09506
ENGINE - 6 CYL. 3.0 LITER EXT COLOR - OXFORD WHITE LESSEE # - 0647-00
SERIAL # - 1FTDA14U4SZA35043 DELIVERY DATE - 03/20/95 REVISION DATE:08/16/95 REVISION NO: 02
- ----------------------------------------------------------------------------------------------------------
S = SIDEBILLED D = DEALER INSTALLED EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
VINYL INT 000000
SWING LOCK MIRR
MANUAL AIR COND
CRUISE/TILT
AM/FM STEREO
DUAL BUCKETS
P215/75R14 BSW
FRONT LICENSE
3.73 AXLE RATIO
FXD SD DOOR GLS
- ----------------------------------------------------------------------------------------------------------
COST
- ----------------------------------------------------------------------------------------------------------
CAPPED CAPPED CAPPED
DESCRIPTION AMOUNT DESCRIPTION AMOUNT DESCRIPTION AMOUNT
- ----------------------------------------------------------------------------------------------------------
BASE COST 15,955.35
P&H 150.00
MODAGRAFICS BODY CST1 9.25
DLR INSTL ITEMS 355.00
SALES TAX 977.21
TOTAL COST 17,466.81
- ----------------------------------------------------------------------------------------------------------
LEASE INFORMATION
- ----------------------------------------------------------------------------------------------------------
OPEN END LEASE - PERIOD BEGINS: 04/95 TOTAL CAPITALIZATION: 17,466.81
* * * * * * RATES BELOW REFLECT DEPRECIATION AND ADMINISTRATIVE FEE ONLY * * * * * *
RATE AMT
1ST-12TH MONTH .02590 $452.39 PER MONTH DEPRECIATION PERIOD 40 MONTHS @ $436.67
13TH-24TH MONTH .02590 $452.39 PER MONTH
25TH-36TH MONTH .02590 $452.39 PER MONTH
37TH-40TH MONTH .02590 $452.39 PER MONTH
FINANCIAL INFO
INT-TYPE: FLOAT INDEX: COMM PAPER FACTOR-SCHEDULE: 107
- ----------------------------------------------------------------------------------------------------------
CENTMARTINE
</TABLE>
MAILING AMERICAN PHARMACEUTICAL DRIVER NAME: TERRY DAVIS
ADDRESS: ATTN: LISA GREENE ADDRESS: 2324 RIDGEPOINT DR.
1771 W DIEHL ROAD SUITE E1
SUITE 210 AUSTIN TX 78754
NAPERVILLE IL 60563
Date 04/24/95 By [SIG]
------------ --------------------------
Authorized Signature
<PAGE>
DUPLICATE
[ARI LOGO] MOTOR VEHICLE LEASE AGREEMENT
AUTOMOTIVE RENTALS, INC. (ARI) hereby leases to AMERICAN PHARMACEUTICAL
SERVICES, INC. (Lessee), the vehicle referred to herein for the rental set forth
herein. This Lease Agreement and any assignment hereof is subject to all the
terms and conditions of the Agreement dated 10/13/94 between ARI and Lessee
covering the leasing of vehicles to Lessee all of which are incorporated herein
by reference.
ARI hereby assigns to CORESTATES BANK NA AGENT (Assignee) all right, title and
interest of ARI in and to all moneys due and to become due under this Lease
Agreement and ARI hereby authorizes Assignee to collect all such moneys when
due, either in the name of Assignee or ARI. Lessee hereby agrees to this
assignment.
To induce Assignee to accept on assignment of ARI's rights hereunder, Lessee
agrees that upon such assignment all rights and remedies of ARI hereunder shall
vest in and be exercisable by Assignee that Lessee will render performance of
Lessee's obligation hereunder to Assignee rather than ARI and that the rights of
Assignee to rentals and other sums due hereunder shall not be subject to any
defense (except payment), off-set, counter-claim or recoupment of Lessee
whatsoever arising from the breach of warranty or representation relating to the
motor vehicle whether made by the manufacturer thereof, ARI or any other person,
or arising from the breach or failure of ARI to observe or perform the
provisions of this Lease Agreement or any other agreement between ARI and Lessee
or arising from any course whatsoever. Lessee also agrees that nothing
(including termination of this Lease Agreement) except full payment to Assignee
of the Capitalized Value set forth below, with interest to date of such payment
as specified below, shall be sufficient to terminate liability of Lessee to make
payment to Assignee under this Lease Agreement. Lessee also agrees to continue
to make prompt payment to Assignee of the rentals due hereunder even if
bankruptcy, reorganization, arrangement, insolvency, liquidation or dissolution
proceedings are instituted by or against ARI and regardless whether a trustee or
receiver in any such proceedings shall assume or reject this Lease Agreement or
other agreement between ARI and Lessee. Lessee also agrees that Assignee does
not assume any obligations arising hereunder and Lessee will look solely to ARI
for the performance of any such obligations.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
VEHICLE INFORMATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
YR & MAKE - 1995 FORD MODEL - A14 C VAN VEHICLE # - 0025-09411
ENGINE - 6 CYL. 3.0 LITER EXT COLOR - OXFORD WHITE LESSEE # - 0647-01
SERIAL # - 1FTDA14U8SZA00733 DELIVERY DATE - 10/13/94 REVISION DATE:00/00/00 REVISION NO: 00
- ----------------------------------------------------------------------------------------------------------
S = SIDEBILLED D = DEALER INSTALLED EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
VINYL INT S/DR FIXED GLS
STD AIR COND 1860#PAYLOAD
TINT GLASS ALL S/LK PLR MIRROR
RADIO AM/FM STE D 004200
PWR STEERING
PWR DISC BRAKES
STD TRIM
DUAL BUCKETS
P215/TIRES
3.73 AXLE RATIO
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
COST
- ----------------------------------------------------------------------------------------------------------
CAPPED CAPPED CAPPED
DESCRIPTION AMOUNT DESCRIPTION AMOUNT DESCRIPTION AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BASE COST 16,347.85
P&H 150.00
DLR INSTL ITEMS 290.00
FLEET INCENTIVE 400.00-
INCENTIVE 2 200.00-
SALES TAX 1,002.37
TOTAL COST 17,190.22
- ----------------------------------------------------------------------------------------------------------
LEASE INFORMATION
- ----------------------------------------------------------------------------------------------------------
OPEN END LEASE - PERIOD BEGINS: 10/94 TOTAL CAPITALIZATION: 17,190.22
* * * * * * RATES BELOW REFLECT DEPRECIATION AND ADMINISTRATIVE FEE ONLY * * * * * *
RATE AMT
1ST-12TH MONTH .02570 $441.79 PER MONTH DEPRECIATION PERIOD 40 MONTHS @ $429.76
13TH-24TH MONTH .02570 $441.79 PER MONTH
25TH-36TH MONTH .02570 $441.79 PER MONTH
37TH-40TH MONTH .02570 $441.79 PER MONTH
FINANCIAL INFO
INT-TYPE: FLOAT INDEX: COMM PAPER FACTOR-SCHEDULE: 108A
- ----------------------------------------------------------------------------------------------------------
</TABLE>
CENTMARTINEZ 320
MAILING AMERICAN PHARMACEUTICAL DRIVER NAME: TERRY DAVIS
ADDRESS: ATTN: LISA GREENE ADDRESS: 2324 RIDGEPOINT DR.
1771 W DIEHL ROAD SUITE E1
SUITE 210 AUSTIN TX 78754
NAPERVILLE IL 60563
Date 10/14/94 By [SIG]
------------ --------------------------
Authorized Signature
<PAGE>
DUPLICATE
[ARI LOGO] MOTOR VEHICLE LEASE AGREEMENT
AUTOMOTIVE RENTALS, INC. (ARI) hereby leases to ABBEY PHARMACEUTICAL
SERVICES (Lessee), the vehicle referred to herein for the rental set forth
herein. This Lease Agreement and any assignment hereof is subject to all the
terms and conditions of the Agreement dated 05/28/92 between ARI and Lessee
covering the leasing of vehicles to Lessee all of which are incorporated herein
by reference.
ARI hereby assigns to CORESTATES BANK NA AGENT (Assignee) all right, title and
interest of ARI in and to all moneys due and to become due under this Lease
Agreement and ARI hereby authorizes Assignee to collect all such moneys when
due, either in the name of Assignee or ARI. Lessee hereby agrees to this
assignment.
To induce Assignee to accept on assignment of ARI's rights hereunder, Lessee
agrees that upon such assignment all rights and remedies of ARI hereunder shall
vest in and be exercisable by Assignee that Lessee will render performance of
Lessee's obligation hereunder to Assignee rather than ARI and that the rights of
Assignee to rentals and other sums due hereunder shall not be subject to any
defense (except payment), off-set, counter-claim or recoupment of Lessee
whatsoever arising from the breach of warranty or representation relating to the
motor vehicle whether made by the manufacturer thereof, ARI or any other person,
or arising from the breach or failure of ARI to observe or perform the
provisions of this Lease Agreement or any other agreement between ARI and Lessee
or arising from any course whatsoever. Lessee also agrees that nothing
(including termination of this Lease Agreement) except full payment to Assignee
of the Capitalized Value set forth below, with interest to date of such payment
as specified below, shall be sufficient to terminate liability of Lessee to make
payment to Assignee under this Lease Agreement. Lessee also agrees to continue
to make prompt payment to Assignee of the rentals due hereunder even if
bankruptcy, reorganization, arrangement, insolvency, liquidation or dissolution
proceedings are instituted by or against ARI and regardless whether a trustee or
receiver in any such proceedings shall assume or reject this Lease Agreement or
other agreement between ARI and Lessee. Lessee also agrees that Assignee does
not assume any obligations arising hereunder and Lessee will look solely to ARI
for the performance of any such obligations.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
VEHICLE INFORMATION
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
YR & MAKE - 1994 FORD MODEL - A14 C VAN VEHICLE # - -09409
ENGINE - 6 CYL. 3.0 LITER EXT COLOR - WHITE LESSEE # - 0847-01
SERIAL # - 1FTDA14U9RZB34046 DELIVERY DATE - 08/10/94 REVISION DATE:00/00/00 REVISION NO: 00
- ----------------------------------------------------------------------------------------------------------
S = SIDEBILLED D = DEALER INSTALLED EQUIPMENT
- ----------------------------------------------------------------------------------------------------------
VINYL INT 004200
TD AIR COND
INT GLASS ALL
AM-FM STEREO
PWR STEERING
PWR DISC BRAKES
STD TRIM
DUAL BUCKETS
FIXED GLS S/D
STLD WHEEL CVRS
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
COST
- ----------------------------------------------------------------------------------------------------------
CAPPED CAPPED CAPPED
DESCRIPTION AMOUNT DESCRIPTION AMOUNT DESCRIPTION AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BASE COST 16,415.85
P&H 150.00
FLEET INCENTIVE 400.00-
SALES TAX 1,000.99
TOTAL COST 17,166.84
- ----------------------------------------------------------------------------------------------------------
LEASE INFORMATION
- ----------------------------------------------------------------------------------------------------------
OPEN END LEASE - PERIOD BEGINS: 08/94 TOTAL CAPITALIZATION: 17,166.84
* * * * * * RATES BELOW REFLECT DEPRECIATION AND ADMINISTRATIVE FEE ONLY * * * * * *
RATE AMT
1ST-12TH MONTH .02570 $441.19 PER MONTH DEPRECIATION PERIOD 40 MONTHS @ $429.17
13TH-24TH MONTH .02570 $441.19 PER MONTH
25TH-36TH MONTH .02570 $441.19 PER MONTH
37TH-40TH MONTH .02570 $441.19 PER MONTH
FINANCIAL INFO
INT-TYPE: FLOAT INDEX: COMM PAPER FACTOR-SCHEDULE: 108A
- ----------------------------------------------------------------------------------------------------------
CENTMARTINEZ 320
</TABLE>
MAILING AMERICAN PHARMACEUTICAL DRIVER NAME: TERRY DAVIS
ADDRESS: ATTN: LISA GREENE ADDRESS: 2324 RIDGEPOINT DR.
1771 W DIEHL ROAD SUITE G1
SUITE 210 AUSTIN TX 78754
NAPERVILLE IL 60563
Date 08/11/94 By [SIG]
------------ --------------------------
Authorized Signature
<PAGE>
SCHEDULE 6.8
PENDING GOVERNMENT INVESTIGATIONS
NONE.
<PAGE>
SCHEDULE 6.13
FINANCIAL STATEMENTS
[SEE ATTACHED]
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1995
<TABLE>
<CAPTION>
Desc October November December January February March April May June July
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Enteral 56,691 56,261 50,513 40,722 40,381 43,913 54,765 49,889 53,384 56,409
Wholesale 6,574 11,202 9,729 11,585 11,890 10,456 10,616 13,512 10,265 14,748
Billing Service Fee 1,000 1,100 1,000 520 890 450 770 810 1,790 660
Option 10,231 7,074 8,968 8,125 10,282 11,779 9,240 13,187 14,619 13,153
------- ------- ------- ------- ------- ------ ------ ------ ------ ------
Enteral Total 74,496 75,637 70,210 60,952 63,443 66,598 75,391 77,398 80,058 84,970
Urological 17,150 18,886 20,417 18,130 17,805 8,879 16,996 15,583 20,641 23,689
Wholesale 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Urological Total 17,150 18,886 20,417 18,130 17,805 8,879 16,996 15,583 20,641 23,689
Orthotics 9,514 8,244 5,616 4,017 5,003 0 0 0 3,006 3,409
Wholesale 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------ ------ ------- ------ ------ ------
Orthotics Total 9,514 8,244 5,616 4,017 5,003 0 0 0 3,006 3,409
Wound Care Part B 3,930 253 3,184 (493) 3,682 5,484 2,757 9,893 2,003 41,375
Wound Care Non B/Whse 0 0 0 0 0 56 258 450 (256) 371
-------- ------- ------- ------- ------ ------ ------ ------ ------ -----
Wound Care Total 3,930 253 3,184 (493) 3,682 5,540 3,015 10,343 1,747 41,746
I.V. 3,420 5,376 10,281 7,610 11,726 26,079 5,791 7,964 14,379 17,159
Pharmacy 146,380 150,807 149,769 151,196 123,581 155,678 159,676 179,227 185,874 58,415
Medicaid 99,573 107,073 129,104 126,595 119,478 150,463 117,363 135,263 128,952 81,335
Contractual Allowance (6,876) (11,571) (16,346) (16,347) (16,347) (30,093) (23,473) (27,053) (25,791) 36,267)
Consulting 6,907 5,640 5,061 5,157 5,474 15,340 9,660 16,177 13,673 16,012
Correctional 0 0 0 0 0 0 0 0 0 0
Corr. Billing Serv. Fee 0 0 0 0 0 0 0 0 0 0
Oxygen 0 0 0 0 0 0 0 0 0 0
Oxygen Medicaid 0 0 0 0 0 0 0 0 0 0
Retail 21,906 13,231 11,506 12,288 21,541 20,450 9,358 32,078 5,074 (4,940)
Other (92) 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Pharmacy Total 267,798 265,180 279,094 278,889 253,727 311,838 272,594 335,692 307,982 14,555
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total Revenue 376,308 373,576 388,802 369,105 355,386 418,934 373,787 446,980 427,813 85,528
Contractual Allowance % (6.9%) (10.6%) (12.7%) (12.9%) (13.7%) (20.0%) (20.0%) (20.0%) (20.0%) (20.0%)
</TABLE>
<TABLE>
<CAPTION>
Desc August September YTD Actuals
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Enteral 61,139 74,608 638,675
Wholesale 13,434 10,961 134,972
Billing Service Fee 770 470 10,230
Option 4,975 7,284 118,917
------- ------ -------
Enteral Total 80,318 93,323 902,794
Urological 15,944 16,973 211,093
Wholesale 0 0 0
------ ------ -------
Urological Total 15,944 16,973 211,093
Orthotics 0 0 38,809
Wholesale 0 0 0
------ ------ -------
Orthotics Total 0 0 38,809
Wound Care Part B 21,099 33,076 126,243
Wound Care Non B/Whse 690 1,092 2,661
------ ------- -------
Wound Care Total 21,789 34,168 128,904
I.V. 9,022 13,841 132,648
Pharmacy 206,236 188,738 1,957,667
Medicaid 149,080 149,448 1,593,727
Contractual Allowance (29,816) (29,890) (269,870)
Consulting 16,639 15,671 131,611
Correctional 0 0 0
Corr. Billing Serv. Fee 0 0 0
Oxygen 0 0 0
Oxygen Medicaid 0 0 0
Retail 8,063 (258) 150,307
Other 0 0 (92)
Pharmacy Total 352,292 323,909 3,563,550
------- ------- ---------
Total Revenue 479,365 482,214 4,977,796
Contractual Allowance % (20.0%) (20.0%) (16.9%)
</TABLE>
Page 1
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1995
<TABLE>
<CAPTION>
Desc October November December January February March April May June July
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COGS
Enteral 29,242 34,793 23,236 18,732 18,575 20,200 25,192 22,949 24,556 25,948
Wholesale 3,391 0 4,475 5,329 5,469 4,810 4,883 6,216 4,722 6,784
Option 5,278 0 4,585 3,977 5,139 7,783 4,604 6,438 7,548 6,354
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Enteral Total 37,911 34,793 32,296 28,038 29,183 32,793 34,679 35,603 36,826 39,086
Urological 12,540 8,688 9,392 8,340 8,190 4,084 7,818 7,168 9,495 10,897
Wholesale 0 0 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Urological Total 12,540 8,688 9,392 8,340 8,190 4,084 7,818 7,168 9,495 10,897
Orthotics 0 3,792 2,584 1,848 2,301 0 0 0 1,383 1,568
Wound Care 0 116 1,465 (227) 1,694 2,546 1,658 5,689 961 22,960
I.V. 0 1,882 3,598 2,663 4,104 9,127 2,027 2,787 5,033 6,005
Pharmacy 170,221 169,221 178,669 178,473 161,861 193,317 226,693 146,588 188,680 194,650
Contractual Allowance 0 0 0 0 0 0 0 0 0 0
Correctional 0 0 0 0 0 0 0 0 0 0
Oxygen 0 0 0 127 0 0 0 174 0 0
Retail 0 0 0 0 0 0 0 0 0 0
Other 17,293 3,303 4,861 2,270 2,046 (6,592) 877 (206) 1,617 921
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Pharmacy Total 187,514 172,524 183,530 180,870 163,907 186,725 227,570 146,556 190,297 195,571
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total COGS 237,965 221,795 232,865 221,532 209,379 235,277 273,752 197,803 243,995 276,067
</TABLE>
<TABLE>
<CAPTION>
Desc August September YTD Actuals
- ----------------------------------------------------------------
<S> <C> <C> <C>
COGS
Enteral 26,124 4,152 275,699
Wholesale 6,180 5,042 57,301
Option 2,643 3,567 57,916
------- ------- ---------
Enteral Total 36,947 12,761 390,916
Urological 7,334 7,808 101,754
Wholesale 0 0 0
------- ------- ---------
Urological Total 7,334 7,808 101,754
Orthotics 0 0 13,476
Wound Care 11,984 21,408 70,256
I.V. 3,158 4,845 45,229
Pharmacy 218,845 200,841 2,228,059
Contractual Allowance 0 0 0
Correctional 0 0 0
Oxygen 0 0 301
Retail 0 0 0
Other 1,805 2,504 30,699
------- ------- ---------
Pharmacy Total 220,650 203,345 2,259,059
------- ------- ---------
Total COGS 280,073 150,167 2,680,690
</TABLE>
Page 2
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1995
<TABLE>
<CAPTION>
Desc October November December January February March April
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Profit
Enteral 27,449 21,468 27,277 21,990 21,806 23,713 29,573
Wholesale 3,183 11,202 5,254 6,256 6,421 5,646 5,733
Billing Service Fee 1,000 1,100 1,000 520 890 450 770
Option 4,953 7,074 4,383 4,148 5,143 3,996 4,636
------- ------- ------- ------- ------- ------- -------
Total Enteral 36,585 40,844 37,914 32,914 34,260 33,805 40,712
Urological 4,610 10,198 11,025 9,790 9,615 4,795 9,178
Wholesale 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Total Urological 4,610 10,198 11,025 9,790 9,615 4,795 9,178
Total Orthotics 9,514 4,452 3,032 2,169 2,702 0 0
Total Wound Care 3,930 137 1,719 (266) 1,988 2,992 1,357
Total I.V. 3,420 3,494 6,683 4,947 7,622 16,952 3,764
Pharmacy 75,732 88,659 100,204 99,318 81,198 112,824 50,346
Contractual Allowance (6,876) (11,571) (16,346) (16,347) (16,347) (30,093) (23,473)
Consulting 6,907 5,640 5,061 5,157 5,474 15,340 9,660
Correctional 0 0 0 0 0 0 0
Oxygen 0 0 0 (127) 0 0 0
Retail 21,906 13,231 11,506 12,288 21,541 20,450 9,368
Other (17,385) (3,303) (4,861) (2,270) (2,046) 6,592 (877)
------- ------- ------- ------- ------- ------- -------
Total Pharmacy 80,284 92,656 95,564 98,019 89,820 125,113 45,024
------- ------- ------- ------- ------- ------- -------
Total Gross Profit 138,343 151,781 155,937 147,573 146,007 183,657 100,035
Enteral % 49.1% 54.0% 54.0% 54.0% 54.0% 50.8% 54.0%
Urological % 26.9% 54.0% 54.0% 54.0% 54.0% 54.0% 54.0%
Orthotics % 100.0% 54.0% 54.0% 54.0% 54.0% 0.0% 0.0%
Wound Care % 100.0% 54.2% 54.0% 54.0% 54.0% 54.0% 45.0%
I.V. % 100.0% 65.0% 65.0% 65.0% 65.0% 65.0% 65.0%
Pharmacy % 30.0% 34.9% 34.2% 35.1% 35.4% 40.1% 16.5%
Total Gross Profit % 36.8% 40.6% 40.1% 40.0% 41.1% 43.8% 26.8%
</TABLE>
<TABLE>
<CAPTION>
Desc May June July August September YTD Actuals
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross Profit
Enteral 26,940 28,828 30,461 33,015 70,456 362,976
Wholesale 7,296 5,543 7,964 7,254 5,919 77,671
Billing Service Fee 810 1,790 660 770 470 10,230
Option 6,749 7,071 6,799 2,332 3,717 61,001
------- ------- ------- ------- ------- ---------
Total Enteral 41,795 43,232 45,884 43,371 80,562 511,878
Urological 8,415 11,146 12,792 8,610 9,165 109,339
Wholesale 0 0 0 0 0 0
------- ------- ------- ------- ------- ---------
Total Urological 8,415 11,146 12,792 8,610 9,165 109,339
Total Orthotics 0 1,623 1,841 0 0 25,333
Total Wound Care 4,654 786 18,786 9,805 12,760 58,648
Total I.V. 5,177 9,346 11,154 5,864 8,996 87,419
Pharmacy 167,902 126,146 145,100 138,561 137,345 1,323,335
Contractual Allowance (27,053) (25,791) (36,267) (29,816) (29,890) (269,870)
Consulting 16,177 13,873 16,012 16,639 15,871 131,811
Correctional 0 0 0 0 0 0
Oxygen (174) 0 0 0 0 (301)
Retail 32,078 5,074 (4,940) 8,063 (258) 150,307
Other 206 (1,617) (921) (1,805) (2,504) (30,791)
------- ------- ------- ------- ------- ---------
Total Pharmacy 189,136 117,685 118,984 131,642 120,564 1,304,491
------- ------- ------- ------- ------- ---------
Total Gross Profit 249,177 183,818 209,441 199,292 232,047 2,097,108
Enteral % 54.0% 54.0% 54.0% 54.0% 56.3% 56.7%
Urological % 54.0% 54.0% 54.0% 54.0% 54.0% 51.8%
Orthotics % 0.0% 54.0% 54.0% 0.0% 0.0% 65.3%
Wound Care % 45.0% 45.0% 45.0% 45.0% 37.3% 45.5%
I.V. % 65.0% 65.0% 65.0% 65.0% 65.0% 65.9%
Pharmacy % 56.3% 38.2% 37.8% 37.4% 37.2% 36.6%
Total Gross Profit % 55.7% 43.0% 43.1% 41.6% 48.1% 42.1%
</TABLE>
Page 3
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1995
<TABLE>
<CAPTION>
Desc October November December January
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries 72,497 91,062 79,699 81,379
Mtb Bonus 1,668 1,668 1,688 1,668
A/R Bonus (706) 0 0 0
Commissions 4,591 2,078 4,120 694
FICA Taxes 5,724 5,630 6,163 6,297
Unemployment Taxes 156 153 577 1,110
Workmen's Comp Insurance 4,328 4,204 6,403 4,995
General Insurance 1,510 1,510 5,896 390
Denver City Tax 0 0 0 0
Group Health Insurance 1,577 8,805 5,582 6,245
401K 0 98 163 110
------- ------- ------- -------
Salaries 91,343 115,206 110,269 102,886
Vehicle GE Capital 83 0 63 68
Vehicle Repairs 0 0 0 0
Vehicle Gasoline 697 0 0 1,462
Vehicle Misc. 0 1,428 155 629
------- -------- ------- -------
Vehicle 780 1,428 218 2,159
Travel & Lodging 883 3,465 1,781 2,683
Meats 535 219 161 334
Entertainment 255 333 497 62
Mileage 541 0 0 0
Car Allowance 1,200 1,500 1,500 1,500
Shows & Conventions 4,907 381 0 0
------- ------- -------- -------
Travel Expense 8,321 5,898 3,939 4,579
Consulting Services 5000 1,600 610 575
Audit Fees 0 0 0 0
Legal Fees 0 0 0 0
Misc Professional Services 1,436 1,476 3,799 1,184
------- ------- ------- -------
Professional Services 1,936 3,078 4,409 1,759
Office Space 7,584 0 6,695 6,695
Other Space Rental 91 0 91 202
------- ------- ------- -------
Space Rental 7,675 0 6,766 6,897
</TABLE>
<TABLE>
<CAPTION>
Desc. June July August September
- -------------------------------------------------------------------------------
<S> <C> <C> <C> C>
Salaries 79,797 78,929 84,148 79,287
Mtb Bonus 4,833 3,633 4,933 5,833
A/R Bonus 184 0 0 (334)
Commissions 292 1,798 2,165 1,794
FICA Taxes 5,885 7,664 6,118 6,703
Unemployment Taxes 194 186 181 119
Workmen's Comp Insurance 6,499 3,448 (1,207) 1,028
General Insurance (1,845) 2,539 3,375 2,183
Denver City Tax 0 0 0 0
Group Health Insurance 5,486 5,904 5,528 4,832
401K 245 174 174 14
------- ------- ------- -------
Salaries 101,570 104,275 105,415 100,457
Vehicle GE Capital 1,126 1,117 1,117 1,110
Vehicle Repairs 213 1,056 1,528 1,969
Vehicle Gasoline 0 1,702 0 3,671
Vehicle Misc. 0 0 0 0
------- ------- ------- -------
Vehicle 1,339 3,875 2,645 6,750
Travel & Lodging 4,245 2,175 1,528 1,624
Meats 320 388 278 372
Entertainment 0 144 0 338
Mileage 0 0 0 0
Car Allowance 1,500 1,500 1,500 1,500
Shows & Conventions 403 0 0 0
------- ------- ------- -------
Travel Expense 6,468 4,207 3,306 3,834
Consulting Services 0 0 0 0
Audit Fees 0 0 0 0
Legal Fees 1,069 (138) (1,089) 75
Misc Professional Services 530 0 865 210
------- ------- ------- -----
Professional Services 1,619 (138) (224) 285
Office Space 7,203 7,627 6,127 6,127
Other Space Rental 168 256 394 230
------- ------- ------- -------
Space Rental 7,371 7,883 6,521 6,357
</TABLE>
Page 4
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1995
<TABLE>
<CAPTION>
Desc October November December January February March
------- -------- -------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Machine & Equipment 1,022 1,337 1,412 (73) 925 925
Furn & Fixtures 412 412 392 (926) 687 550
Vehicles 818 2,154 1,724 6,228 2,201 2,201
Leasehold Improvements 1,473 1,473 1,473 1,473 1,473 1,468
Building Improvements 0 0 0 0 0 0
Durable Medical Equip 0 0 0 0 0 0
Computer Hardware 1,358 1,358 1,321 2,900 1,395 1,395
Computer Software 0 0 0 0 0 0
------ ------ ------ ------ ------ ------
Depreciation Expenses 5,083 6,734 6,322 9,602 6,681 6,539
Employee Relations 375 107 202 827 342 273
Temporary Services 124 0 0 0 0 0
Employee Education 1,592 63 63 63 75 119
Recruiting 1,200 1,200 1,054 1,000 0 0
Office Supplies 1,728 2,063 3,691 2,708 1,428 2,000
Independent Business 0 0 776 200 875 75
Small Equipment 0 0 0 0 0 0
Furniture & Equip
Rentals 513 395 1,517 539 342 1,001
Repairs & Maintenance 52 3,159 2,162 1,135 373 495
Telephone 4,114 3,286 1,384 6,422 2,901 2,182
Cellular Phone 178 239 262 258 370 534
Advertising 583 421 307 618 935 (112)
Postage 483 581 527 103 811 343
Freight 94 54 0 1,149 488 89
Janitorial 351 351 351 351 351 351
Dues/Subscription 12 0 44 0 0 40
Professional Licenses 0 0 420 0 85 0
Uniforms 0 0 0 0 0 0
Computer 0 11 0 864 2,065 907
Utilities 1,189 0 827 2,622 2,404 602
General Taxes 0 0 0 (1,580) 0 294
Tax Penalty 0 147 0 0 0 0
Donations &
Contributions 0 0 0 0 0 0
Property Taxes 1,325 1,325 1,325 9,453 1,325 1,325
LTC Link 0 0 0 0 0 0
Other Misc Income 0 0 (1,706) 0 0 (500)
Other Misc Expenses 0 (61) 0 17,050 0 0
------ ------ ------ ------ ------ ------
Other Misc. Expenses 13,911 13,361 13,204 43,862 15,170 10,018
------ ------ ------ ------ ------ ------
Total Other Expenses 37,706 30,497 34,878 68,858 40,024 37,312
</TABLE>
<TABLE>
<CAPTION>
YTD
Desc May June July August September Actuals
--- ---- ---- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C>
Machine & Equipment 925 1,398 1,017 1,089 5,982 16,884
Furn & Fixtures 580 580 454 758 734 5,183
Vehicles 2,028 2,099 1,711 2,099 2,099 22,978
Leasehold Improvements 1,473 1,473 1,473 1,473 1,473 17,671
Building Improvements 0 0 0 0 0 0
Durable Medical Equip 0 0 0 0 0 0
Computer Hardware 1,395 1,395 1,395 1,395 1,395 18,097
Computer Software 0 0 0 0 0 0
------ ------ ------ ------ ------ -------
Depreciation Expenses 6,401 6,945 6,050 6,814 11,683 80,813
Employee Relations 182 197 125 75 45 2,869
Temporary Services 0 0 65 100 0 289
Employee Education 66 74 72 101 66 2,420
Recruiting 0 0 0 0 0 4,454
Office Supplies 2,924 (340) 1,780 2,878 2,893 24,616
Independent Business 622 898 2,381 563 1,478 8,729
Small Equipment 9 0 0 0 0 9
Furniture & Equip
Rentals 469 972 678 2,142 1,315 9,905
Repairs & Maintenance 1,870 (2,159) 587 678 619 9,297
Telephone 2,461 2,575 3,018 2,725 1,673 33,873
Cellular Phone 319 864 47 1,285 687 5,347
Advertising 1,705 677 736 689 850 7,809
Postage 734 199 428 625 287 6,902
Freight 210 972 103 16 249 3,568
Janitorial 392 351 351 0 351 3,902
Dues/Subscription 0 6 0 80 0 577
Professional Licenses 0 0 0 0 0 505
Uniforms 0 0 0 843 136 979
Computer 1,560 2,039 2,387 1,329 1,347 13,013
Utilities 2,282 1,144 1,261 1,329 1,247 15,568
General Taxes 22 0 61 13 127 (911)
Tax Penalty 94 0 0 0 0 241
Donations &
Contributions 0 0 0 0 0 0
Property Taxes 1,325 1,325 1,325 1,325 1,325 24,028
LTC Link 0 0 0 (594) (108) (702)
Other Misc Income 0 0 0 (247) (13) (2,468)
Other Misc Expenses 0 128 (582) 0 0 16,535
------ ------ ------ ------ ------ -------
Other Misc. Expenses 17,246 9,922 14,823 15,955 14,574 191,354
------ ------ ------ ------ ------ -------
Total Other Expenses 35,213 33,684 36,700 35,017 43,483 457,323
</TABLE>
Page 5
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1995
<TABLE>
<CAPTION>
Desc October November December January February
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Partner Service Charges 0 0 0 0 0
Bad Debt Facility 1,663 671 1,920 2,068 2,068
Bad Debt Medicare 5,404 1,171 4,097 3,472 4,261
Bad Debt Medicaid 2,781 2,865 3,383 3,308 3,094
Bad Debt Private 5,259 3,286 4,990 5,060 4,518
Bad Debt Other 0 215 411 305 569
------- ------- ------- ------- -------
Bad Debt 15,127 8,208 14,801 14,211 14,408
Total Operating Expense 144,178 153,911 159,948 185,955 152,451
Amortization Nondeductible 0 0 0 0 0
Amortization Deductible 0 0 0 0 0
Earnings From Operations (5,833) 2,130 (4,011) (38,382) (6,444)
Interest/Income/Dividend 0 0 0 0 0
Interest Expense 338 22 182 187 164
Minority Interest 0 0 0 0 0
------- ------- ------- ------- -------
Earnings Before Allocations (6,171) (2,152) (4,193) (38,569) (6,608)
Corporate Allocations 0 0 0 0 0
------- ------- ------- ------- -------
Earnings Before Taxes (6,171) (2,152) (4,193) (38,569) (6,608)
State Income Tax 0 0 0 0 0
Federal Income Tax 0 0 0 0 0
------- ------- ------- ------- -------
Income Tax 0 0 0 0 0
Net Income (6,171) (2,152) (4,193) (38,569) (6,608)
======= ======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Percent to Sales
----------------
<S> <C> <C> <C> <C> <C>
Salaries % 24.3% 30.8% 28.4% 27.9% 27.6%
Vehicle % 0.2% 0.4% 0.1% 0.6% 0.3%
Professional Services % 0.5% 0.6% 1.1% 0.5% 0.9%
Space Rental % 2.0% 0.0% 1.7% 1.9% 2.5%
Depreciation % 1.4% 1.8% 1.6% 2.6% 1.9%
Other Misc. Expense % 3.7% 3.6% 3.4% 11.9% 4.3%
Total Other Expenses % 10.0% 8.2% 9.0% 18.7% 11.3%
Bad Debt % 4.0% 2.2% 3.8% 3.9% 4.1%
Total Op. Expense % 38.3% 41.2% 41.1% 50.4% 42.9%
Earnings From Operations % (1.6%) (0.6%) (1.0%) (10.4%) (1.8%)
Net Income % (1.6%) (0.6%) (1.1%) (10.4%) (1.9%)
</TABLE>
<TABLE>
<CAPTION>
Desc August September YTD Actuals
- ----------------------------------------------------------------
<S> <C> <C> <C>
Partner Service Charges 0 0 0
Bad Debt Facility 2,071 1,823 22,904
Bad Debt Medicare 4,663 8,701 59,749
Bad Debt Medicaid 3,578 3,587 39,717
Bad Debt Private 4,991 6,131 63,458
Bad Debt Other 361 554 5,169
------- ------- -------
Bad Debt 15,864 20,796 190,997
Total Operating Expense 156,296 164,736 1,927,844
Amortization Nondeductible 0 0 0
Amortization Deductible 0 0 0
Earnings From Operations 42,996 67,311 169,264
Interest/Income/Dividend 0 0 0
Interest Expense (12,568) 1,617 7,063
Minority Interest 0 0 0
------- ------- -------
Earnings Before Allocations 55,564 65,694 162,201
Corporate Allocations 0 0 0
------- ------- -------
Earnings Before Taxes 55,564 65,694 162,201
State Income Tax 0 0 0
Federal Income Tax 0 0 0
------- ------- -------
Income Tax 0 0 0
Net Income 55,564 65,694 162,201
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
Percent to Sales
----------------
<S> <C> <C> <C>
Salaries % 22.0% 20.8% 25.7%
Vehicle % 0.6% 1.4% 0.6%
Professional Services % (0.0%) 0.1% 0.4%
Space Rental % 1.4% 1.3% 1.6%
Depreciation % 1.4% 2.4% 1.6%
Other Misc. Expense % 3.3% 3.0% 3.8%
Total Other Expenses % 7.3% 9.0% 9.2%
Bad Debt % 3.3% 4.3% 3.8%
Total Op. Expense % 32.6% 34.2% 38.7%
Earnings From Operations % 9.0% 14.0% 3.4%
Net Income % 11.6% 13.6% 3.3%
</TABLE>
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1996
<TABLE>
<CAPTION>
Desc October November December January February
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue
Enteral 54,452 46,134 51,198 43,299 84,699
Wholesale 12,580 12,357 11,514 11,008 9,883
Billing Service Fee 600 720 540 300 330
Option 5,214 6,453 2,508 1,590 2,596
------- -------- ------- ------- -------
Enteral Total 72,846 85,664 65,760 56,197 97,508
Urological 12,527 13,658 13,522 16,062 14,967
Wholesale 0 0 0 0 0
------- ------- ------- ------- -------
Urological Total 12,527 13,658 13,522 16,062 14,967
Orthotics 867 0 0 0 0
Wholesale 0 0 0 0 0
------- ------- ------- ------- -------
Orthotics Total 867 0 0 0 0
Wound Care Part B 32,328 40,130 (6,999) 21,377 19,380
Wound Care Non B/Whlse 879 510 1,130 2,052 (121)
------- ------- ------- ------- -------
Wound Car Total 33,207 40,640 (5,869) 23,429 19,259
Vencor/Vencare 0 0 0 0 1,581
Resp Supplies 0 0 0 0 0
Concent Rentals 0 0 0 0 0
------- ------- ------- ------- -------
Respiratory Total 0 0 0 0 1,581
I.V. 9,183 16,909 5,900 16,261 18,879
Pharmacy 209,510 164,770 192,077 214,848 200,433
Medicaid 158,068 146,975 150,098 158,402 122,383
Contractual Allowance (31,614) (29,395) (30,020) (31,680) (24,477)
Consulting 18,697 16,049 10,286 8,947 13,579
Correctional 0 0 0 0 0
Corr. Billing Serv. Fee 0 0 0 0 0
Oxygen 0 0 0 0 0
Oxygen Medicaid 0 0 0 0 0
Retail 4,176 1,744 3,041 3,742 1,993
Other 0 0 0 0 0
-------- ------- ------- ------- -------
Pharmacy Total 358,837 300,143 325,482 354,259 313,911
------- ------- ------- ------- -------
Total Revenue 487,467 437,014 404,795 466,206 466,105
Contractual Allowance % (20.0%) (20.0%) (20.0%) (20.0%) (20.0%)
</TABLE>
<TABLE>
<CAPTION>
Desc August September YTD Actuals
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Enteral 15,208 49,457 654,504
Wholesale 3,020 8,259 112,094
Billing Service Fee (450) 0 2,760
Option 0 0 21,168
------- ------ -------
Enteral Total 17,778 57,716 690,546
Urological 7,014 7,335 131,849
Wholesale 0 0 0
------ ------ -------
Urological Total 7,014 7,335 131,849
Orthotics (2,052) 0 5,553
Wholesale 0 0 0
------ ------ -------
Orthotics Total (2,052) 0 5,533
Wound Care Part B 2,823 21,756 210,318
Wound Care Non B/Whlse (10) 338 6,280
------ ------- -------
Wound Car Total 2,813 22,094 216,598
Vencor/Vencare 1,631 1,539 11,187
Resp Supplies 0 0 0
Concent Rentals 0 0 0
------ ------ -------
Respiratory Total 1,631 1,539 11,187
I.V. 20,569 11,759 177,205
Pharmacy 196,643 195,336 2,360,009
Medicaid 261,053 239,651 2,346,996
Contractual Allowance (52,211) (47,930) (469,401)
Consulting 13,739 13,795 163,960
Correctional 0 0 0
Corr. Billing Serv. Fee 0 0 0
Oxygen 0 0 0
Oxygen Medicaid 0 0 0
Retail 2,442 1,983 37,858
Other 408 2,361 2,835
------- ------- ---------
Pharmacy Total 424,074 405,196 4,442,279
------- ------- ---------
Total Revenue 471,827 505,639 5,675,197
Contractual Allowance % (20.0%) (20.0%) (20.0%)
</TABLE>
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1996
<TABLE>
<CAPTION>
Desc October November December January February Ma
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COGS
Enteral 24,367 20,645 22,911 19,376 37,903 3
Wholesale 5,629 5,530 5,152 4,926 4,423 4
Option 2,602 3,210 1,365 1,113 1,617 1
------- ------- ------- ------- ------- ---
Enteral Total 32,598 29,385 29,428 25,415 44,143 9
Urological 7,720 8,417 8,333 9,899 9,224 7
Wholesale 534 (534) 0 0 0
------- ------- ------- ------- ------- ---
Urological Total 8,254 7,883 8,333 9,899 9,224 7
Orthotics 399 0 0 0 0
Wound Care 15,986 19,565 (2,825) 11,278 9,271 7
Vencor/Vencare 0 0 0 0 1,423 1
Resp Supplies 0 0 0 0 0
Concent Rentals 0 0 0 0 0
------- ------- ------- ------- ------- ---
Respiratory total 0 0 0 0 1,423 1
I.V. 3,306 6,087 2,124 5,854 6,796 6
Pharmacy 207,928 173,667 189,557 211,089 183,593 205
Contractual Allowance 0 0 0 0 0
Correctional 0 0 0 0 0
Oxygen 0 0 0 0 0
Retail 0 2,570 (2,570) 0 0
Other 676 3,335 3,128 1,289 3,243 1
------- ------- ------- ------- ------- ---
Pharmacy Total 208,604 179,572 190,115 212,378 186,836 207
------- ------- ------- ------- ------- ---
Total COGS 269,147 242,492 227,175 264,824 257,693 240
</TABLE>
<TABLE>
<CAPTION>
Desc May June July August September
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COGS
Enteral 24,448 43,962 (6,431) 5,931 19,288
Wholesale 5,888 4,059 5,937 7,780 7,601
Option 0 0 0 0 0
------- ------- ------- ------- -------
Enteral Total 30,336 48,021 (494) 8,711 26,889
Urological 6,686 2,642 5,960 4,910 5,134
Wholesale 0 0 0 0 0
------- ------- ------- ------- -------
Urological Total 6,686 2,642 5,960 4,910 5,134
Orthotics (143) (128) 2,809 (944) 0
Wound Care 8,924 6,919 10,424 1,407 11,047
Vencor/Vencare 785 1,959 (363) 1,468 1,320
Resp Supplies 0 0 0 0 0
Concent Rentals 0 0 0 0 0
------- ------- ------- ------- -------
Respiratory total 785 1,959 (363) 1,468 1,320
I.V. 4,525 4,608 9,705 12,788 7,311
Pharmacy 248,789 220,210 266,053 263,312 243,381
Contractual Allowance 0 0 0 0 0
Correctional 0 0 0 0 0
Oxygen 0 0 0 0 0
Retail 0 0 0 0 0
Other 740 4,565 4 2,076 1,861
------- ------- ------- ------- -------
Pharmacy Total 249,529 224,775 266,057 265,388 245,242
------- ------- ------- ------- -------
Total COGS 300,642 288,796 294,098 293,728 296,943
</TABLE>
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1996
<TABLE>
<CAPTION>
Desc October November December January February March April
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross profit
Enteral 30,085 25,489 28,287 23,923 46,796 3,886 27,177
Wholesale 6,951 6,827 6,362 6,082 5,460 5,714 5,010
Billing Service Fee 600 720 540 300 330 480 70
Option 2,612 3,243 1,143 477 779 848 0
------- ------- ------- ------- ------- ------- -------
Total Enteral 40,248 36,279 36,332 30,782 53,365 10,928 32,257
Urological 4,807 5,241 5,189 6,163 5,743 4,926 4,119
Wholesale (534) 534 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Total Urological 4,273 5,775 5,189 6,163 5,743 4,926 4,119
Total Orthotics 468 0 0 0 0 0 653
Total Wound Care 17,221 21,075 (3,044) 12,151 9,988 8,112 6,160
Vencor/Vencare 0 0 0 0 158 252 196
Resp Supplies 0 0 0 0 0 0 0
Concent Rentals 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Respiratory Total 0 0 0 0 158 252 196
Total I.V. 5,877 10,822 3,776 10,407 12,083 11,999 17,088
Pharmacy 159,650 138,078 152,618 162,161 139,223 163,424 190,088
Contractual Allowance (31,614) (29,395) (30,020) (31,680) (24,477) (34,774) (47,130)
Consulting 18,697 16,049 10,286 8,947 13,579 13,586 13,855
Correctional 0 0 0 0 0 0 0
Oxygen 0 0 0 0 0 0 0
Retail 4,176 (826) 5,611 3,742 1,993 2,133 3,022
Other (676) (3,335) (3,128) (1,289) (3,243) (1,619) (3,909)
------- ------- ------- ------- ------- ------- -------
Total Pharmacy 150,233 120,571 135,367 141,881 127,075 142,750 155,926
------- ------- ------- ------- ------- ------- -------
Total Gross Profit 218,320 194,522 177,620 201,384 208,412 178,967 216,399
Enteral % 55.3% 55.2% 55.2% 54.8% 54.7% 52.8% 55.3%
Urological % 34.1% 42.3% 38.4% 38.4% 38.4% 38.4% 38.4%
Orthotics % 54.0% 0.0% 0.0% 0.0% 0.0% 0.0% 54.0%
Wound Care % 51.9% 51.9% 51.9% 51.9% 51.9% 51.9% 51.9%
Respiratory % 0.0% 0.0% 0.0% 0.0% 10.0% 14.0% 0
I.V. % 64.0% 64.0% 64.0% 64.0% 64.0% 64.0% 64.0%
Pharmacy % 41.9% 40.2% 41.6% 40.1% 40.5% 40.8% 40.0%
Total Gross Profit % 44.8% 44.5% 43.9% 43.2% 44.7% 42.6% 43.3%
</TABLE>
<TABLE>
<CAPTION>
Desc May June July August September YTD Actuals
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross profit
Enteral 30,186 71,728 (10,058) 9,277 30,169 316,945
Wholesale 7,269 399 513 240 658 51,485
Billing Service Fee 170 (300) 300 (450) 0 2,760
Option 0 0 0 0 0 9,102
------- ------- ------- ------- ------- ---------
Total Enteral 37,625 71,827 (9,245) 9,067 30,827 380,292
Urological 4,162 1,187 2,554 2,104 2,201 48,396
Wholesale 0 0 0 0 0 0
------- ------- ------- ------- ------- ---------
Total Urological 4,162 1,187 2,554 2,104 2,201 48,396
Total Orthotics (169) (157) 3,297 (1,108) 0 2,964
Total Wound Care 9,613 7,201 10,424 1,406 11,047 111,354
Vencor/Vencare 117 299 (122) 163 219 1,282
Resp Supplies 0 0 0 0 0 0
Concent Rentals 0 0 0 0 0 0
------- ------- ------- ------- ------- ---------
Respiratory Total 117 299 (122) 163 219 1,282
Total I.V. 8,045 2,925 2,489 7,781 4,448 97,740
Pharmacy 195,399 169,781 205,758 196,384 191,606 2,064,170
Contractual Allowance (46,052) (43,856) (50,262) (52,211) (47,930) (469,401)
Consulting 13,925 13,819 13,703 13,739 13,795 163,960
Correctional 0 0 0 0 0 0
Oxygen 0 0 0 0 0 0
Retail 8,783 2,466 2,333 2,442 1,983 37,858
Other (674) (4,565) (4) (1,665) 500 (23,610)
------- ------- ------- ------- ------- ---------
Total Pharmacy 171,381 137,645 171,528 158,686 159,954 1,772,997
------- ------- ------- ------- ------- ---------
Total Gross Profit 230,774 220,927 180,925 178,099 206,696 2,415,045
Enteral % 55.4% 59.9% 94.9% 51.0% 53.4% 55.1%
Urological % 38.4% 31.0% 30.0% 30.0% 30.0% 36.7%
Orthotics % 54.2% 55.1% 54.0% 54.0% 0.0% 53.9%
Wound Care % 51.9% 51.0% 50.0% 50.0% 50.0% 51.4%
Respiratory % 13.0% 13.2% 25.2% 10.0% 14.2% 11.5%
I.V. % 64.0% 38.8% 20.4% 37.8% 37.8% 55.2%
Pharmacy % 40.7% 38.0% 39.2% 37.4% 39.5% 39.9%
Total Gross Profit % 43.4% 43.3% 38.1% 37.7% 41.3% 42.6%
</TABLE>
Page 15
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1996
<TABLE>
<CAPTION>
Desc October November December January February March April May
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries 79,945 76,423 79,141 78,665 72,718 72,842 81,405 79,025
MtB Bonus 1,668 1,666 1,666 (211) 1,197 1,197 (7,181) 0
A/R Bonus 4,509 4,489 (7,873) 573 248 (231) 186 73
Commissions 1,101 3,395 3,422 1,674 2,377 2,389 1,014 1,906
FICA Taxes 5,723 5,234 5,002 6,426 5,705 5,706 5,490 5,830
Unemployment Taxes 37 87 53 1,893 855 494 243 182
Workmen's Comp Insurance 3,407 3,212 3,662 3,129 3,023 3,087 3,489 3,349
General Insurance 2,069 1,975 2,228 1,925 1,857 1,862 2,080 2,041
Denver City Tax 0 0 0 0 0 0 0 0
Group Health Insurance 5,885 4,752 5,083 5,235 5,361 (2,098) 2,992 4,669
401K 0 0 0 287 153 241 183 308
------- ------- ------- ------- ------- ------- ------- -------
Salaries 104,342 101,233 92,384 99,596 93,494 85,489 89,901 97,383
Vehicle GE Capital 132 89 98 89 83 160 0 124
Vehicle Repairs 146 214 1,830 921 1,158 1,536 709 722
Vehicle Gasoline 0 3,785 53 4,056 1,863 10 2,372 3,377
Vehicle Misc. 0 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- ------- -------
Vehicle 278 4,088 1,981 5,068 3,104 1,706 3,081 4,223
Travel & Lodging 1,529 1,162 249 406 (158) 172 0 173
Meals 95 288 222 292 146 141 22 103
Entertainment 0 0 742 75 45 98 84 61
Mileage 0 679 1,216 1,543 1,487 1,270 1,612 1,523
Car Allowance 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Shows & Conventions 0 8 0 0 0 0 0 0
------- ------- -------- ------- ------- ------- ------- -------
Travel Expense 3,124 3,637 3,929 3,816 3,020 3,181 3,218 3,360
Consulting Services 0 0 2,198 1,060 0 0 0 0
Audit Fees 0 0 0 0 0 0 0 0
Legal Fees 0 0 0 216 221 325 125 549
Misc Professional Services 0 0 0 0 1,757 1,504 0 0
------- ------- ------- ------- ------- ------- ------- -------
Professional Services 0 0 2,198 1,276 1,978 1,829 125 549
Office Space 6,127 6,127 6,127 6,127 9,321 8,430 4,530 6,480
Other Space Rental 230 301 230 230 230 230 230 230
------- ------- ------- ------- ------ ------- ------- -------
Space Rental 6,357 6,428 6,357 6,357 9,551 8,660 4,760 6,710
</TABLE>
<TABLE>
<CAPTION>
Desc. June July August September YTD Actuals
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Salaries 77,443 87,884 70,295 76,721 932,507
Mtb Bonus 0 0 2,394 1,197 3,591
A/R Bonus 0 0 54 269 2,297
Commissions 3,028 3,482 (771) 2,618 25,635
FICA Taxes 6,377 6,478 4,384 4,889 67,244
Unemployment Taxes 92 1,388 (1,088) 174 4,410
Workmen's Comp Insurance 3,113 713 (2,769) 2,808 30,221
General Insurance 1,818 2,240 (839) 1,640 20,896
Denver City Tax 0 0 0 0 0
Group Health Insurance 4,453 4,627 4,468 5,035 50,460
401K 262 1,666 (1,721) 0 1,379
------- ------- ------- ------- ---------
Salaries 96,586 108,478 74,405 95,349 1,138,640
Vehicle GE Capital 95 87 99 161 1,217
Vehicle Repairs 2,190 338 426 1,539 11,729
Vehicle Gasoline 1,460 2,878 2,888 2,133 24,875
Vehicle Misc. 0 0 0 0 0
------- ------- ------- ------- ---------
Vehicle 3,745 3,303 3,413 3,833 37,821
Travel & Lodging 140 0 101 (605) 3,169
Meals 146 83 54 114 1,706
Entertainment 86 0 0 0 1,191
Mileage 1,077 1,396 1,072 1,476 14,351
Car Allowance 1,500 1,875 1,685 1,419 18,479
Shows & Conventions 0 0 0 0 8
------- ------- ------- ------- ---------
Travel Expense 2,949 3,354 2,912 2,404 38,904
Consulting Services 505 1,050 1,110 0 5,923
Audit Fees 0 0 0 0 0
Legal Fees 329 (1,220) 0 1,382 1,927
Misc Professional Services 1,391 0 750 0 5,402
------- ------- ------- ----- ---------
Professional Services 2,225 (170) 1,860 1,382 13,252
Office Space 6,863 7,246 6,863 6,863 81,104
Other Space Rental 135 368 0 674 3,066
------- ------- ------- ------- ---------
Space Rental 6,998 7,612 6,863 7,537 84,190
</TABLE>
Page 16
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1996
<TABLE>
<CAPTION>
Desc October November December January February March April
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Machine & Equipment 534 1,854 2,582 1,547 1,547 1,547 1,547
Furn & Fixtures 734 490 734 893 714 1,498 882
Vehicles 2,099 3,003 3,463 2,588 2,582 2,365 2,365
Leasehold Improvements 1,473 1,473 1,473 1,473 1,473 1,473 1,473
Building Improvements 0 0 0 0 0 0 0
Durable Medical Equip 0 0 0 0 0 0 0
Computer Hardware 1,395 528 1,418 1,413 1,325 1,325 1,325
Computer Software 0 0 0 0 0 0 0
------ ------ ------ ------ ------ ------ ------
Depreciation Expense 6,235 7,348 9,670 7,914 7,621 8,168 7,592
Employee Relations 23 16 658 163 15 194 202
Temporary Services 0 160 0 225 0 0 220
Employee Education 70 80 1,064 996 298 (904) 21
Recruiting 0 202 0 0 0 0 0
Office Supplies 184 4,072 3,192 3,390 3,358 2,002 2,050
Independent Business 95 745 900 733 1,084 54 1,100
Small Equipment 0 0 0 0 0 0 0
Furniture & Equip Rentals 1,459 443 1,266 634 1,218 517 1,007
Repairs & Maintenance 768 2,186 447 936 752 198 348
Telephone 2,738 2,307 1,680 3,167 3,312 (189) 2,619
Cellular Phone 953 342 568 1,069 305 539 1,025
Advertising 746 550 726 640 552 482 524
Postage 755 211 697 647 734 310 882
Freight 101 23 52 96 (171) 241 39
Janitorial 703 352 352 352 274 484 349
Dues/Subscription 0 15 0 100 0 342 0
Professional Licenses 0 0 0 0 0 0 0
Uniforms 0 44 0 0 0 0 0
Computer 619 744 791 677 558 1,307 1,091
Utilities 1,024 883 822 715 780 1,039 790
General Taxes 0 0 0 0 0 0 242
Tax Penalty 0 0 0 0 0 0 0
Donations & Contributions 0 0 0 0 0 0 0
Property Taxes 600 725 725 2,145 2,145 2,145 2,145
LTC Link 0 0 0 0 0 0 0
Other Misc Income (672) (63) (117) 2,860 0 0 0
Other Misc Expense 0 468 0 (24) 250 (477) 0
------ ------ ------ ------ ------ ------ ------
Other Misc. Expenses 10,164 14,535 13,858 19,527 15,464 8,284 14,654
------ ------ ------ ------ ------ ------ ------
Total Other Expenses 26,158 36,036 37,993 43,958 40,738 31,826 33,430
</TABLE>
<TABLE>
<CAPTION>
Desc May June July August September YTD Actuals
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Machine & Equipment 1,547 1,548 1,547 1,547 1,548 18,893
Furn & Fixtures 882 913 913 913 913 10,437
Vehicles 4,748 2,762 3,095 3,095 2,750 34,895
Leasehold Improvements 1,473 1,473 1,473 1,473 1,473 17,678
Building Improvements 0 0 0 0 0 0
Durable Medical Equip 0 0 0 0 0 0
Computer Hardware 1,325 1,325 1,325 1,325 1,543 15,572
Computer Software 0 0 0 0 0 0
------ ------ ------ ------ ------ -------
Depreciation Expense 9,975 8,021 8,353 8,353 8,225 97,473
Employee Relations 273 78 113 106 245 2,066
Temporary Services 3,095 930 560 80 1,696 6,966
Employee Education 0 83 0 14 48 1,770
Recruiting 0 167 0 0 42 411
Office Supplies 1,679 2,118 588 2,183 1,826 26,612
Independent Business 945 548 1,850 148 1,404 9,602
Small Equipment 0 0 0 0 0 0
Furniture & Equip Rentals 1,293 634 1,269 363 1,238 11,361
Repairs & Maintenance 447 707 311 896 825 8,819
Telephone 2,311 1,011 1,416 1,243 2,891 24,506
Cellular Phone 534 968 494 516 869 8,182
Advertising 335 568 455 716 559 6,853
Postage 635 42 1,055 698 759 7,425
Freight 15 34 60 13 73 576
Janitorial 0 349 698 487 352 4,752
Dues/Subscriptions 75 240 0 0 0 772
Professional Licenses 0 0 0 0 0 0
Uniforms 0 0 0 0 0 44
Computer 941 1,357 497 1,008 1,505 11,123
Utilities 1,028 1,226 13 2,720 1,150 12,190
General Taxes 54 0 0 2,597 16,338 19,252
Tax Penalty 0 0 0 0 0 0
Donations & Contributions 30 0 0 0 0 30
Property Taxes 2,135 2,135 2,135 2,135 1,118 20,288
LTC Link 0 0 0 0 0 0
Other Misc Income 445 (145) 66 (46) (3) 2,292
Other Misc Expense 128 0 21 192 (210) 348
------ ------ ------ ------ ------ -------
Other Misc Expenses 16,398 13,045 11,571 16,065 32,695 186,260
------ ------ ------ ------ ------ -------
Total Other Expenses 41,215 36,983 34,023 39,468 56,076 457,900
</TABLE>
Page 17
<PAGE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1996
<TABLE>
<CAPTION>
Desc October November December January February March April
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Partner Service Charges
Bad Debt Facility 2,104 2,033 1,785 1,754 1,642 1,503 1,070
Bad Debt Medicare 7,236 8,809 4,388 5,170 8,738 1,954 5,154
Bad Debt Medicaid 3,794 3,527 3,602 3,802 2,937 4,172 5,656
Bad Debt Private 6,972 5,477 6,162 6,828 8,840 6,329 6,027
Bad Debt Other 837 676 237 650 755 750 1,068
------- ------- ------- ------- ------- ------- -------
Bad Debt 20,473 20,522 16,174 18,202 20,552 14,708 18,975
Total Operating Expense 150,973 157,791 146,551 161,754 154,784 132,023 142,306
Amortization Nondeductible 0 0 0 0 0 0 0
Amortization Deductible 0 0 0 0 0 0 0
Earnings From Operations 67,347 36,731 31,069 39,630 53,628 46,944 74,093
Interest Income/Dividend 0 0 0 0 0 0 0
Interest Expense 1,692 1,465 1,381 1,371 1,334 1,510 1,000
Minority Interest 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Earnings Before Allocation 65,655 35,266 29,688 38,259 52,294 45,434 73,093
Corporate Allocations 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Earnings Before Taxes 65,655 35,266 29,688 38,259 52,294 45,434 73,093
State Income Tax 0 0 0 0 0 0 0
Federal Income Tax 0 0 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Income Tax 0 0 0 0 0 0 0
Net Income 65,655 35,266 29,688 38,259 52,294 45,434 73,093
======= ======= ======= ======= ======= ======= =======
Percent to Sales
- -----------------
Salaries % 21.4% 23.2% 22.8% 21.4% 20.1% 20.4% 18.0%
Vehicle % 0.1% 0.9% 0.5% 1.1% 0.7% 0.4% 0.6%
Professional Services % 0.0% 0.0% 0.5% 0.3% 0.4% 0.0% 0.0%
Space Rental % 1.3% 1.5% 1.6% 1.4% 2.0% 2.1% 1.0%
Depreciation % 1.3% 1.7% 2.4% 1.7% 1.6% 1.9% 1.5%
Other Misc. Expense % 2.1% 3.3% 3.4% 4.2% 3.3% 2.0% 2.9%
Total Other Expenses % 5.4% 8.2% 9.4% 9.4% 8.7% 7.6% 6.7%
Bad Debt % 4.2% 4.7% 4.0% 3.9% 4.4% 3.5% 3.8%
Total Op. Expense % 31.0% 36.1% 36.2% 34.7% 33.2% 31.5% 28.4%
Earnings From Operations % 13.5% 8.1% 7.3% 8.2% 11.2% 10.8% 14.6%
Net Income % 13.5% 8.1% 7.3% 8.2% 11.2% 10.8% 14.6
</TABLE>
AMERICAN PHARMACEUTICAL SERVICES, INC.
Austin
September 30, 1996
<TABLE>
<CAPTION>
Desc May June July August September YTD Actuals
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Partner Service Charges
Bad Debt Facility 1,970 503 996 690 971
Bad Debt Medicare 5,391 10,331 98 1,832 5,014 64,115
Bad Debt Medicaid 5,526 5,263 6,031 6,268 5,752 56,328
Bad Debt Private 7,101 5,610 6,606 8,457 (78,596) (8,549)
Bad Debt Other 503 301 488 823 471 7,089
------- ------- ------- ------- ------- -------
Bad Debt 20,491 22,008 14,219 16,068 (66,388) 138,004
Total Operating Expense 159,089 155,577 156,720 129,039 85,037 1,732,544
Amortization Nondeductible 0 0 0 0 0 0
Amortization Deductible 0 0 0 0 0 0
Earnings From Operations 71,685 65,350 24,205 48,160 123,659 682,501
Interest Income/Dividend 0 0 0 0 0 0
Interest Expense 1,627 1,214 1,206 1,193 1,100 16,093
Minority Interest 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Earnings Before Allocation 70,058 64,136 22,999 46,967 122,559 666,408
Corporate Allocations 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Earnings Before Taxes 70,058 64,136 22,999 46,967 122,559 666,408
State Income Tax 0 0 0 0 0 0
Federal Income Tax 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Income Tax 0 0 0 0 0 0
Net Income 70,058 64,136 22,999 46,967 122,559 666,408
======= ======= ======= ======= ======= =======
Percent to Series
- -----------------
Salaries % 18.3% 18.9% 22.8% 15.8% 18.9% 20.1%
Vehicle % 0.8% 0.7% 0.7% 0.7% 0.8% 0.7%
Professional Services % 0.1% 0.4% (0.0%) 0.4% 0.3% 0.2%
Space Rental % 1.3% 1.4% 1.6% 1.5% 1.5% 1.5%
Depreciation % 1.9% 1.6% 1.8% 1.6% 1.6% 1.7%
Other Misc. Expense % 3.1% 2.6% 2.4% 3.4% 6.5% 3.3%
Total Other Expenses % 7.8% 7.3% 7.2% 8.4% 11.1% 8.1%
Bad Debt % 3.9% 4.3% 3.0% 3.4% (13.1%) 2.4%
Total Op. Expense % 29.9% 30.5% 33.0% 27.6% 18.8% 30.5%
Earnings From Operations % 13.2% 12.6% 4.6% 10.0% 24.2% 11.7%
Net Income % 13.2% 12.6% 4.6% 10.0% 24.2% 11.7%
</TABLE>
Page 18
<PAGE>
SCHEDULE 6.14
NONCOMPLIANCE WITH ENVIROMENTAL LAWS
NONE.
<PAGE>
SCHEDULE 6.17
OUTSTANDING LITIGATION
NONE.
<PAGE>
EXHIBIT 10.36
INVESTMENT AGREEMENT
--------------------
This Investment Agreement (the "Agreement") is entered into as of March 27,
---------
1998 by and among Fountain View, Inc., a Delaware corporation (the "Company"),
-------
and Robert M. Snukal, Sheila Snukal, William C. Scott ("Scott"), Heritage Fund
-----
II, L.P. ("Heritage"), Heritage Investors II, L.L.C. ("Heritage Investors"),
-------- ------------------
Heritage Fund II Investment Corporation ("HFIC"), HFV Holdings, LLC, Nassau
----
Capital Partners II L.P., NAS Partners I LLC, Paribas North America, Inc.,
Phoenix Home Life Mutual Insurance Company, PMI Mezzanine Fund, L.P., GS Private
Equity Partners, L.P., GS Private Equity Partners Offshore, L.P. and Sutro
Investment Partners V, LLC (collectively, the "Investors").
---------
Introduction
------------
This Agreement is being entered into in connection with the acquisition
(the "Acquisition") of Summit Care Corporation ("Summit") by FV-SCC Acquisition
----------- ------
Corp., a wholly-owned subsidiary of the Company (the "Sub"). The Acquisition
---
will be structured as (i) a tender offer by the Sub for shares of Summit (the
"Offer"), followed by (ii) a merger of the Sub into Summit (the "Merger"),
- ------ ------
pursuant to an Agreement and Plan of Merger by and among Summit, the Company,
the Sub and Heritage dated as of February 6, 1998 (the "Merger Agreement").
----------------
The Company will cause to be filed immediately prior to the purchase of
shares of Summit stock pursuant to the Offer (the "Tender Closing") an amendment
--------------
to its Certificate of Incorporation (the "Amendment") reclassifying its capital
---------
stock and automatically converting the shares of its capital stock outstanding
immediately prior to such amendment into shares of the reclassified capital
stock of the Company. The Investors (other than HFIC) wish to invest certain
amounts in the Company in return for shares of the reclassified capital stock of
the Company, as more particularly described herein. HFIC wishes to purchase
certain securities which may in turn be purchased by Scott and certain other
parties.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Recapitalization. Effective at the respective times set forth
--------- ----------------
below, the stock ownership of the Company will be restructured, and the new
investments specified in this Agreement will be made. This Agreement
constitutes a plan of reorganization, and the transactions effected hereby are
intended
<PAGE>
to qualify under Sections 351 and 368(a)(1)(E) of the Internal Revenue Code of
1986, as amended (the "Code").
----
Section 2. Investments. The Investors will make new cash and other
--------- -----------
investments in the Company, as set forth on Schedule A hereto, in exchange for
----------
the issuance by the Company of the securities (the "Securities") set forth on
----------
Schedule A (the "Investment"), immediately prior to the Tender Closing, except
- ---------- ----------
that (a) Scott agrees to purchase those securities which are indicated on
Schedule A as being purchased by HFIC on his behalf from HFIC at the effective
- ----------
time of the Merger, and (b) HFIC (or any other person or entity which HFIC may
designate, and which may become an "Investor" hereunder by executing a
counterpart of this Agreement) agrees to purchase certain of the Securities at
the effective time of the Merger as set forth on Schedule A. Each purchase of
----------
Series A Common Stock will be at a price of approximately $126.53 per share.
Scott will purchase a portion of the Securities to be acquired by him for a
promissory note in a form acceptable to the Company.
Section 3. Closing. The closing of the Investments will take place at the
--------- -------
times specified above. The Company will give at least 24 hour telephonic or
written notice of the date and time of closing. At closing, subject to the
satisfaction or waiver of the conditions set forth in Section 7, (a) all
payments to be made by the Investors will be made by wire transfer of
immediately available funds to an account designated by the Company, (b) the
Company and each Investor named in such agreements will execute (i) the
Stockholders Agreement in the form of Exhibit 3(b)(i) hereto (the "Stockholders
--------------- ------------
Agreement") and (ii) the Registration Rights Agreement in the form of Exhibit
- --------- -------
3(b)(ii) hereto (the "Registration Rights Agreement"), and (c) the Company will
- -------- -----------------------------
issue to the Investors certificates representing the Securities acquired. The
closing will be conducted in person (if necessary), at a site designated by the
Company, or by mail, facsimile and delivery service.
Section 4. Representations and Warranties of the Company. The Company
--------- ---------------------------------------------
represents and warrants to the Investors as follows:
(a) Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
(b) Charter and By-Laws. The copies of the Certificate of
-------------------
Incorporation, as amended, and the By-Laws, as amended, of the Company furnished
to the Investors are true and correct in all respects. As of the Tender
Closing, the Company will amend its Certificate of Incorporation in the form
attached as Exhibit 4(b) hereto.
------------
-2-
<PAGE>
(c) Authorization. This Agreement, the Amendment, the Stockholders
-------------
Agreement and the Registration Rights Agreement (the "Related Agreements") have
------------------
been duly authorized, executed and delivered by the Company and constitute the
valid and binding obligations of the Company enforceable in accordance with
their terms.
(d) No Conflicts. The execution and delivery of this Agreement and
------------
the Related Agreements and the issuance of the Securities to the Investors as
contemplated hereby will not (i) require any consent, authorization or approval
of or filing with any governmental entity or third party, or (ii) result in any
violation of, be in conflict with or constitute a default under, the charter or
by-laws of the Company or any law, statute, regulation, ordinance, contract,
agreement, instrument, judgment, decree or order to which the Company is a party
or by which the Company is bound.
(e) Compliance with Securities Laws. Subject to the accuracy of the
-------------------------------
representations and warranties of the Investors contained in Section 5 hereof,
the offer and sale of the Securities to the Investors hereunder constitute
transactions exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended (the "1933 Act") and any applicable
--------
state securities and blue sky laws.
(f) Terms of Investment. The Company has not granted any of the
-------------------
Investors (other than Heritage, Mr. and Mrs. Snukal and Mr. Scott) terms or
conditions relating to their investment in the Company which are more favorable
than the terms or conditions granted to any of the other Investors, except as
expressly set forth in this Agreement or the Related Agreements.
(g) Capitalization. After giving effect to the transactions
--------------
contemplated by this Agreement, (i) Schedule B hereto sets forth all of the
----------
outstanding shares of capital stock of the Company, (ii) except as set forth in
Schedule B hereto, there will be no outstanding options, warrants, convertible
- ----------
securities and other rights which may afford any person or entity the right to
acquire shares of any class of capital stock of the Company, or any stock
appreciation or phantom stock rights or arrangements, (iii) the Company will
have no obligation (contingent or otherwise) to repurchase any shares of its
outstanding capital stock, other than as set forth in its Certificate of
Incorporation or in the Stockholders Agreement, and (iv) the Securities will be
duly authorized, validly issued and outstanding, fully paid and nonassessable,
and free to the holders thereof of any liens, encumbrances and restrictions
(other than under applicable securities laws or the provisions of this Agreement
or the Related Agreements).
-3-
<PAGE>
(h) Use of Proceeds. The Company shall use the proceeds of the
---------------
Investment solely to fund the obligations of the Company or its subsidiaries
relating to the Offer or the Merger, to refinance indebtedness of the Company or
its subsidiaries, and for working capital.
(i) Litigation. There are no suits, proceedings or investigations
----------
pending or, to the Company's knowledge, threatened against or affecting the
Company or any of its subsidiaries with respect to the issuance of the
Securities hereunder or seeking to enjoin or challenge the consummation thereof.
(j) Registration Rights. Except for registration rights granted
-------------------
pursuant to the Registration Rights Agreement to the Investors and certain other
parties, the Company has not granted any person the right to require the Company
to register any securities of the Company under the 1933 Act, whether on a
demand basis or in connection with the registration of securities of the Company
for its own account or for the account of any other person.
(k) Brokers. The Company has not dealt with any broker, finder,
-------
commission agent or other similar person in connection with the offer or sale of
the Securities to the Investors, and the Company is under no obligation to pay
any broker's fee, finder's fee, or commission in connection with such offer and
sale.
Section 5. Representations and Warranties of the Investors. Each of the
--------- -----------------------------------------------
Investors hereby represents and warrants severally and not jointly to the
Company and each holder of its securities as follows, and each Investor
acknowledges that the Investor has full knowledge that such persons intend to
rely on such representations and warranties:
(a) Review and Agreements. THE INVESTOR HAS READ CAREFULLY AND
---------------------
UNDERSTANDS THIS AGREEMENT AND THE OTHER AGREEMENTS REFERRED TO HEREIN, AND HAS
CONSULTED SUCH INVESTOR'S OWN ATTORNEY, ACCOUNTANT OR INVESTMENT ADVISER WITH
RESPECT TO THE INVESTMENTS CONTEMPLATED HEREBY AND THEIR SUITABILITY FOR THE
INVESTOR.
(b) Access to Information. The Company has made available to the
---------------------
Investor, during the course of this transaction and prior to the acquisition of
any Securities, the books and records of the Company and the opportunity to ask
questions of and receive answers from representatives of the Company concerning
the terms and conditions of the Securities and the business, affairs, operations
and finances of the Company and any other matters relevant to this investment.
-4-
<PAGE>
(c) Long-Term Investment. The Investor understands that the Investor
--------------------
must bear the economic risk of his investment for an indefinite period of time;
that the Securities have not been registered under the 1933 Act and, therefore,
cannot be resold unless they are subsequently registered under the 1933 Act or
unless exception from such registration is available; that the Investor is
purchasing the Securities for investment for the account of the Investor and not
with a view toward resale or other distribution thereof (except with respect to
HFIC); that the Investor agrees not to resell or otherwise dispose of all or any
part of the Securities acquired by the Investor, except as permitted by law,
including, without limitation, any regulations under the 1933 Act; that the
Company does not have any intention of registering the Securities under the 1933
Act or of supplying the information which may be necessary to enable the
Investor to sell any Securities; and that Rule 144 under the 1933 Act may not be
available as a basis for exemption from registration of any Securities
thereunder until at least two years from the date of acquisition of the
Securities.
(d) Suitability. With respect to each Investor that is an individual:
-----------
(i) such Investor has adequate means of providing for his or her current and
future needs and personal contingencies and has no need for liquidity in
connection with his or her acquisition of the Securities; (ii) such Investor's
overall commitment to investments which are not readily marketable is not
disproportionate to his or her net worth, and his or her investment in the
Securities will not cause such overall commitment to become excessive; (iii)
such Investor can afford a complete loss of his or her investment in the
Securities; (iv) such Investor has evaluated the risks of purchasing the
Securities, and has determined that the Securities are a suitable investment for
him or her: and (v) such Investor has such knowledge and experience in
financial, securities, investments and business matters that he or she is
capable of evaluating the merits and risks of his or her acquisition of the
Securities.
(e) Accredited Investor. The Investor is an "accredited investor"
-------------------
within the meaning of Regulation D promulgated under the 1933 Act.
Section 6. Restrictions on Transfer. Each certificate representing the
--------- ------------------------
Securities shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID
-5-
<PAGE>
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
Section 7. Conditions to Closing. The obligation of each of the Investors
--------- ---------------------
hereunder to purchase the Securities is subject to the satisfaction at or prior
to the closing of the following conditions:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties contained in Section 4 shall be true and accurate in all material
respects on and as of the date of the Tender Closing with the same effect as
though made on and as of such date.
(b) No Material Adverse Change. There shall not have been a material
--------------------------
adverse change in the business, financial condition or results of operations of
the Company from March 1, 1998 through the date of the Tender Closing.
(c) Tender Offer. The conditions precedent to the consummation of
------------
the Offer shall have been satisfied, and there shall have been no increase in
the price to be paid by the Sub over $21.00 per share.
(d) Execution of Related Agreements. The Company, the Investors and
-------------------------------
the other parties thereto shall have executed and delivered the Related
Agreements.
(e) Receipt of All Investments. The Company shall have received the
--------------------------
consideration specified on Schedule A from each of the other Investors (except
----------
HFIC and Mr. Scott).
(g) Opinion of Counsel to Company. The Investors shall have received
-----------------------------
an opinion of Choate, Hall & Stewart, counsel for the Company, dated as of date
of the closing, in the form of Exhibit C hereto.
---------
Section 8. Miscellaneous.
--------- -------------
(a) This Agreement supersedes and overrides all other agreements among
some or all of the parties with respect to the matters covered hereby (other
than the surviving representations, warranties, indemnities and related
provisions of the Stock Purchase and Contribution Agreement dated as of July 24,
1997 among the Company, the Robert and Sheila Snukal, HFIC and certain other
parties). If the Merger Agreement is terminated before the Tender Closing, this
Agreement will terminate, and be of no further force or effect. This Agreement
is governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts (excluding its conflicts of laws
-6-
<PAGE>
principles). Jurisdiction of any litigation arising under this Agreement shall
be in California.
(b) The representations and warranties contained herein this
Agreement shall survive the execution, delivery and performance of this
Agreement.
(c) This Agreement or any term hereof may not be amended or waived
except with the written consent of (i) the Company, (ii) Heritage and (iii) a
majority-in-interest of the other Investors as to which the effect of such
amendment or waiver (A) differs in a material and adverse manner from the effect
on Heritage, or (B) would eliminate any of the material rights of such Investors
provided for in this Agreement or create any material additional obligation for
such Investors. Notwithstanding the foregoing, any waiver, modification or
amendment which requires any Investor to make additional cash contributions to
the Company shall require the consent of such Investor.
(d) This Agreement may be executed in two or more counterparts, and
with counterpart signature pages each of which shall be deemed an original, and
all of such counterparts together constitute but one and the same agreement.
One or more counterparts may be delivered by facsimile with the same force and
effect as an original.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date set forth above.
FOUNTAIN VIEW, INC.
By: /s/ Robert M. Snukal /s/ Robert M. Snukal
----------------------------- --------------------------------
(Title) Robert M. Snukal
/s/ William C. Scott /s/ Sheila Snukal
- -------------------------------- --------------------------------
William C. Scott Sheila Snukal
HERITAGE INVESTORS II, L.L.C. HERITAGE FUND II, L.P.
By Heritage Partners Management By HF Partners II, L.L.C.,
Company, Inc., its manager its general partner
By: [SIGNATURE ILLEGIBLE] ^^ By: [SIGNATURE ILLEGIBLE] ^^
----------------------------- --------------------------------
(title) (title)
HERITAGE FUND II HFV HOLDINGS, LLC
INVESTMENT CORPORATION
By:
-----------------------------
its Manager
By: [SIGNATURE ILLEGIBLE] ^^ By: /s/ Andrew II. McQuarrie
----------------------------- -----------------------------
(title) Andrew II. McQuarrie (title)
Vice President
NASSAU CAPITAL PARTNERS II, L.P. PARIBAS NORTH AMERICA, INC.
By Nassau Capital L.L.C.,
------------------------------
its general partner
By: /s/ John G. Quigley By: John G. Martinez
----------------------------- -----------------------------
John G. Quigley (title) John G. Martinez (title)
Member Financial Controller
PHOENIX HOME LIFE PMI MEZZANINE FUND, L.P.
MUTUAL INSURANCE COMPANY By: Pacific Mezzanine Investors, L.L.C.
its general partner
By: John H. Beer By: /s/ Schuyler G. Lance
----------------------------- -----------------------------
(title) Schuyler G. Lance (title)
Principal
-8-
<PAGE>
GS PRIVATE EQUITY GS PRIVATE EQUITY
PARTNERS, L.P. PARTNERS OFFSHORE, L.P.
By GS Private Equity By GS Private Equity Management
------------------------------ ------------------------------
Management, LLC Offshore, Inc.
--------------- --------------
its general partner its general partner
By: GSAM ?anpar, LLC (its Management member)
By: /s/ Donald Opatrny By: /s/ Donald Opatrny
----------------------------- -----------------------------
Director (title) Director (title)
SUTRO INVESTMENT PARTNERS V, LLC NAS PARTNERS I, LLC
By _____________________, By JOHN G. QUIGLEY
-----------------------,
its Manager its Manager
By: [SIGNATURE ILLEGIBLE] ^^ By: [SIGNATURE ILLEGIBLE] ^^
----------------------------- -----------------------------
President (title) (title)
The undersigned, Karen B. Kaplan, spouse of William Scott, hereby consents
to the foregoing agreement.
/s/ Karen B. Kaplan
____________________________
Karen B. Kaplan
-9-
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Investor Consideration Securities Acquired
- ---------------------- --------------------- ----------------------
- ---------------------------------------------------------------------
<S> <C> <C>
Heritage Fund II, $42,021,000 cash 332,101 shares of
L.P. Series A Common Stock
- ---------------------------------------------------------------------
Heritage Investors $42,000 cash 332 shares of Series
II, L.L.C. A Common Stock
- ---------------------------------------------------------------------
Robert M. and Sheila $5,000,000 cash (for 39,516 shares of
Snukal Series A shares) Series A Common Stock
$6,259 (for Series B 62,599 shares of
shares) Series B Common Stock
- ---------------------------------------------------------------------
William C. Scott $1,437,000 cash (for 11,357 shares of
(HFIC on an interim 11,357 Series A Series A Common Stock
basis for 11,357 shares) (to be initially
shares of Series A purchased by HFIC)
Common Stock) $2,530,600 in a
promissory note (for 20,000 shares of
20,000 Series B Series A Common Stock
shares)
51,603 shares of
$5,160 (for Series B Series B Common Stock
shares)
- ---------------------------------------------------------------------
Heritage Fund II $15,000,000 cash 15,000 shares of
Investment Series A Preferred
Corporation Stock
(to be purchased at
the effective time of
the Merger)
Warrants to purchase
71,119 shares of
Series C Common
Stock, at an exercise
price of $0.01 per
share
(to be purchased at
the effective time of
the Merger)
- ---------------------------------------------------------------------
HFV Holdings, LLC $2,000,000 cash 15,806 shares of
Series A Common Stock
- ---------------------------------------------------------------------
Nassau Capital $4,969,098.40 cash 39,272 shares of
Partners II L.P. Series A Common Stock
- ---------------------------------------------------------------------
NAS Partners I LLC $30,901.60 cash 244 shares of Series
A Common Stock
- ---------------------------------------------------------------------
Paribas North $5,000,000 cash 39,516 shares of
America, Inc. Series A Common Stock
- ---------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------
Phoenix Home Life $2,000,000 cash 15,806 shares of
Mutual Insurance Series A Common Stock
Company
- ---------------------------------------------------------------------
PMI Mezzanine Fund, $7,500,000 cash 59,274 shares of
L.P. Series A Common Stock
- ---------------------------------------------------------------------
GS Private Equity $6,755,920 cash 53,393 shares of
Partners, L.P. Series A Common Stock
- ---------------------------------------------------------------------
GS Private Equity $3,244,080 cash 25,639 shares of
Partners Offshore, Series A Common Stock
L.P.
- ---------------------------------------------------------------------
Sutro Investment $2,000,000 cash 15,806 shares of
Partners V, LLC Series A Common Stock
- ---------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
SCHEDULE B
----------
FOUNTAIN VIEW, INC.
Securities Outstanding After Merger
<TABLE>
<CAPTION>
Series A Series B Series C Series A
Common Common Common Preferred
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Heritage Fund II L.P. 525,633
Heritage Fund II 71,119(W) 15,000
Investment Corporation
Heritage Investors II 429
L.L.C.
Robert and Sheila Snukal 149,484 62,599
Keith Abrahams 8,294
Stacy Abrahams 8,294
Joshua Snukal 8,294
William Scott 11,357 51,603
20,000(N)
GS Private Equity 53,393
Partners, L.P.
GS Private Equity 25,639
Partners Offshore, L.P.
HFV Holdings, LLC 15,806
Nassau Capital Partners 39,272
II L.P.
NAS Partners I LLC 244
PMI Mezzanine Fund, L.P. 59,274
Paribas North America, 39,516
Inc.
Phoenix Home Life Mutual 15,806
Insurance Company
Sutro Investment Partners 15,806
V, LLC
Deborah Wickersham 138
Joan Chandler 138
Rosella Felipe 138
Rolando Abrina 138
John Padama 138
Myles Andrews 277
Martin Axel 277
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Series A Series B Series C Series A
-------- -------- --------
Common Common Common Preferred
------ ------ ------ ---------
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Norbalita Sapiandante 277
- ------------------------------------------------------------------------------------
Consolacion Padama 277
- ------------------------------------------------------------------------------------
Barbara Gale 277
- ------------------------------------------------------------------------------------
Debra Bowman 692
- ------------------------------------------------------------------------------------
Robin Necke 692
--------- ------- ------ ------
- ------------------------------------------------------------------------------------
1,000,000 114,202 71,119 15,000
- ------------------------------------------------------------------------------------
</TABLE>
W = Warrant
N = Exchanged for Note
<PAGE>
EXHIBIT 10.37
STOCKHOLDERS AGREEMENT
----------------------
This Stockholders Agreement (the "Agreement") is entered into as of March
---------
27, 1998 by and among Fountain View, Inc., a Delaware corporation (the
"Company"), Robert Snukal ("RS"), Sheila Snukal ("SS"), William Scott ("Scott"),
------- -- -- -----
Heritage Fund II, L.P. ("Heritage"), Heritage Investors II, L.L.C., Heritage
--------
Fund II Investment Corporation, Keith Abrahams, Stacy Abrahams, Joshua Snukal,
Debbie Wickersham, Joan Chandler, Rosella Felipe, Rolando Abrina, John Padama,
Myles Andrews, Martin Axel, Norbolita Sapiandante, Consolacion Padama, Barbara
Gale, Debra Bowman, Robin Necke, HFV Holdings, LLC, Nassau Capital Partners II
L.P., NAS Partners I LLC, Paribas North America, Inc., Phoenix Home Life Mutual
Insurance Company, PMI Mezzanine Fund, L.P., GS Private Equity Partners, L.P.,
GS Private Equity Partners Offshore, L.P. and Sutro Investment Partners V, LLC
and any Person who hereafter becomes a stockholder of the Company as provided
herein, and is consented to by Scott's spouse, Karen B. Kaplan.
Introduction
------------
The purpose of this Agreement is to establish certain arrangements with
respect to the management and operation of the Company and to grant certain
rights and impose certain restrictions on the ownership of stock of the Company,
which the parties agree are in their best interests and in the best interests of
the Company.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings given to them in Article VIII at the end of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein expressed,
the parties hereto hereby agree as follows:
ARTICLE I
BOARD OF DIRECTORS; VOTING
Section 1.01. Board Size. At all meetings (and written actions in lieu of
------------ ----------
meetings) of stockholders of the Company at which the number of directors of the
Company is to be determined, each Stockholder shall vote all of such
Stockholder's Stock to fix the number of directors of the Company at the number
specified by a Majority of Investors.
Section 1.02. Election of Directors. At all meetings (and written actions
------------ ---------------------
in lieu of meetings) of stockholders of the
<PAGE>
Company at which directors are to be elected, each Stockholder shall vote all of
such Stockholder's Stock to elect, as directors of the Company:
(a) RS Directors. Two nominees of RS, which number shall be
------------
increased if necessary to insure that the nominees of RS constitute not less
than twenty-five percent (25%) of the total number of directors (the "RS
--
Directors"), as long as RS holds any shares of Stock.
- ---------
(b) Scott Directors. One nominee of Scott (the "Scott Director"), as
--------------- --------------
long as Scott holds any shares of Stock.
(c) Investor Directors. Such number of nominees of a Majority of
------------------
Investors as may be designated by a Majority of Investors (the "Investor
--------
Directors").
- ---------
Section 1.03. Removal. Each Stockholder agrees to vote such Stockholder's
------------ -------
Stock, at all meetings (and written actions in lieu of meetings) of stockholders
of the Company, (a) to remove any RS Director, if so requested by RS, (b) to
remove the Scott Director, if so requested by a Scott and (c) to remove any
Investor Director, if so requested by a Majority of Investors. Each Stockholder
agrees not to vote such Stockholder's Stock in favor of the removal of any
director other than in accordance with the preceding sentence.
Section 1.04. Vacancies. Each Stockholder agrees to vote such
------------ ---------
Stockholder's Stock, at all meetings (and written actions in lieu of meetings)
of stockholders of the Company, (a) to fill any vacancy on the Board of
Directors of the Company (the "Board") caused by the resignation or removal of
-----
any RS Director with a nominee selected by RS, (b) to fill any vacancy on the
Board caused by the resignation or removal of the Scott Director with a nominee
selected by Scott and (c) to fill any vacancy on the Board caused by the
resignation or removal of any Investor Director with a nominee selected by a
Majority of Investors.
Section 1.05. Meetings. The Board will meet not less often than
------------ --------
quarterly. Each Director shall be given at least three days prior notice of any
meeting and will be permitted to participate in any meeting by telephone. Any
Director may call a meeting of the Board.
Section 1.06. Observation Rights. An Investor shall be entitled to have
------------ ------------------
one observer present at any meeting of the Board if such Investor holds at least
75,000 shares of Common Stock (appropriately adjusted for stock splits, stock
dividends, combinations and similar transactions) as of the date notice of such
meeting is delivered. The Company shall give each Investor who is listed on the
record books of the Company as holding the
-2-
<PAGE>
number of shares of Stock set forth above at least three days prior notice of
any meeting so that each such Investor may designate an observer to be present
at such meeting. No observer pursuant to this Section 1.06 shall have any right
to vote upon any matters to be considered by the Board.
Section 1.07. Voting on Other Matters. If requested by Heritage, for as
------------ -----------------------
long as Heritage holds more shares of Common Stock than any other Investor, the
Stockholders agree to vote their Securities on all matters to be voted upon by
holders of the Company's Securities as directed by Heritage, unless the effect
of such matter on such Stockholder differs materially and adversely from the
effect on Heritage. Each Stockholder hereby grants Heritage an irrevocable
proxy, which is coupled with an interest, to vote such Stockholder's Securities
as provided in this Section. Each Qualified Stockholder shall, if such
Qualified Stockholder requests, be given an opportunity to be heard by Heritage
for the purpose of discussing the exercise of such proxy, provided that such
opportunity shall in no way limit the scope or validity of such proxy.
ARTICLE II
SPECIAL PROVISIONS REGARDING
SERIES B COMMON STOCK
Section 2.01. General. The Company has issued to RS and SS an aggregate
------------ -------
of 62,599 shares of Series B Common Stock and has issued to Scott 51,603 shares
of Series B Common Stock pursuant to which the provisions of this Article II
apply.
Section 2.02. Forfeiture of Series B Common Stock. Immediately prior to
------------ -----------------------------------
the consummation of a Trigger Event, a portion of the Series B Common Stock may
be deemed to be entitled to remain outstanding as provided below, and upon such
determination each share of Series B Common Stock that is not entitled to remain
outstanding shall immediately be deemed to be forfeited by the holder thereof,
without further action by the Company or the Stockholders, and shall thereafter
not be outstanding. Upon any such forfeiture, the Company shall pay the holder
thereof an amount equal to the price paid to the Company upon original issuance
of such share. The aggregate number of shares of Series B Common Stock that are
deemed to be entitled to remain outstanding shall be determined in accordance
with Section 2.03 below. The number of shares of Series B Common Stock that are
entitled to remain outstanding for each Stockholder who holds Series B Common
Stock immediately prior to the consummation of a Trigger Event shall be (a) the
total number of Series B Common Stock so held by such Stockholder multiplied by
(b) a fraction of which the numerator is the aggregate number
-3-
<PAGE>
of shares of Series B Common Stock that are entitled to remain outstanding and
the denominator is 114,202.
Section 2.03. Determination of Number of Shares of Series B Common Stock
------------ ----------------------------------------------------------
that are Entitled to Remain Outstanding. The aggregate number of shares of
- ---------------------------------------
Series B Common Stock that are entitled to remain outstanding shall be
determined as follows in the circumstances indicated:
(a) Base Case Terminal Value. If, at the time of a Trigger Event, the
------------------------
Terminal Value (as hereinafter defined) of the Company is equal to or less than
the Base Case, the number of shares of Series B Common Stock that are entitled
to remain outstanding shall be 0.
(b) Mid Case Terminal Value. If, at the time of a Trigger Event, the
-----------------------
Terminal Value of the Company is equal to the Mid Case, the number of shares of
Series B Common Stock that are entitled to remain outstanding shall be 81,739.
(c) Target Case Terminal Value. If, at the time of a Trigger Event,
--------------------------
the Terminal Value of the Company is equal to or greater than the Target Case,
the number of shares of Series B Common Stock that are entitled to remain
outstanding shall be 114,202.
(d) Intermediate Cases. If, at the time of a Trigger Event, the
------------------
Terminal Value of the Company is more than the Base Case but less than the Mid
Case, the number of shares of Series B Common Stock that are entitled to remain
outstanding shall be adjusted ratably between the amount specified in Subsection
(a) above and the amount specified in Subsection (b) above. If, at the time of
a Trigger Event, the Terminal Value is more than the Mid Case but less than the
Target Case, the number of shares of Series B Common Stock that are entitled to
remain outstanding shall be adjusted ratably between the amount specified in
Subsection (b) above and the amount specified in Subsection (c) above.
(e) Definition of Base Case, Mid Case and Target Case. As used herein,
-------------------------------------------------
"Base Case", "Mid Case" and "Target Case" shall have the meanings specified on
--------- -------- -----------
Exhibit 2.03 hereto, on the respective dates indicated. The Base Case, Mid Case
- ------------
and Target Case Terminal Value targets for forfeiture of Series B shares may be
changed by the Board to reflect acquisitions, dispositions, start-ups and other
transactions not in the ordinary course, provided that in selecting the new
targets the members of the Board approving such changes believe in good faith
that the new targets are broadly consistent with the valuation methodology
applied in determining the initial Terminal Value targets set forth on Exhibit
-------
2.03 hereto. Prompt notice of any change in the
- ----
-4-
<PAGE>
Terminal Value targets will be given by the Company to each record holder of
shares of Series B Common Stock.
(f) Definition of Terminal Value. As used herein, "Terminal Value"
---------------------------- --------------
shall mean the following:
(i) In the case of a Trigger Event which is a registered,
underwritten public offering of shares of common stock of the Company (a
"Public Offering"), Terminal Value shall mean the aggregate value of all
----------------
Common Stock and equivalents of the Company, based on the price per share
at which shares of Common Stock are to be sold to the public in such
offering, determined immediately prior to such offering.
(ii) In the case of any other Trigger Event, Terminal Value
shall mean the aggregate net proceeds (including the fair market value of
any property) distributable in respect of all Common Stock and equivalents
of the Company from the transaction giving rise to such Trigger Event.
(iii) Definition of Trigger Event. As used herein, "Trigger
--------------------------- -------
Event" shall mean any of the following: (A) the closing of a Public
-----
Offering, (B) the sale of Stock in a single transaction or a series of
related transactions, or a merger or consolidation of the Company as a
result of which a majority of the outstanding Stock is not held by the
initial parties to this Agreement and their transferees under clauses (a)
through (f) of the definition of "Permitted Transfers", or (C) the sale of
-------------------
all or substantially all of the consolidated assets of the Company and its
Subsidiaries, approved as required by this Agreement.
(g) Certain Events. In the event of any stock split, stock dividend,
--------------
combination or other similar transaction affecting the Series B Common Stock,
the share numbers contained in this Article shall be appropriately adjusted by
the Board.
ARTICLE III
PREEMPTIVE RIGHTS
Section 3.01. Notice of Issuance. The Company will give each Qualified
------------ ------------------
Stockholder (as hereinafter defined) at least 20 business days prior written
notice of any proposed sale or issuance by the Company of any Securities, except
for Exempt Issuances (as hereinafter defined). Such notice will identify the
Securities to be issued, the approximate date of issuance, and the price and
other terms and conditions of the issuance.
-5-
<PAGE>
Such notice will also include an offer (the "Offer") to transfer to each
-----
Qualified Stockholder its Proportionate Percentage (as hereinafter defined) of
such Securities (the "Offered Securities") at the price and on the other terms
------------------
as are proposed for such sale or issuance, which Offer by its terms shall remain
open for a period of 15 business days from the date of receipt of such notice
and which offer may be accepted by any such Qualified Stockholder in such
Qualified Stockholder's sole discretion. The Offer will also specify each
Qualified Stockholder's Proportionate Percentage, and the manner in which it was
determined.
Section 3.02. Acceptance. Each Qualified Stockholder shall give notice to
------------ ----------
the Company of such Qualified Stockholder's intention to accept an Offer prior
to the end of the 15-day period of such Offer, setting forth the portion of the
Offered Securities which such Qualified Stockholder elects to purchase and
specifying the maximum number of additional Securities such Qualified
Stockholder is willing to purchase if any other Qualified Stockholder declines
to purchase all of such other Qualified Stockholder's Offered Securities. If
any Qualified Stockholder fails to subscribe for such Qualified Stockholder's
Proportionate Percentage of the Offered Securities, the other subscribing
Qualified Stockholders shall be entitled to purchase such Offered Securities as
are not subscribed for by such Qualified Stockholder, up to the number of
additional Securities specified in their notice in the same relative proportion
in which they were initially entitled to purchase the Offered Securities. The
Company shall notify each Qualified Stockholder within five days following the
expiration of the 15-day period described above of the additional amount of
Offered Securities which each Qualified Stockholder may purchase pursuant to the
foregoing sentence and each Qualified Stockholder shall then have five days from
the delivery of such notice to indicate such additional amount, if any, that
such Qualified Stockholder wishes to purchase.
Section 3.03. Sale to Qualified Stockholders. Upon the closing of any
------------ ------------------------------
sale or issuance as to which the Company has given notice under Section 3.01,
the Qualified Stockholders shall purchase from the Company, and the Company
shall sell to the Qualified Stockholders the Offered Securities subscribed for
by the Qualified Stockholders at the price and on the terms specified in the
Offer, which shall be the same price and terms at which all other Persons
acquire such Securities in connection with such sale or issuance.
Section 3.04. Sale to Third Parties. If, but only if, the Qualified
------------ ---------------------
Stockholders do not subscribe for all of the Offered Securities, the Company
shall have 150 days from the end of the foregoing 15- or five-day period,
whichever is applicable, to
-6-
<PAGE>
sell all or any part of such Offered Securities as to which Qualified
Stockholders have not accepted an Offer to any other Persons, at a price and on
terms and conditions which are no more favorable to such other Persons or less
favorable to the Company than those set forth in the Offer. Any Offered
Securities not purchased by the Qualified Stockholders or other Persons in
accordance with Sections 3.03 and 3.04 may not be sold or otherwise disposed of
until they are again offered to the Stockholders under the procedures specified
in this Article III.
Section 3.05. Exempt Issuances. As used herein, "Exempt Issuances" means
------------ ---------------- ----------------
(a) the issuance of Stock and Stock Equivalents to current employees,
consultants and directors of the Company or its subsidiaries (or to former
employees, consultants and directors of the Company or its subsidiaries pursuant
to the exercise of outstanding stock options or similar rights), (b) the
issuance of shares of Stock upon the conversion or exercise of Stock Equivalents
as to which the Company complied with the provisions of this Article or was not
required to comply such provisions, including without limitation the issuance of
Common Stock upon the exercise of warrants to purchase Series C Common Stock
issued on or about the date hereof, and (c) the issuance of Securities which the
Board determines in good faith should not, in the best interests of the Company,
be subject to the provisions of this Article, provided that none of such
Securities are being issued to Heritage or its Affiliates.
ARTICLE IV
TRANSFER RESTRICTIONS
FOR STOCKHOLDERS
Section 4.01. No Transfer. No Stockholder (other than Heritage, as to
------------ -----------
which this Article IV shall not apply) may sell, pledge, give, assign,
distribute, hypothecate, mortgage or transfer (all hereinafter referred to as
"transfer") any Securities owned by such Stockholder, directly or indirectly, to
- ---------
any other person or entity, except (a) in the case of Management Stockholders,
after the fourth anniversary of the date hereof (or, in the case or RS, the
earlier date, if any, on which his employment with the Company is terminated by
the Company without cause (other than upon death or disability pursuant to his
employment agreement with the Company) and upon compliance with the other
provisions of this Article IV, (b) in the case of Investors, other than
Heritage, upon compliance with the other provisions of this Article IV, or (c)
in a Permitted Transfer (as hereinafter defined) without compliance with the
other provisions of this Article IV.
Section 4.02. Offer to Company and Qualified Stockholders. If a
------------ -------------------------------------------
Stockholder (the "Transferring Stockholder") desires to
------------------------
-7-
<PAGE>
transfer any of such Stockholder's Securities, such Stockholder shall first
offer such Securities to the Company and the other Qualified Stockholders by
written notice (the "Initial Notice") stating the Securities such Stockholder
--------------
desires to transfer and the proposed price (expressed in dollars) and terms of
transfer (which shall be for cash payable upon the transfer). The Company and
each of the other Qualified Stockholders shall then have 30 days within which to
give notice (the "Return Notice") of the maximum number of such Securities they
-------------
wish to acquire at the specified price and terms. Copies of each Return Notice
shall be sent to the Company, to the Transferring Stockholder and to each other
Qualified Stockholder.
The Company shall be entitled to purchase any or all of the Securities
offered. If the Company elects to purchase fewer than all of the Securities
offered, each Qualified Stockholder (other than the Transferring Stockholder)
shall be entitled to acquire a pro rata portion of the balance of the Securities
remaining, determined in accordance with their Proportionate Percentages. If any
Qualified Stockholder elects to acquire less than such Qualified Stockholder's
pro rata portion of the available Securities, the other Qualified Stockholders
may acquire a pro rata portion of the balance of the Securities remaining.
The Company and the Qualified Stockholders shall not be entitled to acquire
any Securities from the Transferring Stockholder unless they have elected, in
the aggregate, to purchase all of the Securities specified in the Initial
Notice.
Section 4.03. Payment. The Company shall, at the close of the 30-day
------------ -------
period provided in Section 4.02 for delivery of the Return Notice, confirm by
notice the Securities to be acquired by each Qualified Stockholder and by the
Company. Payment for such Securities shall be delivered within 30 days
thereafter at the price and on the terms specified in the Initial Notice,
against receipt from the Transferring Stockholder of certificates for the
Securities purchased, duly endorsed for transfer, free and clear of all liens,
restrictions, claims and encumbrances, except as provided in this Agreement and
under applicable securities laws.
Section 4.04. Right to Sell. If, at the close of the 30-day period
------------ -------------
provided in Section 4.02 for delivery of the Return Notice, the Company and the
other Qualified Stockholders have not sent notice of their intention to acquire,
in the aggregate, all of the Securities offered, the Transferring Stockholder
shall have 120 days to transfer the Securities specified in the Initial Notice
at the price and on the terms set forth in the Initial Notice, or at a higher
price than the price specified therein. After the expiration of 120 days the
Transferring Stockholder may not transfer such Securities unless and until they
are again
-8-
<PAGE>
offered to the Company and the other Qualified Stockholders under the procedures
specified in this Article IV, where applicable.
Section 4.05. Legends. All certificates or instruments representing
------------ -------
Securities issued to any party to this Agreement shall bear substantially the
following legends:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS OF
ANY STATE. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED IN THE ABSENCE OF
EFFECTIVE REGISTRATION STATEMENTS COVERING SUCH SECURITIES UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS, UNLESS THE HOLDER SHALL HAVE
OBTAINED AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OTHER OBLIGATIONS CONTAINED IN A STOCKHOLDERS
AGREEMENT BETWEEN THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A
COPY OF WHICH IS ON FILE WITH THE COMPANY AND WILL BE FURNISHED
WITHOUT COST TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY.
ARTICLE V
TRANSFERS BY HERITAGE
Section 5.01. Co-Sale Rights. If Heritage determines to transfer,
------------ --------------
including without limitation any transfer pursuant to a merger, consolidation or
other business combination of the Company or any subsidiary with another person
or entity (except pursuant to a Public Offering), all or a portion of the Common
Stock held by it (any such transfer being referred to herein as a "Heritage
--------
Transfer Event"), Heritage shall give prior notice thereof (the "Transfer Event
- -------------- --------------
Notice") to the other Qualified Stockholders, indicating the overall value of
- ------
the Company implied by the transfer, the Securities to be transferred and the
value of such Securities in the proposed transfer, which value will be
determined by taking the overall Company value stated in the notice and
allocating that value among the Company's outstanding Securities in accordance
with the liquidation provisions of the Certificate of Incorporation.
Each other Qualified Stockholder shall have the right, by giving notice
thereof to Heritage within 20 days after receipt of the Transfer Event Notice,
to include in such transfer the same proportion of its holdings of each class of
Securities as Heritage transfers of its holdings of Common Stock in such
-9-
<PAGE>
transaction; provided, that each holder of Preferred Stock shall be entitled to
include all of such holder's shares of Preferred Stock in any such transfer that
constitutes a Trigger Event. Except as provided below, Heritage will not
transfer any Securities in a transaction covered by this Section 5.01 unless the
transferee also acquires any Securities requested by the other Qualified
Stockholders pursuant to the preceding sentence to be included in such transfer,
at the applicable values determined in accordance with the preceding paragraph
(except as provided in Section 5.04 below) and terms specified in the Transfer
Event Notice and in the same form of consideration received by Heritage, and as
to which the other Qualified Stockholders comply with the following paragraph.
In the event that more Securities are requested to be included in any transfer
under this Section 5.01 than the transferee is willing to purchase, the
Securities to be transferred by Heritage and the other Qualified Stockholders to
such transferee shall be reduced pro rata among Heritage and such other
Qualified Stockholders based on the number of Securities requested to be
included in such transfer (and subject to the prior rights of holders of
Preferred Stock to transfer their shares in a Trigger Event).
Heritage shall have 150 days after the close of the 20-day period specified
above to transfer the Securities described in the Transfer Event Notice at the
price (except as provided in Section 5.04 below) and on the terms specified
therein, together with any additional Securities to be included in such transfer
pursuant to the preceding paragraph. Any Qualified Stockholder whose Securities
are being transferred pursuant hereto, in order to be entitled to have such
Securities transferred, shall deliver on no less than five business days notice
from Heritage, at the time and place specified by Heritage, certificates
representing the Securities to be transferred, duly endorsed for transfer to the
transferee designated by Heritage, free and clear of all liens, restrictions,
claims and encumbrances, except as provided in this Agreement and under
applicable securities laws.
Notwithstanding the foregoing, (a) this Section shall not apply to
transfers by Heritage to its partners which are required by its Agreement of
Limited Partnership, as amended, if such partners become parties to this
Agreement, and (b) no shares of Series B Common Stock may be included in any
transfer covered by this Section unless the transfer constitutes a Trigger
Event.
Section 5.02. Required Transfers. Each Stockholder agrees, at Heritage's
------------ ------------------
request and upon not less than 20 days prior notice from Heritage, to transfer
in any transaction constituting a Heritage Transfer Event which occurs on or
after the occurrence of a Trigger Event (other than any transfer to an Affiliate
of Heritage), at a price (except as provided in Section 5.04 below) and on terms
determined in the manner applicable to transfers
-10-
<PAGE>
under Section 5.01, the same proportion of its holdings of each class of
Securities as Heritage transfers of its holdings of Common Stock in such
transaction, except that the holders of Preferred Stock may elect, if such
Heritage Transfer Event involves a Trigger Event, to transfer all shares of
Preferred Stock held by them in such transaction.
Upon receipt of notice from Heritage under this Section, each Stockholder
shall deliver, on not less than five business days notice from Heritage, at the
time and place specified by Heritage, certificates representing the Securities
to be transferred, duly endorsed for transfer to the transferee designated by
Heritage, free and clear of all liens, restrictions, claims and encumbrances,
except as provided in this Agreement and under applicable securities laws.
Section 5.03. Certain Obligations Relating to Transfer Events. The
------------ -----------------------------------------------
Stockholders will (a) cooperate with Heritage in all respects in the
consummation of any Heritage Transfer Event, (b) vote their Securities in favor
of any Heritage Transfer Event, if requested by Heritage, and (c) execute all
agreements, documents and instruments required by Heritage, which agreements,
documents and instruments will be substantially similar to those executed by
Heritage to consummate such Heritage Transfer Event, provided, however, that any
-------- -------
indemnification obligations of the Investors shall be several and not joint and
that such indemnification obligations shall be limited for each Investor to the
amount of proceeds received by such Investor in such Heritage Transfer Event.
Section 5.04. Treatment of Stock Equivalents. For purposes of Sections
------------ ------------------------------
5.01 and 5.02, Stock Equivalents shall be deemed to be the same class of Stock
as the Securities for which they are exercisable or into which they are
convertible, but the price payable for them in connection with a Heritage
Transfer Event shall be reduced by the exercise price thereof or other
consideration required to be paid to the Company to acquire the underlying
Stock.
ARTICLE VI
INITIAL PUBLIC OFFERING
Section 6.01. Recapitalization in Connection with Initial Public Offering.
------------ -----------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement or in the
Certificate of Incorporation, in connection with an initial Public Offering of
the Company, the Company will recapitalize its Common Stock into a single class
of Common Stock effective immediately prior to such Public Offering, in
accordance with Section 6.02. In connection with any such recapitalization, the
Stockholders will
-11-
<PAGE>
(a) cooperate with a Majority of Investors in all respects and enter into any
transaction reasonably required to effect such recapitalization, (b) vote their
Stock in favor of any such transaction reasonably required to consummate such
recapitalization, if requested by a Majority of Investors, and not exercise any
dissenter's rights or rights to seek an appraisal under Delaware law in
connection with such recapitalization effective upon the initial Public
Offering, and (c) execute all agreements, documents and instruments reasonably
required by a Majority of Investors, consistent with this Section 6.01, whereby
such Stockholders shall (i) undertake all actions reasonably necessary to
effectuate the recapitalization of its Common Stock into a single class of
Common Stock and (ii) agree not to sell, grant any option for the purchase of,
or otherwise dispose of any Securities (other than those included in such
registration) for such period as may be requested by the managing underwriter of
any public offering of the Company's Securities (not to exceed (A) 180 days
thereafter, in the case of the initial public offering of the Company's Common
Stock or (B) 90 days thereafter, in the case of any other registration).
Section 6.02. Determination of Number of Shares. Upon such
------------ ---------------------------------
recapitalization, each share of Common Stock (including, in the case of Series B
Common Stock, only shares that are entitled to remain outstanding in accordance
with Article II) will be converted into a number of shares of Common Stock
determined by dividing (a) the amount that would be distributed in respect of
such share upon a liquidation of the Company in accordance with the Certificate
of Incorporation, assuming an amount of cash available to distribute equal to
the aggregate value of all common equity and equivalents of the Company (but not
any preferred stock) immediately prior to such Public Offering, based on the
price per share at which shares of Common Stock are to be sold to the public in
such Public Offering (the "Per Share Offering Price"), by (ii) the Per Share
------------------------
Offering Price. In order to facilitate the Public Offering, the Board may
determine in good faith its estimate of the Per Share Offering Price in advance
of the Public Offering, and the parties agree that the foregoing adjustment may
be made on the basis of that estimate. Each share of Series B Common Stock not
entitled to remain outstanding in accordance with Article II will be canceled.
Section 6.03. Termination. This Agreement will terminate upon the
------------ -----------
consummation of an initial Public Offering by the Company.
ARTICLE VII
MISCELLANEOUS
-12-
<PAGE>
Section 7.01. Affiliate Transactions. The Company will not, and will not
------------ ----------------------
permit any of its subsidiaries to, engage in any transaction with any Affiliate
of the Company other than (a) as expressly contemplated by this Agreement, (b)
issuances of securities in compliance with (or which are exempt from) Article
III or (c) those transactions that are on a commercially-reasonable, arms-length
basis and that are approved by a disinterested majority of the Board.
Section 7.02. Information. The Company will provide to each Qualified
------------ -----------
Stockholder the following reports:
(a) Monthly Reports. As soon as available, a consolidated balance
---------------
sheets of the Company as at the end of such period and the related consolidated
statement of operations for such period and for the portion of the Company's
fiscal year ended on the last day of such month, in each case setting forth in
comparative form the corresponding figures for the same period and portion of
the next preceding fiscal year.
(b) Quarterly Reports. As soon as available, a consolidated balance
-----------------
sheet of the Company as at the end of such period and the related consolidated
statements of operations, stockholders' equity and cash flows for such period
and for the portion of the Company's fiscal year ended on the last day of such
quarter, in each case setting forth in comparative form the corresponding
figures for the same period.
(c) Annual Reports. As soon as available, a consolidated balance
--------------
sheet of the Company as at the end of such year and the related consolidated
statements of income, stockholders' equity and cash flows for such year, in each
case setting forth in comparative form the corresponding figures for the next
preceding fiscal year, accompanied by the report on such consolidated financial
statements of national independent certified public accountants selected by the
Board.
(d) Securities Filings. As promptly as practicable and in any event
------------------
within five days after the same are available, copies of all periodic and
special reports, documents and registration statements which the Company
furnishes or files with the Securities and Exchange Commission or any securities
exchange.
(e) Board of Directors Information. As promptly as practicable,
------------------------------
copies of all information furnished by the Company to its directors in
connection with meetings of the Board.
(f) Other Information. Such other information relating to the Company
-----------------
as from time to time may reasonably be requested.
-13-
<PAGE>
Section 7.03. Inspection. The Company will permit any person designated
------------ ----------
by a Qualified Stockholder, on reasonable notice and during normal business
hours, to visit and inspect any of the properties, books and records of the
Company or its subsidiaries and to discuss issues relating to the Company with
the Company's management.
Section 7.04. Other Activities of Stockholders and Directors. The
------------ ----------------------------------------------
Stockholders and their Affiliates may engage in and possess interests in other
business ventures and investment opportunities, except as provided in any
employment agreement between such Stockholder and the Company. Neither the
Company nor any other Stockholder shall have any rights in or to such ventures
or opportunities or the income or profits therefrom by reason of this Agreement.
Section 7.05. Option Pool. Following the merger of FV-SCC Acquisition
------------ -----------
Corp., a wholly-owned subsidiary of the Company, into Summit Care Corporation,
the Company expects to create and put into effect a management option program to
provide incentives to employees, other than RS and Scott.
Section 7.06. Failure to Deliver Securities. If any Stockholder fails to
------------ -----------------------------
deliver any Securities to be acquired, Transferred or exchanged hereunder, the
acquiror may elect to establish a segregated account in the amount of the price
to be paid therefor, such account to be turned over to such Stockholder upon
delivery of instruments Transferring the Securities. If a segregated account is
so established, the Company shall take such action as is appropriate to Transfer
record title to the Securities from such Stockholder to the acquiror. Each
Stockholder hereby irrevocably grants the Company a power of attorney to
effectuate the purposes of this Section.
Section 7.07. Requirement to Sign Agreement. Unless waived by the Board,
------------ -----------------------------
notwithstanding anything to the contrary contained in this Agreement, no Person
shall acquire any Securities, whether by Transfer from a Stockholder, issuance
by the Company or otherwise, and whether or not any such Securities are subject
to vesting or similar restrictions, unless such Person first becomes a signatory
to this Agreement as a Stockholder, agreeing to be bound by all the terms of
this Agreement. The Company shall not issue any Securities or transfer any
Securities on its books which have been issued or transferred in violation of
this Agreement, or treat as the owner of such Securities, or accord the right to
vote as such owner or pay dividends to, any Person to which any such Securities
shall have been issued or transferred in violation of this Agreement.
Section 7.08. Exercise of Contractual Rights. The Company and its
------------ ------------------------------
Stockholders recognize, acknowledge and agree that the
-14-
<PAGE>
Stockholders have substantial financial interests in the Company to preserve and
that the exercise by them of any of their respective rights under this Agreement
or any of the other agreements contemplated hereby shall not be deemed to
constitute a lack of good faith, a breach of fiduciary duties or unfair dealing.
Section 7.09. Specific Enforcement. Each Stockholder expressly agrees
------------ --------------------
that the other Stockholders and the Company would be irreparably damaged if this
Agreement is not specifically enforced. Upon a breach or threatened breach of
the terms or provisions of this Agreement by any Stockholder, the other
Stockholders and the Company shall, in addition to all other remedies, each be
entitled to a temporary or permanent injunction, and/or decree for specific
performance, in accordance with the provisions hereof, without the necessity of
proof of actual charges or the posting of a bond or other security.
Section 7.10. Successors and Assigns. Subject to the restrictions on
------------ ----------------------
Transfers set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Stockholders and their respective successors, successors-
in-title, heirs and assigns, and each and every successor-in-interest to any
Stockholder shall hold all Securities subject to all of the terms and provisions
of this Agreement. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor of any Stockholder, or any creditor of
the Company other than a Stockholder who is such a creditor of the Company.
Section 7.11. Waivers, Amendments, Etc. Except as otherwise provided
------------ ------------------------
herein, no waiver, modification or amendment of this Agreement shall be valid or
binding unless such waiver, modification or amendment is in writing and duly
executed by (a) the Company, (b) Heritage, (c) a Majority of Investors (other
than Heritage) as to which the effect of such waiver, modification or amendment
(A) differs in a material and adverse manner from the effect on Heritage, or (B)
would eliminate any of the material rights of such Investors provided for in
this Agreement, including but not limited to any rights under Sections 7.02 or
7.03 hereof, or create any material additional obligation for such Investors,
and (d) a Majority of Management Stockholders as to which the effect of such
waiver, modification or amendment (A) differs in a material and adverse manner
from the effect on Heritage, or (B) would eliminate any of the material rights
of such Management Stockholders provided for in this Agreement, including but
not limited to any rights under Sections 7.02 or 7.03 hereof, or create any
material additional obligation for such Management Stockholders.
Notwithstanding the foregoing, any waiver, modification or amendment which
requires any Investor or Management Stockholder to make additional cash
contributions to
-15-
<PAGE>
the Company shall require the consent of such Investor or Management
Stockholder.
Section 7.12. Notices. All notices under this Agreement shall be in
------------ -------
writing. Any notice shall be deemed to have been duly given upon receipt if
delivered personally, mailed, certified mail, return receipt requested, sent by
facsimile, with verification of receipt and written confirmation provided by
another means permitted hereunder, or sent by nationally recognized overnight
delivery service, to the parties hereto at the addresses set forth on Exhibit A.
---------
Upon notice from any Stockholder of a change in address, the Board will cause
Exhibit A to be amended to reflect the new address of such Stockholder. The
- ---------
address of any new Stockholder shall be added by the Board to Exhibit A.
---------
Section 7.13. Governing Law. This Agreement and the rights and
------------ -------------
obligations of the parties hereunder shall be governed by and interpreted,
construed and enforced in accordance with the internal laws of the Commonwealth
of Massachusetts and with the General Corporation Law of the State of Delaware.
Wherever possible, each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
hereof shall be prohibited by or invalid under any such law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating or nullifying the remainder of such provision or any other
provisions of this Agreement.
Section 7.14. Headings. The headings of Articles and Sections herein are
------------ --------
inserted for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
Section 7.15. Counterparts. This Agreement may be executed in any number
------------ ------------
of counterparts, and with counterpart signature pages, all of which together
shall for all purposes constitute one Agreement, binding on the Company and all
the Stockholders notwithstanding that not all Stockholders have signed the same
counterpart. Any of the initial parties to this Agreement listed in the
preamble hereto who does not sign a counterpart signature page to this Agreement
on the date hereof may become a party to this Agreement after the date hereof by
signing a counterpart signature page hereto.
Section 7.16. Entire Agreement. This Agreement embodies the entire
------------ ----------------
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter, including without limitation (a) the Agreement dated as of
February 6, 1998 by and among the Company, RS, SS, Scott and
-16-
<PAGE>
Heritage Fund II, L.P. and (b) the Stockholders Agreement dated as of August 1,
1997 originally by and among the Company, RS, SS and Heritage Fund II Investment
Corporation.
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following respective meanings:
Act shall have the meaning specified in Section 4.05.
---
Affiliate shall have the meaning given to it in Rule 405 promulgated under
---------
the Securities Act.
Agreement shall mean this Stockholders Agreement, as amended from time to
---------
time.
Base Case shall have the meaning specified in Section 2.03.
---------
Board shall have the meaning specified in Section 1.04.
-----
Business Day shall mean any day on which businesses are generally open in
------------
Los Angeles, California.
Certificate of Incorporation shall mean the Certificate of Incorporation of
----------------------------
the Company, as amended from time to time.
Code shall mean the Internal Revenue Code of 1986, as amended.
----
Common Stock shall mean all classes and series of common stock of the
------------
Company.
Company shall have the meaning specified in the Preamble, and shall also
-------
include any successor entity to the Company.
Exempt Issuances shall have the meaning specified in Section 3.05.
----------------
Heritage shall have the meaning specified in the preamble to this
--------
Agreement.
Initial Notice shall have the meaning specified in Section 4.02.
--------------
Investors shall mean Heritage, Heritage Investors II L.L.C., Heritage Fund
---------
II Investment Corporation, HFV Holdings, LLC, Nassau Capital Partners II L.P.,
NAS Partners I LLC, Paribas North America, Inc., Phoenix Home Life Mutual
Insurance Company,
-17-
<PAGE>
PMI Mezzanine Fund, L.P., GS Private Equity Partners, L.P., GS Private Equity
Partners Offshore, L.P. and Sutro Investment Partners V, LLC and each other
Stockholder that first becomes a Stockholder as a result of acquiring Stock from
Heritage or from another Investor.
Investor Directors shall have the meaning specified in Section 1.02.
------------------
Majority of Management Stockholders shall mean Management Stockholders who
-----------------------------------
hold a majority of the Common Stock held by all Management Stockholders.
Majority of Investors shall mean Investors who hold a majority of the
---------------------
Common Stock held by all Investors; provided that any decision, determination or
actions to be made or taken by a Majority of Investors shall be made or taken by
Heritage as long as Heritage holds more shares of Common Stock than any other
Investor.
Management Stockholders shall mean all Stockholders that are not Investors.
-----------------------
Mid Case shall have the meaning specified in Section 2.03.
--------
Offer shall have the meaning specified in Section 3.01.
-----
Offered Securities shall have the meaning specified in Section 3.01.
------------------
Permitted Transfers shall mean any of the following:
-------------------
(a) Transfers of Securities of a Stockholder to the trustees of a
trust revocable by such Stockholder alone, the beneficiaries of which consist
solely of such Stockholder and transferees enumerated in clause (d) below;
(b) Transfers of Securities between a Stockholder and such
Stockholder's guardian or conservator;
(c) Transfers of Securities of a deceased Stockholder to such
Stockholder's executors or administrators or to trustees under such
Stockholder's will and thereafter to transferees enumerated in clause (d) below;
(d) Transfers of Securities of a Stockholder to the spouse of such
Stockholder, to any of such Stockholder's children or their issue (or to
custodians for the benefit of minor children or issue), or to such Stockholder's
parents or siblings;
-18-
<PAGE>
(e) Transfers of Securities by any Stockholder which is a corporation,
partnership, limited liability company or other entity to any owner or Affiliate
of such Stockholder, provided that such Stockholder may not transfer Securities
to more than (i) a total of five (5) of its owners or Affiliates pursuant to
this clause (e) before January 1, 2004 (unless such transfer relates to a
liquidation or winding-up of such Stockholder, in which case the maximum number
specified in this clause (i) shall be 16), and (ii) a total of fifteen (16) of
its owners or Affiliates pursuant to this clause (e) after January 1, 2005;
(f) Transfers of Securities by Heritage Fund II Investment Corporation
to any other Person within one year of the date hereof; and
(g) Transfers of Securities pursuant to Articles II, V or VI;
provided, however that Securities Transferred pursuant to clauses (a) - (e) may
- --------
not be further Transferred under such clauses except to a Person that would have
been a permitted transferee thereof from the initial Stockholder who held such
Securities.
Per Share Offering Price shall have the meaning specified in Section 6.03.
------------------------
Person shall mean any natural person, corporation, limited liability
------
company, partnership, trust or other entity.
Proportionate Percentage of a Stockholder shall mean a fraction of which
------------------------
(a) the numerator is the number of then outstanding shares of Common Stock held
by such Stockholder, on a fully-diluted basis, and (b) the denominator is the
total number of then outstanding shares of Common Stock, on a fully-diluted
basis.
Public Offering shall have the meaning specified in Section 2.03.
---------------
Qualified Stockholder shall mean any Stockholder then holding more than
---------------------
10,000 shares of Stock (assuming the exercise or conversion of all Stock
Equivalents held by such Stockholder, and appropriately adjusted for stock
splits, stock dividends, combinations and other similar transactions); provided
that (a) all shares of Stock held by a Stockholder and any transferees of such
Stockholder under clause (e) of the definition of Permitted Transfers shall be
aggregated for purposes of determining whether any of them is a Qualified
Stockholder, (b) all shares of Stock held by GS Private Equity Partners, L.P.
and GS Private Equity Partners Offshore, L.P. shall be aggregated for purposes
of determining whether any of them is a Qualified Stockholder, and (c) all
shares of Stock held by Nassau Capital Partners II L.P.
-19-
<PAGE>
and NAS Partners I LLC shall be aggregated for purposes of determining whether
any of them is a Qualified Stockholder.
Return Notice shall have the meaning specified in Section 4.02.
-------------
RS shall mean Robert Snukal.
--
Scott shall mean William Scott.
-----
Securities shall mean all Stock, Stock Equivalents and all other equity
----------
securities of the Company, and any debt securities issued together with warrants
or similar rights.
Securities Act shall mean the Securities Act of 1933, as amended.
--------------
Series A Common Stock shall mean any of the Series A Common Stock and any
---------------------
Stock into which any of the same shall have been converted or exchanged.
Series B Common Stock shall mean any of the Series B Common Stock and any
---------------------
Stock into which any of the same shall have been converted or exchanged.
Series C Common Stock shall mean any of the Series C Common Stock and any
---------------------
Stock into which any of the same shall have been converted or exchanged.
SS shall mean Sheila Snukal.
--
Stock shall mean all outstanding capital stock of the Company.
-----
Stock Equivalents shall mean any equity or debt security convertible into
-----------------
or exchangeable for any Stock, or any right, warrant or option to acquire any
Stock or such convertible or exchangeable equity interest or security.
Stockholder shall mean each Person who holds any Stock.
-----------
Target Case shall have the meaning specified in Section 2.03.
-----------
Terminal Value shall have the meaning specified in Section 2.03.
--------------
transfer shall have the meaning specified in Section 4.01.
--------
Transferring Stockholder shall have the meaning specified in Section 4.02.
------------------------
-20-
<PAGE>
Trigger Event shall have the meaning specified in Section 2.03.
-------------
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed and sworn to this
Agreement as of the date first above written.
FOUNTAIN VIEW, INC.
By: /s/ Robert Snukal /s/ Robert Snukal
--------------------------- ------------------------------
Robert Snukal, President Robert Snukal
/s/ William Scott /s/ Sheila Snukal
- ------------------------------ ------------------------------
William Scott Sheila Snukal
HERITAGE INVESTORS II, L.L.C. HERITAGE FUND II, L.P.
By Heritage Partners Management By HF Partners II, L.L.C.,
Company Inc., its manager its general partner
By: [SIGNATURE ILLEGIBLE] ^^ By: [SIGNATURE ILLEGIBLE] ^^
--------------------------- ------------------------------
(title) (title)
/s/ Keith Abrahams Stacy Abrahams
- ------------------------------ ------------------------------
Keith Abrahams Stacy Abrahams
/s/ Joshua Snukal HERITAGE FUND II
- ------------------------------ INVESTMENT CORPORATION
Joshua Snukal
/s/ Debbie Wickersham By: [SIGNATURE ILLEGIBLE] ^^
- ------------------------------ ---------------------------
Debbie Wickersham (title)
/s/ Joan Chandler /s/ Rosellla Felipe
- ------------------------------ ------------------------------
Joan Chandler Rosella Felipe
/s/ Rolando Abrina /s/ John Padama
- ------------------------------ ------------------------------
Rolando Abrina John Padama
/s/ Myles Andrews /s/ Martin Axel
- ------------------------------ ------------------------------
Myles Andrews Martin Axel
/s/ Norbolita Sapiandante /s/ Consolacion Padama
- ------------------------------ ------------------------------
Norbolita Sapiandante Consolacion Padama
-22-
<PAGE>
/s/ Barbara Gale /s/ Debra Bowman
- ------------------------------ ------------------------------
Barbara Gale Debra Bowman
/s/ Robin Necke HFV HOLDINGS, LLC
- ------------------------------
Robin Necke By _______________________,
its Manager
By: /s/ Andrew H. McQuarrie
--------------------------
Andrew H. McQuarrie (title)
Vice President
NASSAU CAPITAL PARTNERS II L.P. PARIBAS NORTH AMERICA, INC.
By Nassau Capital L.L.C
-------------------------,
its general partner
By: /s/ John G. Quigley By: /s/ John G. Martinez
--------------------------- ---------------------------
Member (title) JOHN G. MARTINEZ (title)
FINANCIAL CONTROLLER
PHOENIX HOME LIFE PMI MEZZANINE FUND, L.P.
MUTUAL INSURANCE COMPANY By _____________________,
its general partner
By: [SIGNATURE ILLEGIBLE] ^^ By: /s/ Schuyler G. Lance
--------------------------- ---------------------------
(title) Schuyler G. Lance, (title)
Principal
GS PRIVATE EQUITY GS PRIVATE EQUITY
PARTNERS, L.P. PARTNERS OFFSHORE, L.P.
By GS PRIVATE EQUITY MANAGEMENT, By GS PRIVATE EQUITY MANAGEMENT
LLC OFFSHORE, INC:
---------------------------- ----------------------------
its general partner its general partner
By GSAM GEN - PARLLC (its managing member)
By: /s/ Donald Opatrny By: /s/ Donald Opatrny
--------------------------- ---------------------------
DONALD OPATRNY (title) DONALD OPATRNY (title)
-23-
<PAGE>
SUTRO INVESTMENT PARTNERS V, LLC NAS PARTNERS I LLC
By Sutro Group, Inc. By John G. Quigley
---------------------------, ----------------------------,
its Manager its Manager
By: [SIGNATURE ILLEGIBLE] ^^ By: [SIGNATURE ILLEGIBLE] ^^
--------------------------- ---------------------------
(title) (title)
The undersigned, Karen B. Kaplan, spouse of William Scott, hereby consents
to the foregoing agreement.
/s/ Karen B. Kaplan
------------------------------
Karen B. Kaplan
-24-
<PAGE>
EXHIBIT A
Addresses for Notice
--------------------
If to Heritage,
Heritage Investors, L.L.C.
or Heritage Fund II
Investment Corporation: c/o Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attn: Mark J. Jrolf
with a copy to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attn: Stephen M. L. Cohen, Esq.
If to RS, SS, Keith Abrahams,
Stacy Abrahams or Joshua
Snukal: Mr. Robert Snukal
c/o Fountain View Management, Inc.
11900 W. Olympic Blvd.
Los Angeles, CA 90064
with a copy to:
David Bloom, Esq.
Law Offices of David Bloom
3325 Wilshire Boulevard, 9th Floor
Los Angeles, CA 90010
If to Scott: William C. Scott
12612 Promontory Road
Los Angeles, CA 90049
If to Nassau Capital
Partners II L.P.
NAS Partners I LLC: c/o Nassau Capital Funds L.P.
22 Chambers Street
Princeton, NJ 08542
Attn: Mr. Thomas Barnds
-25-
<PAGE>
If to Sutro Investment
Partners V, LLC: c/o Sutro & Co., Incorporated
11150 Santa Monica Boulevard
Suite 1500
Los Angeles, CA 90025
Attn: Mr. Joseph A. Boystack
If to Paribas North
America, Inc.: c/o Paribas
787 7th Avenue
New York, NY 10019
Attn: Mr. Steve Alexander
If to HFV Holdings, LLC: HFV Holdings, LLC
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Mr. Andrew H. McQuarrie
with a copy to:
The Hillman Company
1900 Grant Building
Pittsburgh, PA 15219
Attn: H. Vaughan Blaxter, III
and Mr. R. Alan Wright
If to GS Private Equity
Partners, L.P.
GS Private Equity Partners
c/o Goldman Sachs & Co.
Offshore, L.P.: 85 Broad Street
New York, NY 10004
Attn: Ms. Elizabeth Varley Camp
If to Phoenix Home Life
Mutual Insurance Company: c/o Phoenix Duff & Phelps
56 Prospect Street
Hartford, CT 06115
Attn: Mr. Paul Chute
If to PMI Mezzanine
Fund, L.P.: c/o Pacific Mezzanine Group
610 Newport Center Drive
Suite 1100
Newport Beach, CA 92660
Attn: Mr. Sky Lance
If to the Company: Fountain View Management, Inc.
11900 W. Olympic Blvd.
Los Angeles, CA 90064
Attn: President
-26-
<PAGE>
with copies to: Heritage, RS and Choate, Hall &
Stewart, in each case at their respective
addresses set forth above
-27-
<PAGE>
EXHIBIT 2.03
The following constitute the Base Case, Mid Case and Target Case, at the
indicated times (all numbers in thousands):
<TABLE>
<CAPTION>
Determination Date Base Case Mid Case Target Case
------------------ --------- --------- -----------
<S> <C> <C> <C>
4/1/98 through 6/30/98 126,534 136,345 140,167
7/1/98 through 9/30/98 133,101 157,055 171,750
10/1/98 through 12/31/98 139,667 177,765 203,333
1/1/99 through 3/31/99 146,234 198,476 234,916
4/1/99 through 6/30/99 152,801 219,186 288,499
7/1/99 through 9/30/99 173,526 243,074 298,999
10/1/99 through 12/31/99 194,252 266,982 331,498
1/1/00 through 3/31/00 214,977 290,850 363,998
4/1/00 through 6/30/00 235,702 314,738 396,497
7/1/00 through 9/30/00 245,053 340,397 430,655
10/1/00 through 12/31/00 254,403 366,056 464,812
1/1/01 through 3/31/01 263,754 391,714 498,970
4/1/01 through 6/30/01 273,104 417,373 533,127
7/1/01 through 9/30/01 287,174 450,009 577,406
10/1/01 through 12/31/01 301,244 482,645 621,685
1/1/02 through 3/31/02 315,314 515,281 665,964
4/1/02 through 6/30/02 329,384 547,917 710,243
7/1/02 through 9/30/02 345,976 576,531 746,058
10/1/02 through 12/31/02 362,568 605,145 781,874
1/1/03 through 3/31/03 379,159 633,759 817,689
4/1/03 through 6/30/03 395,751 662,373 853,504
7/1/03 through 9/30/03 420,485 716,191 938,854
10/1/03 through 12/31/03 445,220 770,009 1,024,205
1/1/04 through 3/31/04 469,954 823,825 1,109,555
4/1/04 through 6/30/04 494,689 877,644 1,194,908
7/1/04 through 9/30/04 525,607 948,953 1,314,396
10/1/04 through 12/31/04 556,525 1,020,261 1,433,887
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
Determination Date Base Case Mid Case Target Case
------------------ --------- --------- -----------
<S> <C> <C> <C>
1/1/05 through 3/31/05 587,443 1,091,570 1,553,377
4/1/05 through 6/30/05 618,361 1,162,878 1,672,868
7/1/05 through 9/30/05 657,008 1,257,362 1,840,155
10/1/05 through 12/31/05 695,658 1,351,846 2,007,441
1/1/06 through 3/31/06 734,304 1,446,330 2,174,728
4/1/06 through 6/30/06 772,951 1,540,814 2,342,015
7/1/06 through 9/30/06 821,261 1,666,005 2,576,216
10/1/06 through 12/31/06 869,570 1,791,196 2,810,418
1/1/07 through 3/31/07 917,880 1,916,388 3,044,619
4/1/07 through 6/30/07 966,189 2,041,579 3,278,821
7/1/07 through 9/30/07 1,026,576 2,207,457 3,606,703
10/1/07 through 12/31/07 1,086,963 2,373,335 3,934,585
1/1/08 through 3/31/08 1,147,349 2,539,214 4,262,467
4/1/08 through 6/30/08 1,207,736 2,705,092 4,590,349
7/1/08 through 9/30/08 1,283,220 2,924,881 5,049,384
10/1/08 through 12/31/08 1,358,703 3,144,669 5,508,419
1/1/09 through 3/31/09 1,434,187 3,364,458 5,967,454
4/1/09 through 6/30/09 1,509,670 3,584,247 6,426,489
</TABLE>
-29-
<PAGE>
EXHIBIT 10.38
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is entered into as of
---------
this 27th day of March, 1998 by and among Fountain View, Inc., a Delaware
corporation (the "Company"), Heritage Fund II, L.P., Heritage Investors II,
-------
L.L.C. and Heritage Fund II Investment Corporation (collectively, "Heritage"),
--------
Robert Snukal, Sheila Snukal Keith Abrahams, Stacy Abrahams and Joshua Snukal
(collectively, the "Snukals"), William Scott ("Scott"), HFV Holdings, LLC,
------- -----
Nassau Capital Partners II L.P., NAS Partners I LLC, Paribas North America,
Inc., Phoenix Home Life Mutual Insurance Company, PMI Mezzanine Fund, L.P., GS
Private Equity Partners, L.P., GS Private Equity Partners Offshore, L.P. and
Sutro Investment Partners V, LLC.
Introduction
------------
This Agreement is being entered into in connection with the proposed
acquisition (the "Acquisition") of Summit Care Corporation ("Summit") by the
----------- ------
Company.
This Agreement replaces and supersedes the Registration Rights Agreement
entered into by and among the Company, Heritage Fund II Investment Corporation
and the certain of the Snukals dated August 1, 1997.
Certain capitalized terms used herein are defined in Section 4 hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Demand Registration Rights.
--------- --------------------------
(a) At any time, if holders of more than 30% of the Investor
Registrable Securities or the Snukal Registrable Securities request the Company
to file a registration statement under the Securities Act of 1933, as amended
(the "Act"), for a firm commitment underwritten public offering of not less than
---
30% of the Investor Registrable Securities or the Snukal Registrable Securities
(or any lesser percentage if the anticipated aggregate offering price of such
offering, net of underwriting discounts and commissions, exceeds $12,000,000),
as the case may be, the Company shall (i) within 10 days notify all holders of
Registrable Securities of such request and (ii) use its best efforts to so
register under the Act the Investor Registrable Securities or the Snukal
Registrable Securities initially requested to be registered and the Registrable
Securities of all
<PAGE>
other holders who request within 20 days after receiving the Company's notice
that their Registrable Securities be included therein. Notwithstanding the
foregoing, the holders of Snukal Registrable Securities shall not be entitled to
initiate a registration under this Section 1 until after the Company's first
underwritten public offering of Common Stock (the "IPO"). The Company is
---
obligated to effect a maximum of two such demand registrations requested by
holders of Investor Registrable Securities and one such demand registrations
requested by holders of Snukal Registrable Securities, none of which shall be
within the same six-month period.
(b) If the underwriter managing the offering determines that, because
of marketing considerations, all of the Registrable Securities requested to be
registered may not be included in the offering, the underwriter may reduce the
number of Registrable Securities included therein. Such reduction shall be
applied first to shares other than Registrable Securities. In the event the
request for registration is made by the holders of the Snukal Registrable
Securities, such reduction shall next be applied pro rata among the holders of
the Investor Registrable Securities based upon the number of shares requested by
each such holder to be included in the registration; if this reduction is
insufficient, any remaining reduction shall be applied pro rata among the
holders of the Snukal Registrable Securities and Scott Registrable Securities
based upon the number of shares requested by each such holder to be included in
the registration. In all other events, such reduction shall next be applied pro
rata among the Snukal Registrable Securities and Scott Registrable Securities
based upon the number of shares requested by each such holder to be included in
the registration; if this reduction is insufficient, any remaining reduction
shall be applied pro rata among the holders of the Investor Registrable
Securities based upon the number of shares requested by each such holder to be
included in the registration. If any such reduction results in the inclusion of
less than 50% of the Registrable Securities requested to be included therein by
the holders that initiated such registration, such registration shall not reduce
the number of registrations available to such holders under this Section 1.
(c) If the Company includes in any registration required under this
Section 1 a number of shares other than Registrable Securities that exceeds the
number of Registrable Securities to be included, then such registration shall be
deemed to be a registration under Section 2 instead of this Section 1. In all
other cases where the Company includes in such registration any shares other
than Registrable Securities, such registration shall remain subject to this
Section 1, provided that in no event shall other shares be included in such
--------
registration if such inclusion would (i) prevent holders of Registrable
Securities from registering all Registrable
-2-
<PAGE>
Securities requested by them or (ii) adversely affect the offering price of the
Registrable Securities in such registration.
Section 2. Piggyback Registration Rights.
--------- -----------------------------
(a) Whenever the Company proposes to register any Common Stock for its
own or others' account under the Act, other than a registration relating to
employee benefit plans or a registration solely relating to shares to be sold
under Rule 145 under the Act, the Company shall give each holder of Registrable
Securities prompt written notice of its intent to do so. Upon the written
request of any such holder given within 20 days after receipt of such notice,
the Company will use its best efforts to cause to be included in such
registration all of the Registrable Securities which such holder requests.
(b) If the Company is advised in writing in good faith by any managing
underwriter of the securities being offered pursuant to any registration
statement under this Section 2 that, because of marketing considerations, the
number of shares to be sold by persons other than the Company is greater than
the number of such shares which can be offered without adversely affecting the
offering, the Company may reduce the number of shares offered for the accounts
of such persons to a number deemed satisfactory by such managing underwriter.
Such reduction shall be applied first to shares other than Registrable
Securities. Such reduction shall next be applied pro rata among the Snukal
Registrable Securities and Scott Registrable Securities based upon the number of
shares requested by each such holder to be included in the registration. If
this reduction is insufficient, any remaining reduction shall be applied pro
rata among the holders of the Investor Registrable Securities based upon the
number of shares requested by each such holder to be included in the
registration.
Section 3. Form S-3 Registration Rights. If, at a time when Form S-3 is
--------- ----------------------------
available for such registration, the Company shall receive from any holder of
Registrable Securities a written request or requests that the Company effect a
registration on Form S-3 of any of such holder's Registrable Securities, the
Company will promptly give written notice of the proposed registration to all
other holders of Registrable Securities and, as soon as practicable, effect such
registration and all related qualifications and compliances as may be requested
and as would permit or facilitate the sale and distribution of all Registrable
Securities as are specified in such request and any written requests of other
holders given within 20 days after receipt of such notice. The Company shall
have no obligation to effect a registration under this Section 3 (a) unless the
aggregate offering price of the Registrable Securities requested to be sold
-3-
<PAGE>
pursuant to such registration is expected to be equal to or greater than
$3,000,000 and (b) more often than once in any six-month period. Any
registration under this Section 3 will not be counted as a registration under
Section 1 above.
Section 4. Definitions.
--------- -----------
(a) As used herein, "Investor Registrable Securities" means all
-------------------------------
shares of Common Stock of the Company held by Heritage and HFV Holdings, LLC,
Nassau Capital Partners II L.P., NAS Partners I LLC, Paribas North America,
Inc., Phoenix Home Life Mutual Insurance Company, PMI Mezzanine Fund, L.P., GS
Private Equity Partners, L.P., GS Private Equity Partners Offshore, L.P. and
Sutro Investment Partners V, LLC, or in the name of their nominees, at any time,
including without limitation any other shares of Common Stock of the Company
acquired (or which may be acquired upon the exercise or conversion of securities
for or into shares of Common Stock) prior to the IPO by Heritage and HFV
Holdings, LLC, Nassau Capital Partners II L.P., NAS Partners I LLC, Paribas
North America, Inc., Phoenix Home Life Mutual Insurance Company, PMI Mezzanine
Fund, L.P., GS Private Equity Partners, L.P., GS Private Equity Partners
Offshore, L.P. and Sutro Investment Partners V, LLC, or in the name of their
nominees, pursuant to any preemptive right, right of first refusal or otherwise,
and any other shares of Common Stock of the Company issued in respect of any of
such securities (as a result of stock splits, stock dividends,
reclassifications, recapitalizations or other events); provided, however, that
-------- -------
such securities shall cease to be Investor Registrable Securities upon (i) any
sale pursuant to a registration statement under the Act or (ii) any sale
pursuant to Rule 144 under the Act.
(b) As used herein, "Snukal Registrable Securities" means all shares
-----------------------------
of Common Stock of the Company held by the Snukals at any time, including
without limitation any other shares of Common Stock of the Company acquired (or
which may be acquired upon the exercise or conversion of securities for or into
shares of Common Stock) by the Snukals prior to the IPO pursuant to any
preemptive right, right of first refusal or otherwise, and any other shares of
Common Stock of the Company issued in respect of any of such securities (as a
result of stock splits, stock dividends, reclassifications, recapitalizations or
other events); provided, however, that such securities shall cease to be Snukal
-------- -------
Registrable Securities upon (i) any sale pursuant to a registration statement
under the Act or (ii) any sale pursuant to Rule 144 under the Act.
(c) As used herein, "Scott Registrable Securities" means all shares
----------------------------
of Common Stock of the Company held by Scott at any time, including without
limitation any other shares of Common Stock of the Company acquired (or which
may be acquired upon the
-4-
<PAGE>
exercise or conversion of securities for or into shares of Common Stock) by
Scott prior to the IPO pursuant to any preemptive right, right of first refusal
or otherwise, and any other shares of Common Stock of the Company issued in
respect of any of such securities (as a result of stock splits, stock dividends,
reclassifications, recapitalizations or other events); provided, however, that
-------- -------
such securities shall cease to be Scott Registrable Securities upon (i) any sale
pursuant to a registration statement under the Act or (ii) any sale pursuant to
Rule 144 under the Act. Although the Company shall only be obligated to register
shares of Common Stock, the Company shall use all reasonable efforts to cause
the underwriters in any offering to purchase any warrants from the holders of
Registrable Securities, in lieu of requiring such holders to exercise such
warrants and sell the underlying shares of Common Stock.
(d) As used herein, "Registrable Securities" means the Investor
----------------------
Registrable Securities, the Snukal Registrable Securities and the Scott
Registrable Securities.
(e) As used herein, "Common Stock" means the class of common stock
------------
into which shares of the Company's Common Stock are exchanged or converted
pursuant to Article VI of the Stockholders Agreement dated as of March 27, 1998
by and among the parties hereto (as amended from time to time, the "Stockholders
------------
Agreement"), and any replacement class(es) of common stock of the Company into
- ---------
which such Common Stock is exchanged or converted.
(f) Whenever reference is made in this Agreement to the request or
consent of holders of a certain percentage of the Investor Registrable
Securities, Snukal Registrable Securities, Scott Registrable Securities or
Registrable Securities, (i) the determination of such percentage shall include
shares of Common Stock issuable upon conversion of any convertible securities or
exercise of any options, warrants or other rights that are held by persons or
entities who are holders of Investor Registrable Securities, Snukal Registrable
Securities, Scott Registrable Securities or Registrable Securities, as the case
may be, or who would be holders of Investor Registrable Securities, Snukal
Registrable Securities, Scott Registrable Securities or Registrable Securities,
as the case may be, upon the conversion or exercise of such convertible
securities, options, warrants or other rights, (ii) Heritage shall be deemed to
hold a majority of the Investor Registrable Securities as long as Heritage holds
more Investor Registrable Securities than any other holder of Investor
Registrable Securities, and (iii) at any time after the seventh (7th)
anniversary of the date hereof, if the Company has not previously completed an
IPO, notwithstanding the provisions of clause (ii) above, the holders of a
majority of those Investor Registrable Securities other than the Investor
Registrable Securities held by Heritage shall be entitled to act on behalf of
-5-
<PAGE>
the holders of Investor Registrable Securities pursuant to Section 1 without
reference to the shares of Investor Registrable Securities held by Heritage.
Section 5. Selection of Underwriter. The underwriter of any offering
--------- ------------------------
under Section 1 shall be selected by holders of a majority of the Registrable
Securities initiating such registration, provided that such underwriter shall be
--------
reasonably acceptable to the Company. The underwriter of any offering requested
under Section 2 shall be selected by the Company.
Section 6. Registration Procedures. If and whenever the Company is
--------- -----------------------
required by the provisions of this Agreement to use its best efforts to effect
the registration of any of the Registrable Securities under the Act, the Company
shall:
(a) as expeditiously as possible (and, in the case of a registration
under Section 1, within 60 days of any request thereunder) file with the
Securities and Exchange Commission (the "Commission") a registration statement,
----------
in form and substance required by the Act, with respect to such Registrable
Securities and use its best efforts to cause that registration statement to
become effective;
(b) as expeditiously as possible, prepare and file with the Commission
any amendments and supplements to the registration statement and the prospectus
included in the registration statement as may be necessary to keep the
registration statement effective, in the case of a firm commitment underwritten
public offering, until completion of the distribution of all securities
described therein and, in the case of any other offering, until the earlier of
the sale of all Registrable Securities covered thereby or 120 days after the
effective date thereof;
(c) as expeditiously as possible, furnish to each holder that
requested that Registrable Securities be included in such registration, such
reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents as such holder may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities owned by such
holder;
(d) as expeditiously as possible, use its best efforts to register or
qualify the Registrable Securities covered by the registration statement under
the securities or Blue Sky laws of such states as the holders thereof shall
reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the holders thereof to consummate the public
sale or other disposition in such states of the Registrable
-6-
<PAGE>
Securities owned by the holders; provided, however, that the Company shall not
-------- -------
be required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;
(e) in connection with each registration pursuant to Sections 1, 2 and
3 above covering an underwritten public offering, the Company and each
participating holder agrees to enter into a written agreement with the managing
underwriter in such form and containing such provisions (including, if the
underwriter so requests, customary contribution provisions on the part of the
Company) as are customary in the securities business for such an arrangement
between such underwriter and companies of the Company's size and investment
stature, provided that the holders shall not be obligated to enter into any such
--------
underwriting agreement if the indemnification or contribution provisions thereof
are more burdensome on such holder than those contained herein or if any
standback requirement therein is for a period that exceeds the period required
by this Agreement;
(f) at the request of any participating holder, the Company will
furnish to each underwriter, if any, and the participating holders, a legal
opinion of its counsel and a letter from its independent certified public
accountants, each in customary form and substance, at such time or times as such
documents are customarily provided in the type of offering involved;
(g) whenever the Company is registering any Common Stock under the Act
and a holder of Registrable Securities is selling securities under such
registration or determines that it may be a controlling person under the Act,
the Company will keep such holder advised in writing of the initiation, progress
and completion of such registration, will allow such holder and such holders's
counsel to participate in the preparation of the registration statement and to
have access to all relevant corporate records, documents and information, will
include in the registration statement such information as such holder may
reasonably request and will take all such other action as such holder may
reasonably request;
(h) whenever the Company is registering any Common Stock under the Act
and a holder of Registrable Securities is selling securities under such
registration, and the Company obtains knowledge that the registration statement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading, the
Company will promptly notify each such holder of such statement or omission;
-7-
<PAGE>
(i) each holder of Registrable Securities included in a registration
shall furnish to the Company such information regarding such holder and the
distribution proposed by such holder as the Company may reasonably request in
writing and as shall be required in connection with the registration,
qualification or compliance referred to in this Agreement;
(j) as of the effective date of any registration statement relating
thereto, cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed, and,
if not so listed, to be listed on the New York Stock Exchange or the NASDAQ
Stock Market National Market System; and
(k) as of the effective date of any registration statement relating
thereto, provide a transfer agent and registrar for all such Registrable
Securities.
Section 7. Expenses. The Company will pay all expenses incurred by the
--------- --------
Company in complying with this Agreement, including, without limitation, all
registration and filing fees, exchange listing fees, printing expenses, transfer
taxes, fees and expenses of counsel for the Company and the fees and expenses of
one counsel selected by the holders of a majority of the Registrable Securities
to be included in such registration to represent them, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts and selling commissions
relating to the sale of the Registrable Securities.
Section 8. Notification. The Company shall promptly notify each holder of
--------- ------------
Registrable Securities covered by any registration statement of any event which
results in the prospectus included in such registration statement, as then in
effect, containing an untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
Section 9. Indemnification and Contribution.
--------- --------------------------------
(a) Indemnification by the Company. The Company shall indemnify and
------------------------------
hold harmless each holder of Registrable Securities included in any
registration, its officers, directors and partners, each underwriter of the
Registrable Securities being sold by such holder, and each controlling person of
any of the foregoing, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering, circular, or other document relating to such Registrable Securities
(or in any
-8-
<PAGE>
related registration statement, notification or the like) or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of the Act, or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any applicable state securities laws, or any rule or
------------
regulation promulgated thereunder, applicable to the Company and relating to
action or inaction required of the Company in connection with any registration,
qualification or compliance contemplated by this Agreement, and will reimburse
each such holder, each of its officers, directors and partners, and each such
underwriter and controlling person for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, whether or not resulting in liability;
provided, however, that the Company will not be liable in any such case to the
- -------- -------
extent that any such claim, loss, damage or liability (i) arises out of or is
based on any untrue statement or omission based upon and in conformity with
written information furnished to the Company by such holder or underwriter and
stated to be specifically for use therein, or (ii) results solely from the
failure of such holder to deliver a copy of the registration statement,
prospectus, offering circular or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies thereof.
(b) Indemnification by the Holders of Registrable Securities. Each
--------------------------------------------------------
participating holder of Registrable Securities shall indemnify and hold harmless
the Company, each of its directors, each of its officers who has signed the
registration statement, each underwriter of the Registrable Securities, each
other participating holder of Registrable Securities, its officers, directors
and partners, and each controlling person of any of the foregoing, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular, or other document
relating to the Registrable Securities (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or by the failure of such holder to
deliver a copy of the registration statement, prospectus, offering circular, or
any amendments or supplements thereto after the Company has furnished the holder
with a sufficient number of copies thereof, and will reimburse the Company and
each such director, officer or controlling person for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, provided, however, that no holder
-------- -------
of Registrable Securities will be liable in any such case except to
-9-
<PAGE>
the extent that any such claim, loss, damage or liability arises out of any
untrue statement or omission based upon and in conformity with written
information furnished to the Company by such holder and stated to be
specifically for use therein, and provided, further, that no holder of
-------- -------
Registrable Securities will be liable under this Section for losses, costs,
damages or expenses exceeding in the aggregate the net proceeds to such holder
in such offering.
(c) Procedures for Indemnification. Each party entitled to
------------------------------
indemnification under Subsection (a) or (b) (the "Indemnified Party") shall give
-----------------
notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom;
provided, that counsel for the Indemnifying Party, who shall conduct the defense
- --------
of such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld); and,
provided, further, that the failure of any Indemnified Party to give notice as
- -------- -------
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement. The Indemnified Party may participate in such defense at
such party's expense; provided, however, that the Indemnifying Party shall pay
-------- -------
such expense if the Indemnified Party shall believe in good faith that
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim or litigation, and no Indemnified Party shall consent to entry of any
judgment or settle such claim or litigation without the prior written consent of
the Indemnifying Party.
(d) Contribution. If the indemnification provided for in Subsections
------------
(a) or (b) is unavailable to any indemnified party thereunder in respect of any
losses, claims, damages or liabilities (or actions in respect thereof) referred
to in such Sections, then each person or entity that would have been an
indemnifying party thereunder shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the indemnifying party on the one hand and such
indemnified
-10-
<PAGE>
party on the other. The relative fault shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or such indemnified party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, or whether such losses,
claims, damages or liabilities (or actions in respect thereof) arose out of the
action or failure to act of one or more of such parties. Notwithstanding the
foregoing, (i) no holder of Registrable Securities will be required to
contribute any amount in excess of the net proceeds to such holder of all
Registrable Securities sold by such holder pursuant to such registration
statement, and (ii) no person or entity guilty of fraudulent misrepresentation,
within the meaning of Section 11(f) of the Act, shall be entitled to
contribution from any person or entity who is not guilty of such fraudulent
misrepresentation.
Section 10. Reports Under Exchange Act. With a view to making available
---------- --------------------------
to the holders of Registrable Securities the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the Commission that may at any
time permit a holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to
use its best efforts to satisfy the requirements of all such rules and
regulations (including the requirements for public information, registration
under the Exchange Act and timely reporting to the Commission) at the earliest
possible date (but in any event not later than 90 days) after the effective date
of the registration statement for its first registered public offering. The
Company will furnish to each holder of Registrable Securities, whenever
requested, a written statement as to its compliance with the reporting
requirements of Rule 144, the Act and the Exchange Act, a copy of its most
recent annual or quarterly report, and such other reports and information filed
by the Company as any holder of Registrable Securities may reasonably request in
connection with the sale of Registrable Securities without registration.
Section 11. Additional Registration Rights. If a majority of the
---------- ------------------------------
Company's Board of Directors (the "Board") believes in good faith that rights
-----
should be granted to new investors in the Company who are acquiring, in the
aggregate, at least 15% of the Company's stock to (a) require the Company to
initiate the registration of any securities or (b) require the Company to
include in any registration securities owned by such new investors (the
"Additional Rights"), the Board may in its discretion grant such Additional
- ------------------
Rights, subject to such terms and conditions as the Board may determine. The
Board may grant such Additional Rights even though such Additional Rights may
-11-
<PAGE>
impair or limit the right of the parties to this Agreement, provided, however,
-------- -------
that the Board shall not grant any such Additional Rights which impair or limit
the rights of any party to this Agreement to a materially greater extent than
other parties to this Agreement without the consent of such party.
Section 12. Lock-Up Agreement. Each holder of Registrable Securities, and
---------- -----------------
any other holder of Common Stock described in Section 11(b) hereof, agrees that
in connection with any public offering of the Company's Common Stock, and upon
the request of the managing underwriter in such offering, such holder will not
sell, grant any option for the purchase of, or otherwise dispose of any of the
Company's securities held by such holder (other than those included in such
registration) without the prior written consent of such underwriter, for such
period of time as may be requested by such underwriter (not to exceed (a) 180
days after the effective date of such registration, in the case of the initial
public offering of the Company's Common Stock or (b) 90 days after the effective
date of such registration, in the case of any other registration). The
obligation of the holders of Registrable Securities under this Section 12 is
conditional upon the agreement of all of the Company's officers and directors
and of all persons holding 5% or greater of the Company's capital stock to be
bound by the terms of this Section 12.
Section 13. Notices. All notices, demands, requests or other
---------- -------
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered in person, or by United States mail, certified or
registered with return receipt requested, or by facsimile, with verification of
receipt and written confirmation provided by another means permitted hereunder,
or by nationally recognized overnight courier service, to the addresses of the
respective parties for notices in accordance with the Stockholders Agreement
(or, if the address of a holder of Registrable Securities is not included
therein, at the address of such holder on the Company's stock records).
Section 14. Successors and Assigns. This Agreement shall be binding upon
---------- ----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns, including any subsequent holders of Investor Registrable
Securities, Snukal Registrable Securities, Scott Registrable Securities or .
Section 15. Survival. This Agreement, including without limitation the
---------- --------
obligation of the parties under Section 9 hereof, shall survive indefinitely.
Section 16. Severability and Governing Law. If any provision of this
---------- ------------------------------
Agreement is rendered void, invalid or unenforceable by any court of law for any
reason, such invalidity or unenforceability shall not void or render invalid or
-12-
<PAGE>
unenforceable any other provision of this Agreement. This Agreement is governed
by and construed in accordance with the internal laws of the Commonwealth of
Massachusetts.
Section 17. Amendments, Etc. This Agreement may be amended or waived only
---------- ---------------
with the written consent of (a) the Company, (b) Heritage, (c) holders of a
majority of the Investor Registrable Securities other than Heritage, (d) holders
of a majority of the Snukal Registrable Securities, (e) holders of a majority of
the Scott Registrable Securities and (f) holders of a majority of other
Registrable Securities, except that no consent under clauses (c), (d), (e) or
(f) shall be required (i) for any amendment relating to the grant of Additional
Rights or (ii) in the case of each such clause, for any amendment which (A) does
not materially and adversely affect the holders of Registrable Securities
described therein in a manner which is materially different from the effect on
Heritage, or (B) does not eliminate any material right provided for in this
Agreement to which the holders of Registrable Securities described therein are
entitled or does not create any material additional obligation for such holders.
Notwithstanding the foregoing, any waiver, modification or amendment which
requires any holder of Registrable Securities to make additional cash
contributions to the Company shall require the consent of such holder.
Section 18. Counterparts. This Agreement may be executed in one or more
---------- ------------
counterparts, and with counterpart signature pages, each of which shall be an
original, but all of which together shall constitute one in the same Agreement.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as a sealed instrument as of the date first above written.
FOUNTAIN VIEW, INC.
By: /s/ Robert Snukal /s/ Robert Snukal
---------------------------- -------------------------------
Robert Snukal, President Robert Snukal
/s/ William Scott /s/ Sheila Snukal
- ------------------------------- -------------------------------
William Scott Sheila Snukal
HERITAGE INVESTORS II, L.L.C. HERITAGE FUND II, L.P.
By Heritage Partners Management By HF Partners II, L.L.C.,
Company Inc., its manager its general partner
By: [SIGNATURE ILLEGIBLE] ^^ By: [SIGNATURE ILLEGIBLE] ^^
---------------------------- ----------------------------
(title) (title)
/s/ Keith Abrahams /s/ Stacy Abrahams
- ------------------------------- -------------------------------
Keith Abrahams Stacy Abrahams
/s/ Joshua Snukal HERITAGE FUND II
- -------------------------------
Joshua Snukal INVESTMENT CORPORATION
By: [SIGNATURE ILLEGIBLE] ^^
----------------------------
(title)
SUTRO INVESTMENT HFV HOLDINGS, LLC
PARTNERS V, LLC
By Sutro Group Inc., By _______________________,
----------------------
its general partner its Manager
By: [SIGNATURE ILLEGIBLE] ^^ By: /s/ Andrew H. McQuarrie
---------------------------- -----------------------------
President (title) Andrew H. McQuarrie (title)
Vice President
-14-
<PAGE>
NASSAU CAPITAL PARTNERS II L.P. PARIBAS NORTH AMERICA, INC.
By Nassau Capital L.L.C.
----------------------,
its general partner
By: /s/ John G. Quigley By: /s/ John G. Martinez
---------------------------- ---------------------------
(title) John G. Martinez (title)
Financial Countroller
PHOENIX HOME LIFE PMI MEZZANINE FUND, L.P.
MUTUAL INSURANCE COMPANY By _____________________,
its general partner
By: /s/ John H. Beer By: /s/ Schuyler G. Lance
---------------------------- --------------------------
(title) Schuyler G. Lance (title)
Principal
GS PRIVATE EQUITY GS PRIVATE EQUITY
PARTNERS, L.P. PARTNERS OFFSHORE, L.P.
By GS Private Equity Management, LLC By GS Private Equity Management
---------------------------------- -----------------------------
Offshore, Inc.
--------------
its general partner its general partner
By: /s/ Donald Opatriny By: /s/ Donald Opatriny
---------------------------- ----------------------------
Director (title) Director (title)
NAS PARTNERS I LLC
By /s/ John G. Quigley
----------------------,
its Manager
By: [SIGNATURE ILLEGIBLE] ^^
----------------------------
(title)
-15-
<PAGE>
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made as of March 27, 1998
---------
between Fountain View, Inc., a Delaware corporation (the "Company") and Robert
-------
M. Snukal (the "Executive").
---------
Introduction
------------
This Agreement is being entered into in connection with the proposed
acquisition (the "Acquisition") of Summit Care Corporation ("Summit") by the
----------- ------
Company.
The Acquisition and related transactions and the investments and
acquisitions entered into on August 1, 1997 among the Executive, the Company,
Heritage Fund II Investment Corporation, are referred to collectively herein as
the "Transactions".
------------
The Company desires to retain the services of the Executive and the
Executive wishes to be employed by the Company. The Executive is a stockholder,
director and officer of the Company, and has had full access to information
concerning the Company. The disclosure of such information or the engaging in
competitive activities would cause substantial harm to the Company.
This Agreement replaces and supersedes the Employment Agreement made as of
August 1, 1997 by and among Fountain View Holdings, Inc., Heritage Fund II
Investment Corporation and the Executive.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Term. The Company shall employ the Executive for a term
--------- ----
commencing on the date of the closing of the Offer and continue for a period of
five (5) years, unless earlier terminated pursuant to Section 7 (the "Employment
----------
Period"). This Agreement shall automatically renew at the end of the Employment
- ------
Period for up to five additional one year terms, unless either party hereto
provides written notice of termination to the other party not less than thirty
(30) days prior to the end of the Employment Period or the end of any subsequent
renewal period.
Section 2. Duties. The Executive shall be employed as the Chief Executive
--------- ------
Officer of the Company, with such duties of an executive nature as the Board of
Directors of the Company (the "Board") shall determine. The Executive will
-----
report to the Board.
<PAGE>
Section 3. Full Time. During the term of this Agreement, the Executive
--------- ---------
shall use the Executive's best efforts to promote the interests of the Company
and the direct and indirect subsidiaries of the Company, and shall devote
substantially the Executive's full business time and efforts to their business
and affairs. The Executive may engage in other business activities that do not
interfere materially with the performance of the Executive's duties, services
and responsibilities hereunder.
Section 4. Compensation. The Executive shall be entitled to compensation
--------- ------------
as follows:
(a) Base Salary. During the term of the Executive's employment with
-----------
the Company, the Executive will receive a salary at the rate of $500,000
annually (the "Base Salary"), payable in equal installments not less than bi-
-----------
weekly in arrears. The Company shall withhold from compensation payable to the
Executive all applicable federal, state and local withholding taxes. The Base
Salary will be subject to annual consumer price adjustments.
(b) Bonus. In addition to the payment of the Base Salary and the
-----
other payments and benefits available to the Executive under this Agreement,
while the Executive is employed by the Company, the Company will pay to the
Executive for each fiscal year incentive compensation (the "Bonus") in an amount
-----
of (i) an annual bonus of $250,000 if the Company achieves Base Case EBITDA and
(ii) up to an additional bonus of $250,000 determined ratably based on the
Company's EBITDA being between the Base Case and the Target Case, such Bonus
payable within 120 days after the end of such fiscal year, as determined by the
Board, in its discretion. Payments with respect to partial percentages will be
prorated. [The payment of the Bonus shall be prorated for any partial fiscal
year during the term of this Agreement.- Question re year one?]
(c) Definition of Base Case, Mid Case and Target Case. As used
-------------------------------------------------
herein, "Base Case", "Mid Case" and "Target Case" shall have the meanings
--------- -------- -----------
specified on Exhibit A hereto, on the respective dates indicated, and may be
---------
changed by approval of the Company's Board to reflect acquisitions,
dispositions, start-ups and other transactions not in the ordinary course,
provided that in selecting the new targets the members of the Board approving
such changes believe in good faith that the new targets are broadly consistent
with the valuation methodology applied in determining the initial EBITDA targets
set forth on Exhibit A hereto.
---------
Section 5. Benefits. In addition to salary and Bonus, the Executive shall
--------- --------
be entitled to receive reasonable and customary fringe benefits in an amount not
less than the greater of those benefits that are generally and customarily
available to the
-2-
<PAGE>
Company's executive and managerial employees and those benefits that are
generally and customarily available to Summit's executive and managerial
employees. Such benefits include health insurance and vacation time in
accordance with the Company or Summit's policies, consistent with prior
practices. The Company will also reimburse the Executive for the cost of an
automobile, including fuel, maintenance and insurance expenses relating thereto,
not to exceed $600 per month. The Executive will be entitled to reimbursement of
all reasonable expenses incurred in the ordinary course of business on behalf of
the Company, subject to presentation of appropriate documentation, in accordance
with policies approved by the Board.
Section 6. Confidentiality and Non-Competition. In consideration of, and
--------- -----------------------------------
as a condition to, the Transactions, and in consideration of the mutual promises
contained herein, and to preserve the goodwill of the Company and its direct and
indirect subsidiaries (collectively, the "Companies"), the Executive agrees as
---------
follows:
(a) The Executive will not at any time, directly or indirectly,
disclose or divulge, except as reasonably required in connection with the
performance of the executive's duties for the Companies, any Confidential
Information (as hereinafter defined) acquired by the executive during the
executive's affiliation with or employment by the Companies. As used herein,
"Confidential Information" means all trade secrets and all other proprietary or
- -------------------------
non-public information of a business, financial, marketing, technical or other
nature pertaining to the Companies or their affairs and all information of
others that the Companies have agreed not to disclose; provided, that
--------
Confidential Information shall not include any information which has entered or
enters the public domain through no fault of the Executive or which the
Executive is required to disclose by law or legal process.
(b) The Executive shall make no use whatsoever, directly or
indirectly, of any Confidential Information, except as reasonably required in
connection with the performance of the executive's duties for the Companies.
(c) Upon the Companies' request at any time and for any reason, the
Executive shall immediately deliver to the Companies all materials (including
all copies) in the executive's possession which contain or relate to
Confidential Information.
(d) All inventions, developments or improvements made by the
Executive, either alone or in conjunction with others, at any time or at any
place during the term of the executive's employment by the Companies, whether or
not reduced to writing or practice during such term, which relate to the
business in which the Companies are engaged or in which the Companies intend to
-3-
<PAGE>
engage, or which were developed or made in whole or in part using the Companies'
facilities, shall be the exclusive property of the Companies. The Executive
shall promptly disclose any such invention, development or improvement to the
Companies, and, at the request and expense of the Companies, shall assign all of
the executive's rights to the same to the Companies. The Executive shall sign
all instruments necessary for the filing and prosecution of any applications for
or extension or renewals of letters patent of the United States or any foreign
country which the Companies desire to file.
(e) All copyrightable work by the Executive during the term of the
Executive's employment by the Company which relates to the businesses in which
the Companies are engaged is intended to be "work made for hire" as defined in
Section 101 of the Copyright Act of 1976, and shall be the property of the
Companies. If the copyright to any such copyrightable work is not the property
of the Companies by operation of law, the Executive will, without further
consideration, assign to the Companies all right, title and interest in such
copyrightable work and will assist the Companies and their nominees in every
way, at the Companies' expense, to secure, maintain and defend for the
Companies' benefit copyrights and any extensions and renewals thereof on any and
all such work including translations thereof in any and all countries, such work
to be and to remain the property of the Companies whether copyrighted or not.
(f) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
three years after such termination, the Executive will not directly or
indirectly, individually or as a consultant to, or Executive, officer, director,
stockholder, partner or other owner or participant in any business entity,
engage in or assist any other person to engage in the businesses of skilled
nursing facilities, assisted living facilities, inpatient or outpatient therapy
services, pharmacies, urological supplies, enteral feeding supplies and
orthodics anywhere in the counties of the State of California identified on
Schedule A hereto or in Arizona, Texas or any other state within the United
- ----------
States; provided, however, that the Executive may own not more than a 5% equity
-------- -------
interest in any publicly-traded company.
(g) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
two years after such termination, the Executive will not directly or indirectly,
individually or as a consultant to, or as employee, officer, director,
stockholder, partner or other owner or participant in any business entity other
than the Companies, solicit or endeavor to entice away from the Companies, or
otherwise materially
-4-
<PAGE>
interfere with the business relationship of the Companies with, (i) any person
who is, or was within the one-year period immediately prior to the termination
of the Executive's employment by the Companies, employed by, a consultant to or
associated with the Companies or (ii) any person or entity who is, or was within
the two-year period immediately prior to the termination of the Executive's
employment by the Companies, a customer, client of or supplier to the Companies.
(h) Without limiting the remedies available to the Companies, the
Executive acknowledges that a breach of any of the covenants contained in this
Section 6 could result in irreparable injury to the Companies for which there
might be no adequate remedy at law, and that, in the event of such a breach or
threat thereof, the Companies shall be entitled to obtain a temporary
restraining order and/or a preliminary injunction and a permanent injunction
restraining the executive from engaging in any activities prohibited by this
Section 6 or such other equitable relief as may be required to enforce
specifically any of the covenants of this Section 6. The provisions of this
Section 6 shall survive the termination of this Agreement and shall continue
thereafter indefinitely in full force and effect in accordance with the terms of
this Section 6.
Section 7. Termination.
--------- -----------
(a) The Executive's employment with the Company may be terminated at
any time by the Company with cause or without cause or in the event of the death
or Disability of the Executive. As used herein, "cause" shall mean the
-----
reasonable and good faith determination by a majority of the Board (other than
the Executive), after reasonable notice to the Executive and after the Executive
has had an opportunity to present his view of the relevant facts and
circumstances to the Board, that the Executive has (i) breached any material
term of this Agreement, which breach has not been cured by the Executive within
20 days after notice to him or her by any of the Companies, (ii) engaged in
criminal acts or acts of moral turpitude causing injury to the Companies or
their reputations or (iii) engaged in material acts of dishonesty affecting the
Companies. As used herein, "disability" shall mean illness (mental or physical)
----------
or accident which, in the good faith and reasonable determination of a majority
of the Board, based on the report of a reputable physician, renders him unable
to perform his duties for six months during any 12-month period.
(b) If the Executive's employment is terminated hereunder for any
reason, the Company shall have no further obligation to make any payments or
provide any benefits to the Executive hereunder except for (i) payments of Base
Salary that had accrued but had not been paid prior to the date of
-5-
<PAGE>
termination, (ii) payments of Bonus that had been earned by the Executive but
not paid prior to the date of termination, and (iii) if the Executive's
employment is terminated by the Company without cause (other than on death or
Disability), but only as long as the Executive remains in material compliance
with the provisions of Section 6, continuation of the Executive's Base Salary
(plus an additional $25,000 annually in the case of such termination of both the
Executive and Sheila Snukal) for the duration of the Executive's scheduled term
of employment (excluding any renewal periods not then commenced).
(c) The provisions of Section 6 shall survive the termination of the
Executive's employment in accordance with its terms.
Section 8. Enforceability, etc. This Agreement shall be interpreted so as
--------- -------------------
to be effective under applicable law, but if any portion hereof is prohibited or
invalid, such portion shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
If any one or more of the provisions contained in this Agreement are for any
reason held to be excessively broad as to duration, geographical scope, activity
or subject, such provisions shall be construed by limiting and reducing them so
as to be enforceable to the maximum extent permitted under applicable law.
Section 9. Notices. Any notice or other communication given pursuant to
--------- -------
this Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested as follows:
(a) If to the Company:
Fountain View, Inc.
11900 W. Olympic Boulevard, Suite 680
Los Angeles, CA 90064
With copies to:
Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attn: Mark J. Jrolf
and
Stephen M. L. Cohen, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
-6-
<PAGE>
Boston, MA 02109-2891
(b) If to the Executive:
Robert Snukal
c/o Fountain View, Inc.
11900 W. Olympic Boulevard, Suite 680
Los Angeles, CA 90064
With a copy to:
David Bloom, Esq.
Law Offices of David Bloom
3325 Wilshire Boulevard
9th Floor
Los Angeles, CA 90010
or to such other address as the parties shall have designated by notice to the
other party.
Section 10. Governing Law. This Agreement shall be governed by and
---------- -------------
construed in accordance with the laws of the State of California without regard
to the choice of law provisions thereof.
Section 11. Amendments and Waivers. No amendment or waiver of this
---------- ----------------------
Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
as a waiver by that party of the same or any subsequent breach of any provision
of this Agreement by the other party.
Section 12. Binding Effect; Assignment. This Agreement shall be binding
---------- --------------------------
on and inure to the benefit of the parties hereto and their respective heirs,
executors and administrators, successors and assigns. This Agreement may not be
assigned in whole or in part by either party (whether by operation of law or
otherwise, including by merger or consolidation).
Section 13. Entire Agreement. This Agreement constitutes the final and
---------- ----------------
entire agreement of the parties with respect to the matters covered hereby, and
replaces and supersedes all other agreements and understandings relating
thereto.
Section 14. Counterparts. This Agreement may be executed in any number of
---------- ------------
counterparts, and with counterpart signature pages, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
-7-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.
FOUNTAIN VIEW, INC.
By /s/ Robert M. Snukal
--------------------------
(Title)
/s/ Robert M. Snukal
--------------------------
Robert M. Snukal
-8-
<PAGE>
Exhibit B
EBITDA Targets (000)
Base Mgmt Upside
---- ---- ------
30-Jun-99 45,188 47,314 47,314
30-Jun-00 53,581 57,101 59,320
30-Jun-01 56,499 67,030 71,287
30-Jun-02 60,395 78,196 85,390
30-Jun-03 65,080 87,063 95,621
-9-
<PAGE>
EXHIBIT B
Identified Counties
- -------------------
Alameda Orange
Alpine Placer
Amador Plumas
Butte Riverside
Calaveras Sacramento
Colusa San Benito
Contra Costa San Bernardino
Del Norte San Diego
El Dorado San Francisco
Fresno San Joaquin
Glenn San Luis Obispo
Humboldt San Mateo
Imperial Santa Barbara
Inyo Santa Clara
Kern Santa Cruz
Kings Shasta
Lake Sierra
Lassen Siskiyou
Los Angeles Solano
Madera Sonoma
Marin Stanislaus
Mariposa Sutter
Mendocino Tehama
Merced Trinity
Modoc Tulare
Mono Tuolumne
Monterey Ventura
Napa Yolo
Nevada Yuba
-10-
<PAGE>
Exhibit B
EBITDA Targets
Base Mgmt Upside
---- ---- ------
30-Jun-99 45,188 47,314 47,314
30-Jun-00 53,581 57,101 59,320
30-Jun-01 56,499 67,030 71,287
30-Jun-02 60,395 78,196 85,390
30-Jun-03 65,080 87,063 95,621
<PAGE>
EXHIBIT 10.40
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made as of March 27, 1998
---------
between Fountain View, Inc., a Delaware corporation (the "Company") and Sheila
-------
Snukal (the "Executive").
---------
Introduction
------------
This Agreement is being entered into in connection with the proposed
acquisition (the "Acquisition") of Summit Care Corporation ("Summit") by the
----------- ------
Company.
The Acquisition and related transactions and the investments and
acquisitions entered into on August 1, 1997 among the Executive, the Company,
Heritage Fund II Investment Corporation are referred to collectively herein as
the "Transactions".
------------
The Company desires to retain the services of the Executive and the
Executive wishes to be employed by the Company. The Executive is a stockholder,
director and officer of the Company, and has had full access to information
concerning the Company. The disclosure of such information or the engaging in
competitive activities would cause substantial harm to the Company.
This Agreement replaces and supersedes the Employment Agreement made as of
August 1, 1997 by and among Fountain View Holdings, Inc., Heritage Fund II
Investment Corporation and the Executive.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Term. The Company shall employ the Executive for a term
--------- ----
commencing on the date of the closing of the Offer and continue for a period of
five (5) years, unless earlier terminated pursuant to Section 7 (the "Employment
----------
Period"). This Agreement shall automatically renew at the end of the Employment
- ------
Period for up to five additional one year terms, unless either party hereto
provides written notice of termination to the other party not less than thirty
(30) days prior to the end of the Employment Period or the end of any subsequent
renewal period.
Section 2. Duties. The Executive shall be employed as the Executive Vice
--------- ------
President of the Company, with such duties of an executive nature as the Board
of Directors of the Company (the "Board") shall determine. The Executive will
-----
report to the President.
<PAGE>
Section 3. Full Time. During the term of this Agreement, the Executive
--------- ---------
shall use the Executive's best efforts to promote the interests of the Company
and the direct and indirect subsidiaries of the Company and shall devote
substantially the Executive's full business time and efforts to their business
and affairs. The Executive may engage in other business activities that do not
interfere materially with the performance of the Executive's duties, services
and responsibilities hereunder.
Section 4. Compensation. The Executive shall be entitled to compensation
--------- ------------
as follows:
(a) Base Salary. During the term of the Executive's employment with
-----------
the Company, the Executive will receive a salary at the rate of $225,000
annually (the "Base Salary"), payable in equal installments not less than bi-
-----------
weekly in arrears. The Company shall withhold from compensation payable to the
Executive all applicable federal, state and local withholding taxes. The Base
Salary will be subject to annual consumer price adjustments.
(b) Bonus. In addition to the payment of the Base Salary and the
-----
other payments and benefits available to the Executive under this Agreement,
while the Executive is employed by the Company, the Company will pay to the
Executive for each fiscal year incentive compensation (the "Bonus") in an amount
-----
up to $125,000 determined ratably based on the Company's EBITDA being between
the Base Case and the Target Case, such Bonus payable within 120 days after the
end of such fiscal year, as determined by the Board, in its discretion (with the
approval of a director of the Company who is an employee of Heritage Partners
Management Company, Inc). Payments with respect to partial percentages will be
prorated. The payment of the Bonus shall be prorated for any partial fiscal
year during the term of this Agreement.
(c) Definition of Base Case, Mid Case and Target Case. As used
-------------------------------------------------
herein, "Base Case", "Mid Case" and "Target Case" shall have the meanings
--------- -------- -----------
specified on Exhibit A hereto, on the respective dates indicated, and may be
---------
changed by approval of the Company's Board to reflect acquisitions,
dispositions, start-ups and other transactions not in the ordinary course,
provided that in selecting the new targets the members of the Board approving
such changes believe in good faith that the new targets are broadly consistent
with the valuation methodology applied in determining the initial EBITDA targets
set forth on Exhibit A hereto.
---------
Section 5. Benefits. In addition to salary and Bonus, the Executive shall
--------- --------
be entitled to receive reasonable and customary fringe benefits in an amount not
less than the greater of those benefits that are generally and customarily
available to the
-2-
<PAGE>
Company's executive and managerial employees and those benefits that are
generally and customarily available to Summit's executive and managerial
employees. Such benefits include health insurance and vacation time in
accordance with the Company or Summit's policies, consistent with prior
practices. The Company will also reimburse the Executive for the cost of an
automobile, including fuel, maintenance and insurance expenses relating thereto,
not to exceed $600 per month. The Executive will be entitled to reimbursement of
all reasonable expenses incurred in the ordinary course of business on behalf of
the Company, subject to presentation of appropriate documentation, in accordance
with policies approved by the Board.
Section 6. Confidentiality and Non-Competition. In consideration of, and
--------- -----------------------------------
as a condition to, the Transactions, and in consideration of the mutual promises
contained herein, and to preserve the goodwill of the Company and its direct and
indirect subsidiaries (collectively, the "Companies"), the Executive agrees as
---------
follows:
(a) The Executive will not at any time, directly or indirectly,
disclose or divulge, except as reasonably required in connection with the
performance of the executive's duties for the Companies, any Confidential
Information (as hereinafter defined) acquired by the executive during the
executive's affiliation with or employment by the Companies. As used herein,
"Confidential Information" means all trade secrets and all other proprietary or
- -------------------------
non-public information of a business, financial, marketing, technical or other
nature pertaining to the Companies or their affairs and all information of
others that the Companies have agreed not to disclose; provided, that
--------
Confidential Information shall not include any information which has entered or
enters the public domain through no fault of the Executive or which the
Executive is required to disclose by law or legal process.
(b) The Executive shall make no use whatsoever, directly or
indirectly, of any Confidential Information, except as reasonably required in
connection with the performance of the executive's duties for the Companies.
(c) Upon the Companies' request at any time and for any reason, the
Executive shall immediately deliver to the Companies all materials (including
all copies) in the executive's possession which contain or relate to
Confidential Information.
(d) All inventions, developments or improvements made by the
Executive, either alone or in conjunction with others, at any time or at any
place during the term of the executive's employment by the Companies, whether or
not reduced to writing or practice during such term, which relate to the
business in which the Companies are engaged or in which the Companies intend to
-3-
<PAGE>
engage, or which were developed or made in whole or in part using the Companies'
facilities, shall be the exclusive property of the Companies. The Executive
shall promptly disclose any such invention, development or improvement to the
Companies, and, at the request and expense of the Companies, shall assign all of
the executive's rights to the same to the Companies. The Executive shall sign
all instruments necessary for the filing and prosecution of any applications for
or extension or renewals of letters patent of the United States or any foreign
country which the Companies desire to file.
(e) All copyrightable work by the Executive during the term of the
Executive's employment by the Company which relates to the businesses in which
the Companies are engaged is intended to be "work made for hire" as defined in
Section 101 of the Copyright Act of 1976, and shall be the property of the
Companies. If the copyright to any such copyrightable work is not the property
of the Companies by operation of law, the Executive will, without further
consideration, assign to the Companies all right, title and interest in such
copyrightable work and will assist the Companies and their nominees in every
way, at the Companies' expense, to secure, maintain and defend for the
Companies' benefit copyrights and any extensions and renewals thereof on any and
all such work including translations thereof in any and all countries, such work
to be and to remain the property of the Companies whether copyrighted or not.
(f) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
three years after such termination, the Executive will not directly or
indirectly, individually or as a consultant to, or Executive, officer, director,
stockholder, partner or other owner or participant in any business entity,
engage in or assist any other person to engage in the businesses of skilled
nursing facilities, assisted living facilities, inpatient or outpatient therapy
services, pharmacies, urological supplies, enteral feeding supplies and
orthodics anywhere in the counties of the State of California identified on
Schedule A hereto or in Arizona, Texas or any other state within the United
- ----------
States; provided, however, that the Executive may own not more than a 5% equity
-------- -------
interest in any publicly-traded company.
(g) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
two years after such termination, the Executive will not directly or indirectly,
individually or as a consultant to, or as employee, officer, director,
stockholder, partner or other owner or participant in any business entity other
than the Companies, solicit or endeavor to entice away from the Companies, or
otherwise materially
-4-
<PAGE>
interfere with the business relationship of the Companies with, (i) any person
who is, or was within the one-year period immediately prior to the termination
of the Executive's employment by the Companies, employed by, a consultant to or
associated with the Companies or (ii) any person or entity who is, or was within
the two-year period immediately prior to the termination of the Executive's
employment by the Companies, a customer, client of or supplier to the Companies.
(h) Without limiting the remedies available to the Companies, the
Executive acknowledges that a breach of any of the covenants contained in this
Section 6 could result in irreparable injury to the Companies for which there
might be no adequate remedy at law, and that, in the event of such a breach or
threat thereof, the Companies shall be entitled to obtain a temporary
restraining order and/or a preliminary injunction and a permanent injunction
restraining the executive from engaging in any activities prohibited by this
Section 6 or such other equitable relief as may be required to enforce
specifically any of the covenants of this Section 6. The provisions of this
Section 6 shall survive the termination of this Agreement and shall continue
thereafter indefinitely in full force and effect in accordance with the terms of
this Section 6.
Section 7. Termination.
--------- -----------
(a) The Executive's employment with the Company may be terminated at
any time by the Company with cause or without cause or in the event of the death
or Disability of the Executive. As used herein, "cause" shall mean the
-----
reasonable and good faith determination by a majority of the Board (other than
the Executive), after reasonable notice to the Executive and after the Executive
has had an opportunity to present his view of the relevant facts and
circumstances to the Board, that the Executive has (i) breached any material
term of this Agreement, which breach has not been cured by the Executive within
20 days after notice to him or her by any of the Companies, (ii) engaged in
criminal acts or acts of moral turpitude causing injury to the Companies or
their reputations or (iii) engaged in material acts of dishonesty affecting the
Companies. As used herein, "disability" shall mean illness (mental or physical)
----------
or accident which, in the good faith and reasonable determination of a majority
of the Board, based on the report of a reputable physician, renders him unable
to perform his duties for six months during any 12-month period.
(b) If the Executive's employment is terminated hereunder for any
reason, the Company shall have no further obligation to make any payments or
provide any benefits to the Executive hereunder except for (i) payments of Base
Salary that had accrued but had not been paid prior to the date of
-5-
<PAGE>
termination, (ii) payments of Bonus that had been earned by the Executive but
not paid prior to the date of termination and (iii) if the Executive's
employment is terminated by the Company without cause (other than on death or
Disability), but only as long as the Executive remains in material compliance
with the provisions of Section 6, the continuation of the Executive's Base
Salary (plus an additional $25,000 annually in the case of such termination of
both the Executive and Robert Snukal) for the duration of the Executive's
scheduled term of employment (excluding any renewal periods not then commenced).
(c) If Robert Snukal is terminated without cause pursuant to Section
7 of the Employment Agreement made as of March __, 1998 between the Company,
Heritage and Robert Snukal, the Executive has the option, but not the
obligation, to deem her employment to have been terminated without cause and
receive the severance referred to in this Section of this Agreement.
(d) The provisions of Section 6 shall survive the termination of the
Executive's employment in accordance with its terms.
Section 8. Enforceability, etc. This Agreement shall be interpreted so as
--------- -------------------
to be effective under applicable law, but if any portion hereof is prohibited or
invalid, such portion shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
If any one or more of the provisions contained in this Agreement are for any
reason held to be excessively broad as to duration, geographical scope, activity
or subject, such provisions shall be construed by limiting and reducing them so
as to be enforceable to the maximum extent permitted under applicable law.
Section 9. Notices. Any notice or other communication given pursuant to
--------- -------
this Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested as follows:
(a) If to the Company:
Fountain View, Inc.
11900 W. Olympic Boulevard, Suite 680
Los Angeles, CA 90064
With copies to:
Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attn: Mark J. Jrolf
-6-
<PAGE>
and
Stephen M. L. Cohen, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
(b) If to the Executive:
Sheila Snukal
c/o Fountain View, Inc.
11900 W. Olympic Boulevard, Suite 680
Los Angeles, CA 90064
With a copy to:
David Bloom, Esq.
Law Offices of David Bloom
3325 Wilshire Boulevard
9th Floor
Los Angeles, CA 90010
or to such other address as the parties shall have designated by notice to the
other party.
Section 10. Governing Law. This Agreement shall be governed by and
---------- -------------
construed in accordance with the laws of the State of California without regard
to the choice of law provisions thereof.
Section 11. Amendments and Waivers. No amendment or waiver of this
---------- ----------------------
Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
as a waiver by that party of the same or any subsequent breach of any provision
of this Agreement by the other party.
Section 12. Binding Effect; Assignment. This Agreement shall be binding
---------- --------------------------
on and inure to the benefit of the parties hereto and their respective heirs,
executors and administrators, successors and assigns. This Agreement may not be
assigned in whole or in part by either party (whether by operation of law or
otherwise, including by merger or consolidation).
Section 13. Entire Agreement. This Agreement constitutes the final and
---------- ----------------
entire agreement of the parties with respect to the matters covered hereby, and
replaces and supersedes all other agreements and understandings relating
thereto.
-7-
<PAGE>
Section 14. Counterparts. This Agreement may be executed in any number of
---------- ------------
counterparts, and with counterpart signature pages, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.
FOUNTAIN VIEW, INC.
By /s/ [SIGNATURE ILLEGIBLE]^^
------------------------------
(Title)
/s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Sheila Snukal
-9-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument as
of the date first above written.
FOUNTAIN VIEW, INC.
By /S/ SIGNATURE ILLEGIBLE^^
------------------------------
(Title)
----------------------------------
Sheila Snukal
-9-
<PAGE>
EXHIBIT B.
EBITDA Targets (000)
-----------------------
Base Mgmt Upside
-----------------------
30-Jun-?? 4/,1?? 47,??4 47,???
30-Jun-00 53,581 57,101 59,???
30-Jun-01 ??,??? ??,??? 712???
30-Jun-02 ??,??? 7?,1?? 85,???
30-Jun-03 ??,0?0 ??,??? ??,?21
<PAGE>
EXHIBIT B
Identified Counties
-------------------
Alameda Orange
Alpine Placer
Amador Plumas
Butte Riverside
Calaveras Sacramento
Colusa San Benito
Contra Costa San Bernardino
Del Norte San Diego
El Dorado San Francisco
Fresno San Joaquin
Glenn San Luis Obispo
Humboldt San Mateo
Imperial Santa Barbara
Inyo Santa Clara
Kern Santa Cruz
Kings Shasta
Lake Sierra
Lassen Siskiyou
Los Angeles Solano
Madera Sonoma
Marin Stanislaus
Mariposa Sutter
Mendocino Tehama
Merced Trinity
Modoc Tulare
Mono Tuolumne
Monterey Ventura
Napa Yolo
Nevada Yuba
-11-
<PAGE>
EXHIBIT 10.41
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made as of March 27, 1998
---------
between Fountain View, Inc., a Delaware corporation (the "Company"), and William
-------
C. Scott (the "Executive").
---------
Introduction
------------
This Agreement is being entered into in connection with the proposed
acquisition (the "Acquisition") of Summit Care Corporation ("Summit") by the
----------- ------
Company by means of the merger (the "Merger") of a wholly-owned subsidiary of
------
the Company with and into Summit.
The Acquisition and related transactions are referred to collectively
herein as the "Transactions".
------------
The Company desires to retain the services of the Executive and the
Executive wishes to be employed by the Company. The Executive is a stockholder,
director and officer of the Company, and has had full access to information
concerning the Company. The disclosure of such information or the engaging in
competitive activities would cause substantial harm to the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Section 1. Term. The Company shall employ the Executive for a term
--------- ----
commencing on the date of the closing of the Merger and continue for a period of
five (5) years, unless earlier terminated pursuant to Section 7 (the "Employment
----------
Period"). This Agreement shall automatically renew at the end of the Employment
- ------
Period for up to five additional one year terms, unless either party hereto
provides written notice of termination to the other party not less than thirty
(30) days prior to the end of the Employment Period or the end of any subsequent
renewal period.
Section 2. Duties. The Executive shall be employed as the Chairman of the
--------- ------
Company, with such duties of an executive nature as the Board of Directors of
the Company (the "Board") shall determine. The Executive will report to the
-----
Board.
Section 3. Full Time. During the term of this Agreement, the Executive
--------- ---------
shall use the Executive's best efforts to promote the interests of the Company
and the direct and indirect subsidiaries of the Company, and shall devote
substantially the Executive's full business time and efforts to their business
and affairs. The Executive may engage in other business activities
<PAGE>
that do not interfere materially with the performance of the Executive's duties,
services and responsibilities hereunder.
Section 4. Compensation. The Executive shall be entitled to compensation
--------- ------------
as follows:
(a) Base Salary. During the term of the Executive's employment with
-----------
the Company, the Executive will receive a salary at the rate of $450,000
annually (the "Base Salary"), payable in equal installments not less than bi-
-----------
weekly in arrears. The Company shall withhold from compensation payable to the
Executive all applicable federal, state and local withholding taxes. The Base
Salary will be subject to annual consumer price adjustments.
(b) Bonus. In addition to the payment of the Base Salary and the
-----
other payments and benefits available to the Executive under this Agreement,
while the Executive is employed by the Company, the Company will pay to the
Executive for each fiscal year incentive compensation (the "Bonus") in an amount
-----
of (i) an annual bonus of $200,000 if the Company achieves Base Case EBITDA and
(ii) up to an additional bonus of $150,000 determined ratably based on the
Company's EBITDA being between the Base Case and the Target Case, such Bonus
payable within 120 days after the end of such fiscal year, as determined by the
Board, in its discretion (with the approval of a director of the Company who is
an employee of Heritage Partners Management Company, Inc). Payments with respect
to partial percentages will be prorated. The payment of the Bonus shall be
prorated for any partial fiscal year during the term of this Agreement.
(c) Definition of Base Case, Mid Case and Target Case. As used
-------------------------------------------------
herein, "Base Case", "Mid Case" and "Target Case" shall have the meanings
--------- -------- -----------
specified on Exhibit A hereto, on the respective dates indicated, and may be
---------
changed by approval of the Company's Board to reflect acquisitions,
dispositions, start-ups and other transactions not in the ordinary course,
provided that in selecting the new targets the members of the Board approving
such changes believe in good faith that the new targets are broadly consistent
with the valuation methodology applied in determining the initial EBITDA targets
set forth on Exhibit A hereto.
---------
Section 5. Benefits. In addition to salary and Bonus, the Executive shall
--------- --------
be entitled to receive reasonable and customary fringe benefits in an amount not
less than the greater of those benefits that are generally and customarily
available to the Company's executive and managerial employees and those benefits
that are generally and customarily available to Summit's executive and
managerial employees. Such benefits include health insurance and vacation time
in accordance with the Company or Summit's policies, consistent with prior
practices. The Company
-2-
<PAGE>
will also reimburse the Executive for the cost of an automobile, including fuel,
maintenance and insurance expenses relating thereto, not to exceed $600 per
month. The Executive will be entitled to reimbursement of all reasonable
expenses incurred in the ordinary course of business on behalf of the Company,
subject to presentation of appropriate documentation, in accordance with
policies approved by the Board.
Section 6. Confidentiality and Non-Competition. In consideration of, and
--------- -----------------------------------
as a condition to, the Transactions, and in consideration of the mutual promises
contained herein, and to preserve the goodwill of the Company and its direct and
indirect subsidiaries (collectively, the "Companies"), the Executive agrees as
---------
follows:
(a) The Executive will not at any time, directly or indirectly,
disclose or divulge, except as reasonably required in connection with the
performance of the executive's duties for the Companies, any Confidential
Information (as hereinafter defined) acquired by the executive during the
executive's affiliation with or employment by the Companies. As used herein,
"Confidential Information" means all trade secrets and all other proprietary or
- -------------------------
non-public information of a business, financial, marketing, technical or other
nature pertaining to the Companies or their affairs and all information of
others that the Companies have agreed not to disclose; provided, that
--------
Confidential Information shall not include any information which has entered or
enters the public domain through no fault of the Executive or which the
Executive is required to disclose by law or legal process.
(b) The Executive shall make no use whatsoever, directly or
indirectly, of any Confidential Information, except as reasonably required in
connection with the performance of the executive's duties for the Companies.
(c) Upon the Companies' request at any time and for any reason, the
Executive shall immediately deliver to the Companies all materials (including
all copies) in the executive's possession which contain or relate to
Confidential Information.
(d) All inventions, developments or improvements made by the
Executive, either alone or in conjunction with others, at any time or at any
place during the term of the executive's employment by the Companies, whether or
not reduced to writing or practice during such term, which relate to the
business in which the Companies are engaged or in which the Companies intend to
engage, or which were developed or made in whole or in part using the Companies'
facilities, shall be the exclusive property of the Companies. The Executive
shall promptly disclose any such invention, development or improvement to the
Companies, and, at the request and expense of the Companies, shall assign all of
the
-3-
<PAGE>
executive's rights to the same to the Companies. The Executive shall sign all
instruments necessary for the filing and prosecution of any applications for or
extension or renewals of letters patent of the United States or any foreign
country which the Companies desire to file.
(e) All copyrightable work by the Executive during the term of the
Executive's employment by the Company which relates to the businesses in which
the Companies are engaged is intended to be "work made for hire" as defined in
Section 101 of the Copyright Act of 1976, and shall be the property of the
Companies. If the copyright to any such copyrightable work is not the property
of the Companies by operation of law, the Executive will, without further
consideration, assign to the Companies all right, title and interest in such
copyrightable work and will assist the Companies and their nominees in every
way, at the Companies' expense, to secure, maintain and defend for the
Companies' benefit copyrights and any extensions and renewals thereof on any and
all such work including translations thereof in any and all countries, such work
to be and to remain the property of the Companies whether copyrighted or not.
(f) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
three years after such termination, the Executive will not directly or
indirectly, individually or as a consultant to, or Executive, officer, director,
stockholder, partner or other owner or participant in any business entity,
engage in or assist any other person to engage in any business which competes
with the Business of any of the Companies or any business in which any of the
Companies is planning to engage anywhere in the counties of the State of
California identified on Schedule A hereto or in Arizona, Texas or any other
----------
state within the United States; provided, however, that the Executive may own
-------- -------
not more than a 5% equity interest in any publicly-traded company.
(g) Prior to the termination of the Executive's employment with the
Companies, and for the greater of five years after the date of the Agreement or
two years after such termination, the Executive will not directly or indirectly,
individually or as a consultant to, or as employee, officer, director,
stockholder, partner or other owner or participant in any business entity other
than the Companies, solicit or endeavor to entice away from the Companies, or
otherwise materially interfere with the business relationship of the Companies
with, (i) any person who is, or was within the one-year period immediately prior
to the termination of the Executive's employment by the Companies, employed by,
a consultant to or associated with the Companies or (ii) any person or entity
who is, or was within the two-year period immediately prior to the
-4-
<PAGE>
termination of the Executive's employment by the Companies, a customer, client
of or supplier to the Companies.
(h) Without limiting the remedies available to the Companies, the
Executive acknowledges that a breach of any of the covenants contained in this
Section 6 could result in irreparable injury to the Companies for which there
might be no adequate remedy at law, and that, in the event of such a breach or
threat thereof, the Companies shall be entitled to obtain a temporary
restraining order and/or a preliminary injunction and a permanent injunction
restraining the executive from engaging in any activities prohibited by this
Section 6 or such other equitable relief as may be required to enforce
specifically any of the covenants of this Section 6. The provisions of this
Section 6 shall survive the termination of this Agreement and shall continue
thereafter indefinitely in full force and effect in accordance with the terms of
this Section 6.
Section 7. Termination.
--------- -----------
(a) The Executive's employment with the Company may be terminated at
any time by the Company with cause or without cause or in the event of the death
or Disability of the Executive. As used herein, "cause" shall mean the
-----
reasonable and good faith determination by a majority of the Board (other than
the Executive), after reasonable notice to the Executive and after the Executive
has had an opportunity to present his view of the relevant facts and
circumstances to the Board, that the Executive has (i) breached any material
term of this Agreement, which breach has not been cured by the Executive within
20 days after notice to him or her by any of the Companies, (ii) engaged in
criminal acts or acts of moral turpitude causing injury to the Companies or
their reputations or (iii) engaged in material acts of dishonesty affecting the
Companies. As used herein, "disability" shall mean illness (mental or physical)
----------
or accident which, in the good faith and reasonable determination of a majority
of the Board, based on the report of a reputable physician, renders him unable
to perform his duties for six months during any 12-month period.
(b) If the Executive's employment is terminated hereunder for any
reason, the Company shall have no further obligation to make any payments or
provide any benefits to the Executive hereunder except for (i) payments of Base
Salary that had accrued but had not been paid prior to the date of termination,
(ii) payments of Bonus that had been earned by the Executive but not paid prior
to the date of termination and (iii) if the Executive's employment is terminated
by the Company without cause (other than on death or Disability), but only as
long as the Executive remains in material compliance with the provisions of
Section 6, the Executive's Base Salary for the
-5-
<PAGE>
duration of the Executive's scheduled term of employment, such amount to be
reduced by the amount, if any, that the Executive is then due under the Summit
Special Severance Plan adopted by Summit in connection with the Acquisition (the
"Summit Severance Plan").
---------------------
(c) The provisions of Section 6 shall survive the termination of the
Executive's employment in accordance with its terms.
Section 8. Enforceability, etc. This Agreement shall be interpreted so as
--------- -------------------
to be effective under applicable law, but if any portion hereof is prohibited or
invalid, such portion shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
If any one or more of the provisions contained in this Agreement are for any
reason held to be excessively broad as to duration, geographical scope, activity
or subject, such provisions shall be construed by limiting and reducing them so
as to be enforceable to the maximum extent permitted under applicable law.
Section 9. Notices. Any notice or other communication given pursuant to
--------- -------
this Agreement shall be in writing and shall be personally delivered, sent by
overnight courier or express mail, or mailed by first class certified or
registered mail, postage prepaid, return receipt requested as follows:
(a) If to the Company:
Fountain View, Inc.
11900 W. Olympic Boulevard, Suite 680
Los Angeles, CA 90064
With copies to:
Heritage Partners, Inc.
30 Rowes Wharf, Suite 300
Boston, MA 02110
Attn: Mark J. Jrolf
and
Stephen M. L. Cohen, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
-6-
<PAGE>
(b) If to the Executive:
William C. Scott
c/o Summit Care Corporation
2600 W. Magnolia Road
Burbank, California 91505-3031
With a copy to:
or to such other address as the parties shall have designated by notice to the
other party.
Section 10. Governing Law. This Agreement shall be governed by and
---------- -------------
construed in accordance with the laws of the State of California without regard
to the choice of law provisions thereof.
Section 11. Amendments and Waivers. No amendment or waiver of this
---------- ----------------------
Agreement or any provision hereof shall be binding upon the party against whom
enforcement of such amendment or waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
as a waiver by that party of the same or any subsequent breach of any provision
of this Agreement by the other party.
Section 12. Binding Effect; Assignment. This Agreement shall be binding
---------- --------------------------
on and inure to the benefit of the parties hereto and their respective heirs,
executors and administrators, successors and assigns. This Agreement may not be
assigned in whole or in part by either party (whether by operation of law or
otherwise, including by merger or consolidation).
Section 13. Entire Agreement. This Agreement constitutes the final and
---------- ----------------
entire agreement of the parties with respect to the matters covered hereby, and
replaces and supersedes all other agreements and understandings relating
thereto.
Section 14. Counterparts. This Agreement may be executed in any number of
---------- ------------
counterparts, and with counterpart signature pages, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 15. Effect on Severance Plan. The execution and performance of
---------- ------------------------
this Agreement and the termination of the Executive's employment with Summit
will not constitute an event
-7-
<PAGE>
entitling the Executive to payments under the Summit Severance Plan until such
time, if any, as the Executive's employment with the Company is terminated.
-8-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
as of the date first above written.
FOUNTAIN VIEW, INC.
By /s/ [SIGNATURE ILLEGIBLE]^^
-------------------------------
(Title)
/s/ William C. Scott
---------------------------------
William C. Scott
-9-
<PAGE>
EXHIBIT B
EBITDA TARGETS (ooo)
- --------------
<TABLE>
<CAPTION>
?? ?? ??
--------------------------
<S> <C> <C> <C>
30-Jun-99 45,1?? 47,314 47,314
30-Jun-00 53,581 57,101 59,320
30-Jun-01 5?,??? 67,030 7?,287
30-Jun-02 60,3?3 78,196 85,390
30-Jun-03 66,0?0 87,??? ??,?21
</TABLE>
<PAGE>
EXHIBIT B
Identified Counties
-------------------
Alameda Orange
Alpine Placer
Amador Plumas
Butte Riverside
Calaveras Sacramento
Colusa San Benito
Contra Costa San Bernardino
Del Norte San Diego
El Dorado San Francisco
Fresno San Joaquin
Glenn San Luis Obispo
Humboldt San Mateo
Imperial Santa Barbara
Inyo Santa Clara
Kern Santa Cruz
Kings Shasta
Lake Sierra
Lassen Siskiyou
Los Angeles Solano
Madera Sonoma
Marin Stanislaus
Mariposa Sutter
Mendocino Tehama
Merced Trinity
Modoc Tulare
Mono Tuolumne
Monterey Ventura
Napa Yolo
Nevada Yuba
-11-
<PAGE>
EXHIBIT 10.42
PROMISSORY NOTE AND PLEDGE AGREEMENT
------------------------------------
$2,530,600 April 16, 1998
For value received, William Scott (the "Maker") promises to pay to Fountain
-----
View, Inc. (the "Company"), the sum of Two Million Five Hundred Thirty Thousand
-------
Six Hundred and 00/100 Dollars ($2,530,600.00).
The unpaid principal balance of this Note, plus interest thereon at an
annual rate of five and seven-tenths percent (5.7%), compounded annually, shall
be due and payable on the earlier to occur of (i) April 15, 2007, or (ii) the
sale or transfer by the Maker of the Pledged Shares (as defined below). Failure
to repay all of the principal and interest owed under this Note upon such date
shall constitute an event of default ("Event of Default"). The Maker may prepay
----------------
the principal balance of this Note, plus all accrued interest thereon, at any
time without penalty.
For the purposes of securing payment of this Note, the Maker pledges and
delivers over to the Company 20,000 shares of the Series A Common Stock of the
Company, represented by stock certificate number 8 (hereinafter, the "Pledged
-------
Shares") and grants to the Company a security interest in the Pledged Shares.
- ------
The Company shall have recourse to the Maker for the payment of up to
$1,012,240.00 of the principal amount hereof and for the payment of all interest
accrued thereon. The Company shall be without recourse to the Maker for the
payment of all other principal of this Note and shall look solely to the Pledged
Shares for the payment of such amounts.
The Maker hereby represents, warrants and covenants to the Company that:
(a) The Maker has good title to the Pledged Shares, free and clear of all
claims, mortgages, pledges, liens, security interests and other encumbrances of
every nature whatsoever, other than those under applicable securities law or
those set forth herein or in the Stockholders Agreement dated as of March 27,
1998 among Heritage Fund II, L.P., Heritage Investors II, L.L.C., Heritage Fund
II Investment Corporation, Robert Snukal, Sheila Snukal, the Maker and certain
other parties, as amended from time to time (the "Stockholders Agreement").
----------------------
(b) If any additional shares of capital stock or other securities of the
Company are acquired by the Maker after the date hereof as the result of any
stock dividend or stock distribution with respect to the Pledged Shares, the
same shall constitute Pledged Shares and shall be deposited and pledged with the
Company as provided for herein.
<PAGE>
(c) The Maker will not sell, convey or otherwise dispose of any of the
Pledged Shares, nor will the Maker create, incur or permit to exist any pledge,
mortgage, lien, charge, encumbrance or any security interest whatsoever with
respect to any of the Pledged Shares or the proceeds thereof, other than liens
on and security interests in the Pledged Shares created hereby and restrictions
contained in the Stockholders Agreement or under applicable securities laws.
Upon the occurrence of an Event of Default, the Company shall have all of
the rights and remedies provided by law, including, without limitation, those
provided by the Uniform Commercial Code.
In case there shall exist an Event of Default, but subject to the
provisions of the Uniform Commercial Code or other applicable law, the Company
may cause all or any of the Pledged Shares to be transferred into its name or
into the name of its nominee or nominees.
Upon the occurrence of an Event of Default, the Company shall have the
right at any time or times thereafter to sell, resell, assign and deliver all or
any of the Pledged in one or more parcels at any exchange or broker's board or
at public or private sale. Unless the Pledged Shares threaten to decline
speedily in value or are of a type customarily sold on a recognized market, the
Company will give the Maker at least ten (10) days' prior written notice of the
time and place of any public sale thereof or of the time after which any private
sale or any other intended disposition thereof is to be made. Any such notice
shall be deemed to meet any requirement hereunder or under any applicable law
(including the Uniform Commercial Code) that reasonable notification be given of
the time and place of such sale or other disposition. Such notice may be given
without any demand of performance or other demand, all such demands being hereby
expressly waived by the Maker. All such sales shall be at such commercially
reasonable price or prices as the Company shall deem best and either for cash or
on credit or for future delivery (without assuming any responsibility for credit
risk). At any such sale or sales the Company may purchase any or all of the
Pledged Shares to be sold thereat upon such terms as the Company may deem best.
Upon any such sale or sales the Pledged Shares so purchased shall be held by the
purchaser absolutely free from any claims or rights of whatsoever kind or
nature, including any equity of redemption and any similar rights, all such
equity of redemption and any similar rights being hereby expressly waived and
released by the Maker, other than restrictions under the Stockholders Agreement
or applicable securities law. In the event any consent, approval or
authorization of any governmental agency will be necessary to effectuate any
such sale or sales, the Maker shall execute all such applications or other
-2-
<PAGE>
instruments as may be required. The proceeds of any such sale or sales, together
with any other additional collateral security at the time received and held
hereunder, shall be received and applied: first, to the payment of all costs and
expenses of such sale, including reasonable attorneys' fees; second, to the
payment of the amount owed hereunder to which the Company does not have recourse
against the Maker; third, to the payment of the amount owed hereunder to which
the Company does have recourse against the Maker, and any surplus thereafter
remaining shall be paid to the Maker or to whomever may be legally entitled
thereto.
The Maker recognizes that the Company may be unable to effect a public sale
of all or a part of the Pledged Shares by reason of certain prohibitions
contained in the Securities Act of 1933, but may be compelled to resort to one
or more private sales to a restricted group of purchasers, each of whom will be
obligated to agree, among other things, to acquire such Pledged Shares for its
own account, for investment and not with a view to the distribution or resale
thereof. The Maker acknowledges that private sales so made may be at prices and
upon other terms less favorable to the seller than if such Pledged Shares were
sold at public sales, and that the Company has no obligation to delay sale of
any such Pledged Shares for the period of time necessary to permit such Pledged
Shares to be registered for public sale under the Securities Act of 1933. The
Maker agrees that any such private sales shall not be deemed to have been made
in a commercially unreasonable manner solely because they shall have been made
under the foregoing circumstances.
This agreement shall be governed by the internal laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the undersigned has executed this agreement this 16th
day of April, 1998.
/s/ William Scott
-----------------------
William Scott
-3-
<PAGE>
EXHIBIT 10.43
SUPPLEMENTAL SIGNATURE PAGE TO
FOUNTAIN VIEW, INC. INVESTMENT AGREEMENT
Reference is hereby made to that certain Investment Agreement dated as of
March 27, 1998 (the "Investment Agreement") by and among Fountain View, Inc.
--------------------
(the "Company"), Robert Snukal, Sheila Snukal, William Scott, Heritage Fund II,
-------
L.P. ("Heritage"), Heritage Investors II, L.L.C., Heritage Fund II Investment
--------
Corporation ("HFIC"), and certain other parties.
----
Preliminary Statement
---------------------
HFIC has purchased certain securities of the Company (the "Securities")
----------
pursuant to the Investment Agreement. HFIC desires to transfer certain of the
Securities to Baylor Health Care System ("Baylor") and Buckner Foundation
------
("Buckner"), and Baylor and Buckner wish to purchase such Securities from HFIC.
-------
The Company and HFIC desire that such purchase and sale be consummated, and have
agreed to make certain representations and warranties to Baylor and Buckner
hereunder.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, HFIC, Baylor and
Buckner hereby agree as follows:
1. Additional Parties; Purchase of Securities. By its execution of this
------------------------------------------
Supplemental Signature Page, (a) each of Baylor and Buckner is hereby added as a
party to the Investment Agreement, shall be deemed to make the representations
of an Investor therein, and shall have the rights and obligations thereunder as
an Investor, on a pari passu basis with the other Investors party thereto, and
(b) each of Baylor and Buckner agrees to purchase from HFIC, and HFIC agrees to
sell, the following Securities for the consideration indicated, to be paid on
the date hereof to HFIC by wire transfer of immediately available funds:
<TABLE>
<CAPTION>
Investor Securities Purchased Consideration
-------- -------------------- -------------
<S> <C> <C>
Baylor 9,873 shares of Series A $10,000,000
Preferred Stock and
Warrants to purchase
54,999 shares of Series C
Common Stock
Buckner 2,469 shares of Series A $ 2,500,000
Preferred Stock and
Warrants to purchase
4,267 shares of Series C
Common Stock
</TABLE>
<PAGE>
2. Representations of the Company. The Company hereby represents and
------------------------------
warrants to Baylor and Buckner as follows:
(a) Each of the representations and warranties of the Company contained in
the Investment Agreement is true and correct in all respects as of the date of
this Supplemental Signature Page.
(b) Each of the statements of the Company contained in the Offering
Circular issued by the Company in connection with its issuance of $120,000,000
of 11 1/4% Senior Subordinated Notes due 2008 is true and correct in all
material respects as of the date of this Supplemental Signature Page, other than
those statements contained therein which are made as of a stated date, which
statements are true and correct in all material respects as of such stated date.
(c) Assuming the due execution and delivery by Baylor and Buckner of (i)
this Supplemental Signature Page, (ii) the Amendment No. 1 to Stockholders
Agreement dated the date hereof by and among the Company, Heritage, Baylor and
Buckner (the "Stockholders Amendment"), (iii) the Amendment No. 1 to
----------------------
Registration Rights Agreement dated the date hereof by and among the Company,
Heritage, Baylor, Buckner and certain other parties (the "Registration Rights
-------------------
Amendment"), and (iv) the Stock and Warrant Powers dated the date hereof made by
- ---------
HFIC in favor of Baylor and Buckner (the "Powers", and collectively with this
------
Supplemental Signature Page, the Stockholders Amendment and the Registration
Rights Amendment, the "Baylor Documents"), such Baylor Documents (A) have been
----------------
duly executed and delivered by all persons and entities necessary to amend the
Investment Agreement, the Stockholders Agreement and the Registration Rights
Agreement (each as defined in the Investment Agreement) (collectively, the
"Original Documents") as such Original Documents are purported to be amended in
------------------
the Baylor Documents, and (B) convey to Baylor and Buckner all of the rights
purported to be granted to Baylor and Buckner thereunder, and make Baylor and
Buckner parties to the Original Documents, as amended, in accordance with the
terms thereof.
(d) As of the date this Supplemental Signature Page, the Company will
amend its Certificate of Incorporation in the form attached as Exhibit A hereto,
---------
which amendment has been duly authorized by all requisite corporate action on
behalf of the Company.
3. Representations of HFIC. HFIC hereby represents and warrants to
-----------------------
Baylor and Buckner that HFIC is the record and beneficial owner of the
Securities, with good and marketable title to such Securities, free and clear of
all liens, security interests, claims or other encumbrances, other than
restrictions under applicable securities laws and the Stockholders Agreement
referred to in the Investment Agreement.
2
<PAGE>
4. Covenant and Guaranty of Heritage. By its execution of this
---------------------------------
Supplemental Signature Page, Heritage hereby (a) covenants to use commercially
reasonable efforts to cause the Company to comply in all respects with the
obligations of the Company set forth in Section 2 of the Amendment No. 1 to
Stockholders Agreement dated the date hereof by and among the Company, Heritage,
Baylor and Buckner, and (b) guarantees HFIC's obligations with respect to the
representations and warranties contained in Section 3 above.
5. Survival. The representations and warranties contained in Section
--------
2(a) and Section 3 of this Supplemental Signature Page shall survive the
execution, delivery and performance of this Supplemental Signature Page. The
representations and warranties contained in Section 2(b) of this Supplemental
Signature Page shall not survive the execution, delivery and performance of this
Supplemental Signature Page.
6. Miscellaneous. This Supplemental Signature Page (a) shall be binding
-------------
upon and enforceable against the parties and their successors and permitted
assigns, (b) shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, without giving effect to conflicts of laws
principles, and (c) may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall be considered one and
the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, this Supplemental Signature Page to Fountain View, Inc.
Investment Agreement has been executed as a sealed instrument as of the 4th day
of May, 1998.
FOUNTAIN VIEW, INC.
----------------------------------------
By: /s/ Robert Snukal
-------------------------------------
Name: Robert Snukal
Title: President
BAYLOR HEALTH CARE SYSTEM
By: /s/ William S. Carter
-------------------------------------
Name: William S. Carter
Title: Executive Vice President
BUCKNER FOUNDATION
By: /s/ H. Allen Jordan
-------------------------------------
Name: H. Allen Jordan
Title: Senior Vice President & Chief
Financial Officer
HERITAGE FUND II, L.P.
By: HF Partners II, L.L.C.,
its general partner
By: /s/ [SIGNATURE ILLEGIBLE]^^
-------------------------------------
Name:
Title:
HERITAGE FUND II
INVESTMENT CORPORATION
By: /s/ [SIGNATURE ILLEGIBLE]^^
-------------------------------------
Name:
Title:
4
<PAGE>
EXHIBIT 10.44
AMENDMENT NO. 1 TO FOUNTAIN VIEW, INC.
STOCKHOLDERS AGREEMENT
This Amendment No. 1 to Stockholders Agreement (the "Amendment") is entered
---------
into as of May 4, 1998 by and among (i) Fountain View, Inc., a Delaware
corporation (the "Company"), (ii) Heritage Fund II, L.P. ("Heritage"), (iii)
------- --------
Baylor Health Care System ("Baylor"), and (iv) Buckner Foundation ("Buckner").
------ -------
Preliminary Statement
---------------------
Reference is hereby made to that certain Stockholders Agreement dated as of
March 27, 1998 (the "Original Agreement") by and among the Company, Robert
------------------
Snukal, Sheila Snukal, William Scott, Heritage, Heritage Investors II, L.L.C.,
Heritage Fund II Investment Corporation ("HFIC"), and certain other parties.
----
HFIC has purchased certain securities of the Company (the "Securities")
----------
pursuant to the terms of an Investment Agreement dated as of March 27, 1998.
HFIC desires to transfer certain of the Securities to Baylor and Buckner, and
Baylor and Buckner wish to purchase such Securities from HFIC. The Company and
Heritage desire that such purchase and sale be consummated, and wish to amend
the Original Agreement to add Baylor and Buckner as a party thereto and to make
certain other changes.
All capitalized terms used but not defined in this Amendment shall have the
meanings set forth in the Original Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Additional Party. By its execution of this Amendment, each of Baylor
----------------
and Buckner is hereby added as a party to the Original Agreement, and shall have
the rights and obligations thereunder as an Investor, on a pari passu basis with
the other Investors.
2. Amendment to Original Agreement. Effective as of the date hereof, the
-------------------------------
Original Agreement is hereby amended as follows:
2.1. Amendment to Section 1.02. Section 1.02 of the Original
-------------------------
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in lieu thereof the following:
"Section 1.02. Election of Directors. At all meetings (and written
------------ ---------------------
actions in lieu of meetings) of stockholders of the Company at which
directors are to be elected, each Stockholder
<PAGE>
shall vote all of such Stockholder's Stock to elect, as directors of the
Company:
(a) RS Directors. Two nominees of RS, which number shall be
------------
increased if necessary to insure that the nominees of RS constitute not
less than twenty-five percent (25%) of the total number of directors (the
"RS Directors"), as long as RS holds any shares of Stock.
-------------
(b) Scott Director. One nominee of Scott (the "Scott
-------------- -----
Director"), as long as Scott holds any shares of Stock.
--------
(c) Baylor Director. One nominee of Baylor Health Care System
---------------
("Baylor") (the "Baylor Director"), as long as Baylor holds any shares of
------ ---------------
Stock or Stock Equivalents.
(d) Investor Directors. Such number of nominees of a Majority
------------------
of Investors as may be designated by a Majority of Investors (the "Investor
--------
Directors")."
---------
2.2. Amendment to Section 1.03. Section 1.03 of the Original
-------------------------
Agreement is hereby amended by deleting the first sentence thereof in its
entirety and inserting in lieu thereof the following:
"Each Stockholder agrees to vote such Stockholder's Stock, at all meetings
(and written actions in lieu of meetings) of stockholders of the Company,
(a) to remove any RS Director, if so requested by RS, (b) to remove the
Scott Director, if so requested by a Scott, (c) to remove the Baylor
Director, if so requested by Baylor, and (d) to remove any Investor
Director, if so requested by a Majority of Investors."
2.3. Amendment to Section 1.04. Section 1.04 of the Original
-------------------------
Agreement is hereby amended by deleting the text thereof in its entirety and
inserting in lieu thereof the following:
"Section 1.04. Vacancies. Each Stockholder agrees to vote such
------------ ---------
Stockholder's Stock, at all meetings (and written actions in lieu of
meetings) of stockholders of the Company, (a) to fill any vacancy on the
Board of Directors of the Company (the "Board") caused by the resignation
-----
or removal of any RS Director with a nominee selected by RS, (b) to fill
any vacancy on the Board caused by the resignation or removal of the Scott
Director with a nominee selected by Scott, (c) to fill any vacancy on the
Board caused by the resignation or removal of the Baylor Director with a
nominee selected by Baylor, and (d) to fill any vacancy on the Board caused
by the resignation or removal of any Investor Director with a nominee
selected by a Majority of Investors."
2
<PAGE>
2.4. Amendment to Section 5.01. Section 5.01 of the Original
-------------------------
Agreement is hereby amended by deleting clause (a) of the fourth paragraph
thereof in its entirety and inserting in lieu thereof the following:
"this Section shall not apply to transfers by Heritage to its partners
which are required by Article X of its Agreement of Limited Partnership, as
in effect on May 4, 1998, a true and correct copy of which Article X has
been delivered to Baylor, if such partners become parties to this
Agreement, and".
2.5. Amendment to Section 5.03. Section 5.03 of the Original
-------------------------
Agreement is hereby amended by (a) inserting the word "reasonably" in clause (c)
thereof following the words "all agreements, documents and instruments" and
before the words "required by Heritage", and (b) deleting the words following
"provided, however," in their entirety and inserting in lieu thereof the words
- --------- -------
"that any obligation of the Investors with respect to indemnification or
representations, warranties and covenants shall be several and not joint and
that such obligations shall be limited for each Investor to the amount of
proceeds received by such Investor in such Heritage Transfer Event (other than
proceeds received with respect to shares of Preferred Stock held by such
Investor, except with respect to indemnification relating to title, authority to
transfer and similar matters relating to the sale of such shares of Preferred
Stock)."
2.6. Addition of New Section 7.04A. The Original Agreement is hereby
-----------------------------
amended by adding a new Section 7.04A as follows after Section 7.04 thereof:
"Section 7.04A. Issuance of Certain Shares of Stock by the Company and its
------------- ----------------------------------------------------------
Subsidiaries. The Company will not, at any time when any shares of Series
------------
A Preferred Stock are outstanding, without the prior written consent of the
holders of a majority of the shares of Series A Preferred Stock then
outstanding, (i) issue any shares of preferred stock or other equity
securities having rights or preferences which are senior to or pari passu
with the rights and preferences applicable to the Series A Preferred Stock
with respect to liquidation, dividends or redemption, or (ii) permit any of
its subsidiaries (other than any subsidiary whose assets or gross revenues,
combined with the assets or gross revenues of all other subsidiaries which
have issued equity securities since April 30, 1998, did not exceed twenty
percent (20%) of the Company's consolidated assets or gross revenues,
respectively, at any time within the preceding twelve months) to issue any
shares of their capital stock to any Person other than the Company or any
other subsidiary of the Company.
Notwithstanding the foregoing, the Company may issue any Stock without
regard to the restrictions contained in this
3
<PAGE>
Section 7.04A if at the time of such issuance (A) the aggregate amount of
outstanding indebtedness of the Company, determined in accordance with
generally accepted accounting principles, including the issuance of Series
A Preferred Stock and any preferred stock to which this Section 7.04A is
applicable, is not more than four (4) times the EBITDA (as defined below)
of the Company for the Company's four most recently completed fiscal
quarters, and (B) the Fixed Charge Coverage Ratio of the Company, including
the issuance of Series A Preferred Stock and any preferred stock to which
this Section 7.04A is applicable, is not less than 2.0 to 1. The term
"EBITDA" as used in this Section 7.04A shall mean consolidated net income,
after restoring thereto amounts deducted with respect to interest, taxes,
depreciation, amortization and other non-cash charges. The term "Fixed
Charge Coverage Ratio" as used in this Section 7.04A shall have the meaning
set forth in the Offering Circular of the Company dated April 9, 1998 with
respect to the Company's 11 1/4% Senior Subordinated Notes due 2008."
2.7. Addition of New Section 7.04B. The Original Agreement is hereby
-----------------------------
amended by adding a new Section 7.04B as follows after Section 7.04A thereof:
"Section 7.04B. Payment of Certain Dividends and Redemptions with Respect
------------- ---------------------------------------------------------
to Capital Stock. The Company will not, at any time when any shares of
----------------
Series A Preferred Stock are outstanding, without the prior written consent
of the holders of a majority of the shares of Series A Preferred Stock then
outstanding, (i) pay any amounts to the holders of shares of capital stock
of the Company (other than shares of Series A Preferred Stock or shares of
preferred stock issued pursuant to Section 7.04A hereof) in respect of a
redemption or repurchase of such shares which exceed in the aggregate,
collectively with any other payments made under clause (i) or (ii) of this
Section 7.04B, the Section 7.04B Amount (as defined below), or (ii) pay any
amounts to the holders of shares of capital stock of the Company (other
than shares of Series A Preferred Stock or shares of preferred stock issued
pursuant to Section 7.04A hereof) in respect of a dividend or distribution
(A) while any dividends with respect to shares of Series A Preferred Stock
remain accrued but not yet paid, unless the Company shall at such time pay
a dividend with respect to the shares of Series A Preferred Stock in an
aggregate amount equal to the amount of the proposed payment under this
clause (ii) multiplied by a fraction, the numerator of which is the amount
-------------
of accrued but not yet paid dividends owed with respect to shares of Series
A Preferred Stock and the denominator of which is the Section 7.04B Amount,
and (B) which exceed in the aggregate, collectively with any other payments
made under clause (i) or clause (ii) of this Section 7.04B, the Section
7.04B Amount. Any payments made with
4
<PAGE>
respect to shares of Series A Preferred Stock pursuant to clause (ii)(A)
above shall be excluded in determining whether the Section 7.04B Amount has
been exceeded. The term "Section 7.04B Amount" as used herein shall mean
$20,000,000."
2.8. Addition of New Definition. Article VIII of the Original
--------------------------
Agreement is hereby amended by inserting the following definitions:
"Baylor" shall have the meaning specified in Section 1.02.
------
"Baylor Director shall have the meaning specified in Section 1.02.
---------------
"Buckner" shall have the meaning specified in Section 1.02.
-------
"Series A Preferred Stock" shall mean the 15,000 shares of Series A
------------------------
Preferred Stock of the Company issued by the Company on March 27, 1998.
2.9. Definition of Majority of Investors. The definition of the term
-----------------------------------
"Majority of Investors" in Article VIII of the Original Agreement is hereby
amended by deleting the text thereof in its entirety and inserting in lieu
thereof the following:
"Majority of Investors shall mean Investors who hold a majority of the
---------------------
Common Stock held by all Investors (assuming the exercise or conversion of
all Stock Equivalents held by all Investors); provided that any decision,
determination or actions to be made or taken by a Majority of Investors
shall be made or taken by Heritage as long as Heritage holds more shares of
Common Stock than any other Investor."
2.10. Definition of Permitted Transfers. The definition of the term
---------------------------------
"Permitted Transfers" in Article VIII of the Original Agreement is hereby
amended by deleting the text thereof in its entirety and inserting in lieu
thereof the following:
"Permitted Transfers shall mean any of the following:
-------------------
(a) Transfers of Securities of a Stockholder to the trustees of a
trust revocable by such Stockholder alone, the beneficiaries of which
consist solely of such Stockholder and transferees enumerated in clause (d)
below;
(b) Transfers of Securities between a Stockholder and such
Stockholder's guardian or conservator;
(c) Transfers of Securities of a deceased Stockholder to such
Stockholder's executors or administrators or to trustees under such
Stockholder's will and thereafter to transferees enumerated in clause (d)
below;
5
<PAGE>
(d) Transfers of Securities of a Stockholder to the spouse of
such Stockholder, to any of such Stockholder's children or their issue (or
to custodians for the benefit of minor children or issue), or to such
Stockholder's parents or siblings;
(e) Transfers of Securities of any Stockholder which is a
corporation, partnership, limited liability company or other entity to any
owner or Affiliate of such Stockholder, provided that such Stockholder may
not transfer Securities to more than (i) a total of five (5) of its owners
or Affiliates pursuant to this clause (e) before January 1, 2004 (unless
such transfer relates to a liquidation or winding-up of such Stockholder,
in which case the maximum number specified in this clause (i) shall be 16),
and (ii) a total of sixteen (16) of its owners or Affiliates pursuant to
this clause (e) after January 1, 2005;
(f) Transfers of warrants to purchase Series C Common Stock of
the Company by Baylor to any broker or agent retained by Baylor or Buckner
with respect to their investment in the Company (up to a maximum of 20,742
shares of Series C Common Stock in the aggregate) or transfers of
Securities of Baylor to Baylor Health Care System Foundation (in any
amount);
(g) Transfers of Securities by Heritage Fund II Investment
Corporation to any other Person; and
(h) Transfers of Securities pursuant to Articles II, V or VI;
provided, however that Securities Transferred pursuant to clauses (a) - (f)
--------
may not be further Transferred under such clauses except to a Person that
would have been a permitted transferee thereof from the initial Stockholder
who held such Securities."
2.11. Definition of Proportionate Percentage. The definition of the
--------------------------------------
term "Proportionate Percentage" in Article VIII of the Original Agreement is
hereby amended by deleting the text thereof in its entirety and inserting in
lieu thereof the following:
"Proportionate Percentage of a Stockholder shall mean a fraction of which
------------------------
(a) the numerator is the number of then outstanding shares of Common Stock
held by such Stockholder (assuming the exercise or conversion of all Stock
Equivalents held by such Stockholder), and (b) the denominator is the total
number of then outstanding shares of Common Stock (assuming the exercise or
conversion of all Stock Equivalents held by all stockholders)."
6
<PAGE>
2.12. Definition of Qualified Stockholder. The definition of the
-----------------------------------
term "Qualified Stockholder" in Article VIII of the Original Agreement is hereby
amended by deleting the text thereof in its entirety and inserting in lieu
thereof the following:
"Qualified Stockholder shall mean any Stockholder then holding more than
---------------------
10,000 shares of Stock (assuming the exercise or conversion of all Stock
Equivalents held by such Stockholder, and appropriately adjusted for stock
splits, stock dividends, combinations and other similar transactions);
provided that (a) all shares of Stock held by a Stockholder and any
transferees of such Stockholder under clause (e) of the definition of
Permitted Transfers shall be aggregated for purposes of determining whether
any of them is a Qualified Stockholder, (b) all shares of Stock held by GS
Private Equity Partners, L.P. and GS Private Equity Partners Offshore, L.P.
shall be aggregated for purposes of determining whether any of them is a
Qualified Stockholder, (c) all shares of Stock held by Nassau Capital
Partners II L.P. and NAS Partners I LLC shall be aggregated for purposes of
determining whether any of them is a Qualified Stockholder, and (d) all
shares of Stock held by Baylor, Buckner and each transferee of Baylor or
Buckner permitted under clause (f) of the definition of Permitted Transfers
shall be aggregated for purposes of determining whether any of them is a
Qualified Stockholder."
2.13. Definition of Stockholder. The definition of the term
-------------------------
"Stockholder" in Article VIII of the Original Agreement is hereby amended by
deleting the text thereof in its entirety and inserting in lieu thereof the
following:
"Stockholder" shall mean each Person who holds any Stock (including Baylor
-----------
or Buckner, as long as they shall hold any Stock or Stock Equivalents)."
3. Survival. Except as specifically set forth herein, the Original
--------
Agreement shall remain in full force and effect. This Amendment shall be deemed
part of, and construed in accordance with, the Original Agreement.
4. Miscellaneous. This Amendment shall be binding upon and enforceable
-------------
against the parties and their successors and permitted assigns. This Amendment
shall not be amended, modified, revised, supplemented, or terminated unless
mutually agreed in writing by all of the parties hereto. This Amendment shall
be governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to conflicts of laws principles. This
Amendment may be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which shall be considered one and the same
instrument.
7
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 to Stockholders Agreement has been
executed as a sealed instrument as of the day and year first above written.
FOUNTAIN VIEW, INC.
By:/s/ Robert Snukal
----------------------
Robert Snukal, President
BAYLOR HEALTH CARE SYSTEM
By:/s/ William S. Carter
-----------------------
Name: William S. Carter
Title: E.V. - Pres.
BUCKNER FOUNDATION
By:/s/ H. Allen Jordan
-----------------------
Name: H. Allen Jordan
Title: Senior Vice President & Chief
Financial Officer
HERITAGE FUND II, L.P.
By: HF Partners II, L.L.C.,
its general partner
By:[SIGNATURE ILLEGIBLE]^^
------------------------
Name:
Title:
8
<PAGE>
EXHIBIT 10.45
AMENDMENT NO. 1 TO FOUNTAIN VIEW, INC.
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 1 to Registration Rights Agreement (the "Amendment") is
---------
entered into as of May 4, 1998 by and among (i) Fountain View, Inc., a Delaware
corporation (the "Company"), (ii) Heritage Fund II, L.P., Heritage Investors II,
-------
L.L.C. and Heritage Fund II Investment Corporation (collectively, "Heritage"),
--------
(iii) Baylor Health Care System ("Baylor"), and (iv) Buckner Foundation
------
("Buckner").
-------
Preliminary Statement
---------------------
Reference is hereby made to that certain Registration Rights Agreement
dated as of March 27, 1998 (the "Original Agreement") by and among the Company,
------------------
Robert Snukal, Sheila Snukal, William Scott, Heritage, and certain other
parties.
Heritage Fund II Investment Corporation ("HFIC") has purchased certain
----
securities of the Company (the "Securities") pursuant to the terms of an
----------
Investment Agreement dated as of March 27, 1998. HFIC desires to transfer
certain of the Securities to Baylor and Buckner, and Baylor and Buckner wish to
purchase such Securities from HFIC. The Company and Heritage desire that such
purchase and sale be consummated, and wish to amend the Original Agreement to
add Baylor and Buckner as a party thereto and to make certain other changes.
All capitalized terms used but not defined in this Amendment shall have the
meanings set forth in the Original Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Additional Party. By its execution of this Amendment, each of Baylor
----------------
and Buckner is hereby added as a party to the Original Agreement, and shall have
the rights and obligations thereunder as a holder of Investor Registrable
Securities, on a pari passu basis with the other holders of Investor Registrable
Securities.
2. Provision of Notices. The Company hereby covenants and agrees that,
--------------------
for as long as Baylor or Buckner, respectively, holds warrants to purchase
Common Stock of the Company and until such time as Baylor or Buckner,
respectively, holds any shares of Common Stock of the Company, the Company will
provide Baylor or Buckner, respectively, with copies of all written notices
given by the Company to holders of Registrable Securities pursuant to the
<PAGE>
Original Agreement, at the same time and in the same manner as such written
notices are provided to holders of Registrable Securities.
3. Amendment to Original Agreement. Effective as of the date hereof, the
-------------------------------
Original Agreement is hereby amended as follows:
3.1. Definition of Investor Registrable Securities. The term
---------------------------------------------
"Investor Registrable Securities" as used in the Original Agreement is hereby
amended to include within the definition thereof all shares of Common Stock of
the Company held by Baylor or Buckner, including all shares of Common Stock
issuable to Baylor or Buckner (or any of their permitted transferees under the
Stockholders Agreement referred to in the Original Agreement) pursuant to
warrants to purchase Series C Common Stock held by Baylor or Buckner, subject to
the the terms and conditions applicable to Investor Registrable Securities as
set forth in Section 4(a) of the Original Agreement, and the names "Baylor
Health Care System" and "Buckner Foundation" (and the names of any of their
permitted transferees under the Stockholders Agreement referred to in the
Original Agreement) are hereby inserted into the list of holders of Investor
Registrable Securities appearing in the Original Agreement.
3.2. New Section 19. A new Section 19 to the Original Agreement is
--------------
hereby added as follows:
"Section 19. Addition of Subsequent Holders. Any person who acquires
---------- ------------------------------
any shares of Registrable Securities in compliance with the terms and
conditions of the Stockholders Agreement on or after the date hereof shall
be entitled to become a party to this Agreement upon such person's
execution of a counterpart to, or other written agreement to be bound by
and to comply with all of the provisions of, this Agreement, and upon
execution of such counterpart or other written agreement shall become a
holder of Registrable Securities for purposes of this Agreement, such
Registrable Securities to be of the same type (i.e., Investor Registrable
Securities, Snukal Registrable Securities or Scott Registrable Securities)
as were held by the transferor from whom such person acquired such shares."
4. Survival. Except as specifically set forth herein, the Original
--------
Agreement shall remain in full force and effect. This Amendment shall be deemed
part of, and construed in accordance with, the Original Agreement.
5. Miscellaneous. This Amendment shall be binding upon and enforceable
-------------
against the parties and their successors and permitted assigns. This Amendment
shall not be amended, modified, revised, supplemented, or terminated unless
mutually agreed in writing by all of the parties hereto. This Amendment shall be
governed by and construed in accordance with the laws of the Commonwealth of
2
<PAGE>
Massachusetts, without giving effect to conflicts of laws principles. This
Amendment may be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which shall be considered one and the same
instrument.
3
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 to Registration Rights Agreement
has been executed as a sealed instrument as of the day and year first above
written.
FOUNTAIN VIEW, INC.
By: /s/ Robert Snukal
-------------------------------
Robert Snukal, President
BAYLOR HEALTH CARE SYSTEM
By: /s/ William S. Carter
-------------------------------
Name: William S. Carter
Title: Executive Vice President
BUCKNER FOUNDATION
By: /s/ H. Allen Jordan
-------------------------------
Name: H. Allen Jordan
Title: Senior Vice President &
Chief Financial Officer
HERITAGE FUND II, L.P.
By: Heritage Partners
Management Company Inc.,
its general partner
By: /s/ SIGNATURE ILLEGIBLE ^^
-------------------------------
Name:
Title:
HERITAGE INVESTORS II, L.L.C.
By: HF Partners II, L.L.C.,
its manager
By: /s/ SIGNATURE ILLEGIBLE ^^
-------------------------------
Name:
Title:
HERITAGE FUND II
INVESTMENT CORPORATION
By: /s/ SIGNATURE ILLEGIBLE ^^
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.46
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "SECURITIES
LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS (1)
REGISTERED UNDER THE SECURITIES LAWS OR (2) EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF MARCH 27, 1998
AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE SECRETARY.
No. C-1 Warrant to Purchase 70,622 Shares of Series C Common
Stock
FOUNTAIN VIEW, INC.
Warrant
-------
Void after April 16, 2008
Fountain View, Inc., a Delaware corporation (the "Company"), hereby
-------
certifies that, for value received, Heritage Fund II Investment Corporation or
its permitted assigns (the "Holder"), is entitled, subject to the terms set
------
forth below, to purchase from the Company at any time on or after April 16,
1998, but in any event not later than 5:00 p.m., Eastern time, on April 16, 2008
(the "Expiration Date"), up to 70,622 fully paid and nonassessable shares of the
---------------
Company's Series C Common Stock at the purchase price (the "Warrant Price") of
-------------
$.01 per share and otherwise in accordance with the terms hereof.
Section 1. Certain Definitions. As used herein, the following terms have
--------- -------------------
the meanings set forth below:
"Stockholders Agreement" means the Stockholders Agreement dated as of March
----------------------
27, 1998 among the Company, Heritage Fund II, L.P., Heritage Investors II,
L.L.C., Heritage Fund II Investment Corporation, Robert Snukal, Sheila Snukal,
William Scott and certain other parties, as amended from time to time.
Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Stockholders Agreement.
<PAGE>
Section 2. Exercise. This Warrant shall be exercisable in full or in part
--------- --------
at any time prior to the Expiration Date. Except as otherwise provided in
Sections 7 and 8, this Warrant shall be exercisable by delivery by the Holder to
the Company of notice of exercise setting forth the number of shares for which
the Warrant is being exercised and payment in cash or by check of the Warrant
Price for each share for which this Warrant is being exercised.
Section 3. Delivery of Stock Certificates, etc. on Exercise. As soon as
--------- ------------------------------------------------
practicable after the exercise of this Warrant, and in any event within three
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, (i) a certificate or certificates for the number of
fully paid and nonassessable shares of Series C Common Stock to which the Holder
shall be entitled on such exercise, and (ii) a new Warrant to purchase all of
the shares, if any, to which the Holder shall be entitled to receive in
connection with the portion of the Warrant not so exercised.
Section 4. Adjustment for Stock Splits, Stock Dividends,
--------- ---------------------------------------------
Recapitalizations, etc. The Warrant Price and the number of shares of Series C
- ----------------------
Common Stock issuable upon exercise of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
of outstanding shares of Series C Common Stock. In case of any adjustment or
readjustment in the Warrant Price or number of shares of Series C Common Stock
issuable on the exercise of this Warrant, the Company will promptly give written
notice thereof to the Holder in the form of a certificate, certified and
confirmed by the president or treasurer of the Company, setting forth such
adjustment and showing in reasonable detail the facts upon which such adjustment
or readjustment is based.
Section 5. Adjustment for Conversions, Reclassifications, Mergers, etc.
--------- -----------------------------------------------------------
In case of any capital reorganization or any reclassification of the capital
stock of the Company or in case of the consolidation or merger of the Company
with or into another corporation or the conveyance of all or substantially all
of the assets of the Company to another corporation, this Warrant shall
thereafter be exercisable for the number of shares of stock or other securities
or property to which a holder of the number of shares of Series C Common Stock
of the Company deliverable upon exercise of the Warrant would have been entitled
to upon such conversion, reorganization, reclassification, consolidation, merger
or conveyance.
Section 6. Reservation of Shares. The Company (a) will at all times
--------- ---------------------
reserve and keep available a number of its authorized shares of Series C Common
Stock free from all preemptive or similar rights therein, which will be
sufficient to permit the
-2-
<PAGE>
exercise of this Warrant, and (b) will take such action as may be necessary or
appropriate so that all shares of Series C Common Stock issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, except for certain restrictions on transfer set forth in
the Stockholders Agreement and under applicable securities laws.
Section 7. Net Issue Exercise. In lieu of exercising this Warrant in
--------- ------------------
accordance with Section 2, the Holder may elect to receive shares equal to the
value of this Warrant (to the extent exercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder a number of shares of the
Company's Series C Common Stock equal to the quotient obtained by dividing (a)
the value of the aggregate number of shares of Series C Common Stock for which
this Warrant is then exercised (determined by subtracting the aggregate Warrant
Price for such shares immediately prior to surrender from the aggregate Fair
Market Value (as hereinafter defined) of such shares), by (b) the Fair Market
Value of one share of Series C Common Stock immediately prior to surrender. For
purposes of this Section, the "Fair Market Value" of the Company's Series C
Common Stock shall mean (i) if the Company has consummated a registered public
offering of its common stock, the average of the closing sale prices of each
share of common stock into which the Company's Series C Common Stock was
converted for the ten (10) business days preceding the date upon which Fair
Market Value is to be determined, or (ii) if the Company has not consummated a
registered public offering of its common stock, the fair market value of each
share of Series C Common Stock, as determined in good faith by the Company's
Board of Directors.
In the event of the surrender of this Warrant, as described above,
certificates for the shares of stock issuable thereon shall be delivered to the
Holder as soon as possible and in any event within three days of receipt of
notice of surrender. If the Warrant is not exercised in full pursuant to such
surrender, a replacement warrant for the portion of the Warrant not so exercised
shall be issued in accordance with Section 3.
Section 8. Surrender of Preferred Stock. Upon the exercise of this
--------- ----------------------------
Warrant by any holder of shares of the Company's Series A Preferred Stock (the
"Preferred Stock"), such holder may, at its option, surrender a portion of such
Preferred Stock to the Company, together with written instructions from such
holder to apply all or a specified portion of the Liquidation Value (as defined
in the Company's Certificate of Incorporation) of the Preferred Stock against
the payment of some or all of the Warrant Price required upon such exercise, in
which case the Company will
-3-
<PAGE>
accept such specified portion of the Preferred Stock in lieu of a like amount of
cash payment.
In the event of the surrender of Preferred Stock, as described above,
certificates for the number of shares of Series C Common Stock issuable
hereunder shall be delivered to the holder hereof as soon as possible and in any
event within three days of notice of surrender of the Preferred Stock, together
with a certificate therefor, duly endorsed for transfer and together with this
Warrant, and a certificate for the balance of the Preferred Stock surrendered to
the Company with such notice shall also be issued to the holder hereof as soon
as possible and in any event within such two-day period.
Section 9. Exchange of Warrants. On surrender for exchange of this
--------- --------------------
Warrant, properly endorsed, to the Company, and subject to the restrictions on
transfer set forth in the Stockholders Agreement, the Company at its expense
will issue and deliver to or on the order of the holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder may direct, calling in
the aggregate on the face thereof for the number of shares of Series C Common
Stock called for on the face of the Warrant so surrendered.
Section 10. Replacement of Warrants. On receipt of evidence reasonably
---------- -----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
Section 11. Notices. Any notice or other communication given pursuant to
---------- -------
this Warrant shall be in writing and shall be personally delivered, sent by
nationally recognized overnight courier or express mail, or mailed by first
class certified or registered mail, postage prepaid, return receipt requested,
to the Company, at its address as it appears in the Stockholders Agreement and
(b) to the Holder, at such Holder's address as it appears in the Stockholders
Agreement (or, if not specified therein, at such Holder's address as it appears
in the records of the Company), unless otherwise indicated by the Company or
such Holder, as the case may be, in each case with any copies required by the
Stockholders Agreement.
Section 12. Fractional Shares. The number of shares of Series C Common
---------- -----------------
Stock to be issued upon exercise of this Warrant shall be rounded to the nearest
whole share, with any fractional shares disregarded.
-4-
<PAGE>
Section 13. Legend. A legend setting forth or referring to the
---------- ------
restrictions described on page 1 of this Warrant shall be placed on any
replacement hereof and any certificate representing securities issued pursuant
to the exercise of this Warrant.
Section 14. No Rights as Shareholder. This Warrant shall not entitle the
---------- ------------------------
holder to any voting rights or any other rights as a shareholder of the Company,
except the rights stated herein.
Section 15. Investment Intent. By accepting this Warrant, the holder
---------- -----------------
represents that it is acquiring this Warrant for investment and not with a view
to or for sale in connection with any distribution thereof. The Holder
represents that it is an accredited investor as defined in Regulation D under
the Securities Act.
Section 16. Miscellaneous. This Warrant and any term hereof may be
---------- -------------
amended, modified or waived only by an instrument in writing signed by the
Company and the Holder. This Warrant shall be governed by and construed in
accordance with the General Corporation Law of the State of Delaware and the
internal laws of the Commonwealth of Massachusetts (without regard for its
conflicts of laws principles).
IN WITNESS WHEREOF, this Warrant has been executed and delivered as a
sealed instrument as of the date first above written.
FOUNTAIN VIEW, INC.
By:/s/ Robert Snukal
-----------------------------
Robert Snukal, President
-5-
<PAGE>
FORM OF EXERCISE NOTICE
(To be signed only on exercise of Warrant)
TO: FOUNTAIN VIEW, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* shares of Series C Common Stock of Fountain
View, Inc., and herewith makes payment of $______ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_______________, whose address is _________________________________.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
* Insert here the number of shares as to which the Warrant is being
exercised.
-6-
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________________ the right represented by the within Warrant to
purchase ______ shares of Series C Common Stock of Fountain View, Inc. to which
the within Warrant relates, and appoints _________________ its attorney to
transfer such right on the books of Fountain View, Inc. with full power of
substitution in the premises.
The undersigned represents and warrants that this transfer is
permitted by the restrictions contained in the Warrant, and acknowledges that
Fountain View, Inc. is entitled to require compliance with those restrictions as
a condition to recognition of this transfer. This Warrant is and remains subject
to the restrictions set forth in the Stockholders Agreement referenced in the
Warrant.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
-7-
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "SECURITIES
LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS (1)
REGISTERED UNDER THE SECURITIES LAWS OR (2) EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF MARCH 27, 1998
AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE SECRETARY.
No. C-2 Warrant to Purchase 34,257 Shares
of Series C Common Stock
FOUNTAIN VIEW, INC.
Warrant
-------
Void after April 16, 2008
Fountain View, Inc., a Delaware corporation (the "Company"), hereby
-------
certifies that, for value received, Baylor Health Care System or its permitted
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
------
purchase from the Company at any time on or after April 16, 1998, but in any
event not later than 5:00 p.m., Eastern time, on April 16, 2008 (the "Expiration
----------
Date"), up to 34,257 fully paid and nonassessable shares of the Company's Series
- ----
C Common Stock at the purchase price (the "Warrant Price") of $.01 per share and
-------------
otherwise in accordance with the terms hereof.
Section 1. Certain Definitions. As used herein, the following terms have
--------- -------------------
the meanings set forth below:
"Stockholders Agreement" means the Stockholders Agreement dated as of March
----------------------
27, 1998 among the Company, Heritage Fund II, L.P., Heritage Investors II,
L.L.C., Heritage Fund II Investment Corporation, Robert Snukal, Sheila Snukal,
William Scott and certain other parties, as amended from time to time.
Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Stockholders Agreement.
<PAGE>
Section 2. Exercise. This Warrant shall be exercisable in full or in part
--------- --------
at any time prior to the Expiration Date. Except as otherwise provided in
Sections 7 and 8, this Warrant shall be exercisable by delivery by the Holder to
the Company of notice of exercise setting forth the number of shares for which
the Warrant is being exercised and payment in cash or by check of the Warrant
Price for each share for which this Warrant is being exercised.
Section 3. Delivery of Stock Certificates, etc. on Exercise. As soon as
--------- ------------------------------------------------
practicable after the exercise of this Warrant, and in any event within three
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, (i) a certificate or certificates for the number of
fully paid and nonassessable shares of Series C Common Stock to which the Holder
shall be entitled on such exercise, and (ii) a new Warrant to purchase all of
the shares, if any, to which the Holder shall be entitled to receive in
connection with the portion of the Warrant not so exercised.
Section 4. Adjustment for Stock Splits, Stock Dividends,
--------- ---------------------------------------------
Recapitalizations, etc. The Warrant Price and the number of shares of Series C
- ----------------------
Common Stock issuable upon exercise of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
of outstanding shares of Series C Common Stock. In case of any adjustment or
readjustment in the Warrant Price or number of shares of Series C Common Stock
issuable on the exercise of this Warrant, the Company will promptly give written
notice thereof to the Holder in the form of a certificate, certified and
confirmed by the president or treasurer of the Company, setting forth such
adjustment and showing in reasonable detail the facts upon which such adjustment
or readjustment is based.
Section 5. Adjustment for Conversions, Reclassifications, Mergers, etc.
--------- -----------------------------------------------------------
In case of any capital reorganization or any reclassification of the capital
stock of the Company or in case of the consolidation or merger of the Company
with or into another corporation or the conveyance of all or substantially all
of the assets of the Company to another corporation, this Warrant shall
thereafter be exercisable for the number of shares of stock or other securities
or property to which a holder of the number of shares of Series C Common Stock
of the Company deliverable upon exercise of the Warrant would have been entitled
to upon such conversion, reorganization, reclassification, consolidation, merger
or conveyance.
Section 6. Reservation of Shares. The Company (a) will at all times
--------- ---------------------
reserve and keep available a number of its authorized shares of Series C Common
Stock free from all preemptive or similar rights therein, which will be
sufficient to permit the
<PAGE>
exercise of this Warrant, and (b) will take such action as may be necessary or
appropriate so that all shares of Series C Common Stock issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, except for certain restrictions on transfer set forth in
the Stockholders Agreement and under applicable securities laws.
Section 7. Net Issue Exercise. In lieu of exercising this Warrant in
--------- ------------------
accordance with Section 2, the Holder may elect to receive shares equal to the
value of this Warrant (to the extent exercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder a number of shares of the
Company's Series C Common Stock equal to the quotient obtained by dividing (a)
the value of the aggregate number of shares of Series C Common Stock for which
this Warrant is then exercised (determined by subtracting the aggregate Warrant
Price for such shares immediately prior to surrender from the aggregate Fair
Market Value (as hereinafter defined) of such shares), by (b) the Fair Market
Value of one share of Series C Common Stock immediately prior to surrender. For
purposes of this Section, the "Fair Market Value" of the Company's Series C
Common Stock shall mean (i) if the Company has consummated a registered public
offering of its common stock, the average of the closing sale prices of each
share of common stock into which the Company's Series C Common Stock was
converted for the ten (10) business days preceding the date upon which Fair
Market Value is to be determined, or (ii) if the Company has not consummated a
registered public offering of its common stock, the fair market value of each
share of Series C Common Stock, as determined in good faith by the Company's
Board of Directors.
In the event of the surrender of this Warrant, as described above,
certificates for the shares of stock issuable thereon shall be delivered to the
Holder as soon as possible and in any event within three days of receipt of
notice of surrender. If the Warrant is not exercised in full pursuant to such
surrender, a replacement warrant for the portion of the Warrant not so exercised
shall be issued in accordance with Section 3.
Section 8. Surrender of Preferred Stock. Upon the exercise of this
--------- ----------------------------
Warrant by any holder of shares of the Company's Series A Preferred Stock (the
"Preferred Stock"), such holder may, at its option, surrender a portion of such
Preferred Stock to the Company, together with written instructions from such
holder to apply all or a specified portion of the Liquidation Value (as defined
in the Company's Certificate of Incorporation) of the Preferred Stock against
the payment of some or all of the Warrant Price required upon such exercise, in
which case the Company will
<PAGE>
accept such specified portion of the Preferred Stock in lieu of a like amount of
cash payment.
In the event of the surrender of Preferred Stock, as described above,
certificates for the number of shares of Series C Common Stock issuable
hereunder shall be delivered to the holder hereof as soon as possible and in any
event within three days of notice of surrender of the Preferred Stock, together
with a certificate therefor, duly endorsed for transfer and together with this
Warrant, and a certificate for the balance of the Preferred Stock surrendered to
the Company with such notice shall also be issued to the holder hereof as soon
as possible and in any event within such two-day period.
Section 9. Exchange of Warrants. On surrender for exchange of this
--------- --------------------
Warrant, properly endorsed, to the Company, and subject to the restrictions on
transfer set forth in the Stockholders Agreement, the Company at its expense
will issue and deliver to or on the order of the holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder may direct, calling in
the aggregate on the face thereof for the number of shares of Series C Common
Stock called for on the face of the Warrant so surrendered.
Section 10. Replacement of Warrants. On receipt of evidence reasonably
---------- -----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
Section 11. Notices. Any notice or other communication given pursuant to
---------- -------
this Warrant shall be in writing and shall be personally delivered, sent by
nationally recognized overnight courier or express mail, or mailed by first
class certified or registered mail, postage prepaid, return receipt requested,
to the Company, at its address as it appears in the Stockholders Agreement and
(b) to the Holder, at such Holder's address as it appears in the Stockholders
Agreement (or, if not specified therein, at such Holder's address as it appears
in the records of the Company), unless otherwise indicated by the Company or
such Holder, as the case may be, in each case with any copies required by the
Stockholders Agreement.
Section 12. Fractional Shares. The number of shares of Series C Common
---------- -----------------
Stock to be issued upon exercise of this Warrant shall be rounded to the nearest
whole share, with any fractional shares disregarded.
<PAGE>
Section 13. Legend. A legend setting forth or referring to the
---------- ------
restrictions described on page 1 of this Warrant shall be placed on any
replacement hereof and any certificate representing securities issued pursuant
to the exercise of this Warrant.
Section 14. No Rights as Shareholder. This Warrant shall not entitle the
---------- ------------------------
holder to any voting rights or any other rights as a shareholder of the Company,
except the rights stated herein.
Section 15. Investment Intent. By accepting this Warrant, the holder
---------- -----------------
represents that it is acquiring this Warrant for investment and not with a view
to or for sale in connection with any distribution thereof. The Holder
represents that it is an accredited investor as defined in Regulation D under
the Securities Act.
Section 16. Miscellaneous. This Warrant and any term hereof may be
---------- -------------
amended, modified or waived only by an instrument in writing signed by the
Company and the Holder. This Warrant shall be governed by and construed in
accordance with the General Corporation Law of the State of Delaware and the
internal laws of the Commonwealth of Massachusetts (without regard for its
conflicts of laws principles).
IN WITNESS WHEREOF, this Warrant has been executed and delivered as a
sealed instrument as of the date first above written.
FOUNTAIN VIEW, INC.
/s/ Robert Snukal
By:____________________________
Robert Snukal, President
<PAGE>
FORM OF EXERCISE NOTICE
(To be signed only on exercise of Warrant)
TO: FOUNTAIN VIEW, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* shares of Series C Common Stock of Fountain
View, Inc., and herewith makes payment of $______ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_______________, whose address is _________________________________.
Dated: __________, ____
______________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
* Insert here the number of shares as to which the Warrant is being
exercised.
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto __________________ the right represented by the within Warrant to purchase
______ shares of Series C Common Stock of Fountain View, Inc. to which the
within Warrant relates, and appoints _________________ its attorney to transfer
such right on the books of Fountain View, Inc. with full power of substitution
in the premises.
The undersigned represents and warrants that this transfer is permitted by
the restrictions contained in the Warrant, and acknowledges that Fountain View,
Inc. is entitled to require compliance with those restrictions as a condition to
recognition of this transfer. This Warrant is and remains subject to the
restrictions set forth in the Stockholders Agreement referenced in the Warrant.
Dated: __________, ____
______________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "SECURITIES
LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS (1)
REGISTERED UNDER THE SECURITIES LAWS OR (2) EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF MARCH 27, 1998
AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE SECRETARY.
No. C-3 Warrant to Purchase 10,371 Shares of Series C Common
Stock
FOUNTAIN VIEW, INC.
Warrant
-------
Void after April 16, 2008
Fountain View, Inc., a Delaware corporation (the "Company"), hereby
-------
certifies that, for value received,Baylor Health Care System or its permitted
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
------
purchase from the Company at any time on or after April 16, 1998, but in any
event not later than 5:00 p.m., Eastern time, on April 16, 2008 (the "Expiration
----------
Date"), up to 10,371 fully paid and nonassessable shares of the Company's Series
- ----
C Common Stock at the purchase price (the "Warrant Price") of $.01 per share and
-------------
otherwise in accordance with the terms hereof.
Section 1. Certain Definitions. As used herein, the following terms have
--------- -------------------
the meanings set forth below:
"Stockholders Agreement" means the Stockholders Agreement dated as of March
----------------------
27, 1998 among the Company, Heritage Fund II, L.P., Heritage Investors II,
L.L.C., Heritage Fund II Investment Corporation, Robert Snukal, Sheila Snukal,
William Scott and certain other parties, as amended from time to time.
Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Stockholders Agreement.
<PAGE>
Section 2. Exercise. This Warrant shall be exercisable in full or in part
--------- --------
at any time prior to the Expiration Date. Except as otherwise provided in
Sections 7 and 8, this Warrant shall be exercisable by delivery by the Holder to
the Company of notice of exercise setting forth the number of shares for which
the Warrant is being exercised and payment in cash or by check of the Warrant
Price for each share for which this Warrant is being exercised.
Section 3. Delivery of Stock Certificates, etc. on Exercise. As soon as
--------- ------------------------------------------------
practicable after the exercise of this Warrant, and in any event within three
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, (i) a certificate or certificates for the number of
fully paid and nonassessable shares of Series C Common Stock to which the Holder
shall be entitled on such exercise, and (ii) a new Warrant to purchase all of
the shares, if any, to which the Holder shall be entitled to receive in
connection with the portion of the Warrant not so exercised.
Section 4. Adjustment for Stock Splits, Stock Dividends,
--------- ---------------------------------------------
Recapitalizations, etc. The Warrant Price and the number of shares of Series C
- ----------------------
Common Stock issuable upon exercise of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
of outstanding shares of Series C Common Stock. In case of any adjustment or
readjustment in the Warrant Price or number of shares of Series C Common Stock
issuable on the exercise of this Warrant, the Company will promptly give written
notice thereof to the Holder in the form of a certificate, certified and
confirmed by the president or treasurer of the Company, setting forth such
adjustment and showing in reasonable detail the facts upon which such adjustment
or readjustment is based.
Section 5. Adjustment for Conversions, Reclassifications, Mergers, etc.
--------- -----------------------------------------------------------
In case of any capital reorganization or any reclassification of the capital
stock of the Company or in case of the consolidation or merger of the Company
with or into another corporation or the conveyance of all or substantially all
of the assets of the Company to another corporation, this Warrant shall
thereafter be exercisable for the number of shares of stock or other securities
or property to which a holder of the number of shares of Series C Common Stock
of the Company deliverable upon exercise of the Warrant would have been entitled
to upon such conversion, reorganization, reclassification, consolidation, merger
or conveyance.
Section 6. Reservation of Shares. The Company (a) will at all times
--------- ---------------------
reserve and keep available a number of its authorized shares of Series C Common
Stock free from all preemptive or similar rights therein, which will be
sufficient to permit the
<PAGE>
exercise of this Warrant, and (b) will take such action as may be necessary or
appropriate so that all shares of Series C Common Stock issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, except for certain restrictions on transfer set forth in
the Stockholders Agreement and under applicable securities laws.
Section 7. Net Issue Exercise. In lieu of exercising this Warrant in
--------- ------------------
accordance with Section 2, the Holder may elect to receive shares equal to the
value of this Warrant (to the extent exercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder a number of shares of the
Company's Series C Common Stock equal to the quotient obtained by dividing (a)
the value of the aggregate number of shares of Series C Common Stock for which
this Warrant is then exercised (determined by subtracting the aggregate Warrant
Price for such shares immediately prior to surrender from the aggregate Fair
Market Value (as hereinafter defined) of such shares), by (b) the Fair Market
Value of one share of Series C Common Stock immediately prior to surrender. For
purposes of this Section, the "Fair Market Value" of the Company's Series C
Common Stock shall mean (i) if the Company has consummated a registered public
offering of its common stock, the average of the closing sale prices of each
share of common stock into which the Company's Series C Common Stock was
converted for the ten (10) business days preceding the date upon which Fair
Market Value is to be determined, or (ii) if the Company has not consummated a
registered public offering of its common stock, the fair market value of each
share of Series C Common Stock, as determined in good faith by the Company's
Board of Directors.
In the event of the surrender of this Warrant, as described above,
certificates for the shares of stock issuable thereon shall be delivered to the
Holder as soon as possible and in any event within three days of receipt of
notice of surrender. If the Warrant is not exercised in full pursuant to such
surrender, a replacement warrant for the portion of the Warrant not so exercised
shall be issued in accordance with Section 3.
Section 8. Surrender of Preferred Stock. Upon the exercise of this
--------- ----------------------------
Warrant by any holder of shares of the Company's Series A Preferred Stock (the
"Preferred Stock"), such holder may, at its option, surrender a portion of such
Preferred Stock to the Company, together with written instructions from such
holder to apply all or a specified portion of the Liquidation Value (as defined
in the Company's Certificate of Incorporation) of the Preferred Stock against
the payment of some or all of the Warrant Price required upon such exercise, in
which case the Company will
<PAGE>
accept such specified portion of the Preferred Stock in lieu of a like amount of
cash payment.
In the event of the surrender of Preferred Stock, as described above,
certificates for the number of shares of Series C Common Stock issuable
hereunder shall be delivered to the holder hereof as soon as possible and in any
event within three days of notice of surrender of the Preferred Stock, together
with a certificate therefor, duly endorsed for transfer and together with this
Warrant, and a certificate for the balance of the Preferred Stock surrendered to
the Company with such notice shall also be issued to the holder hereof as soon
as possible and in any event within such two-day period.
Section 9. Exchange of Warrants. On surrender for exchange of this
--------- --------------------
Warrant, properly endorsed, to the Company, and subject to the restrictions on
transfer set forth in the Stockholders Agreement, the Company at its expense
will issue and deliver to or on the order of the holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder may direct, calling in
the aggregate on the face thereof for the number of shares of Series C Common
Stock called for on the face of the Warrant so surrendered.
Section 10. Replacement of Warrants. On receipt of evidence reasonably
---------- -----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
Section 11. Notices. Any notice or other communication given pursuant to
---------- -------
this Warrant shall be in writing and shall be personally delivered, sent by
nationally recognized overnight courier or express mail, or mailed by first
class certified or registered mail, postage prepaid, return receipt requested,
to the Company, at its address as it appears in the Stockholders Agreement and
(b) to the Holder, at such Holder's address as it appears in the Stockholders
Agreement (or, if not specified therein, at such Holder's address as it appears
in the records of the Company), unless otherwise indicated by the Company or
such Holder, as the case may be, in each case with any copies required by the
Stockholders Agreement.
Section 12. Fractional Shares. The number of shares of Series C Common
---------- -----------------
Stock to be issued upon exercise of this Warrant shall be rounded to the nearest
whole share, with any fractional shares disregarded.
<PAGE>
Section 13. Legend. A legend setting forth or referring to the
---------- ------
restrictions described on page 1 of this Warrant shall be placed on any
replacement hereof and any certificate representing securities issued pursuant
to the exercise of this Warrant.
Section 14. No Rights as Shareholder. This Warrant shall not entitle the
---------- ------------------------
holder to any voting rights or any other rights as a shareholder of the Company,
except the rights stated herein.
Section 15. Investment Intent. By accepting this Warrant, the holder
---------- -----------------
represents that it is acquiring this Warrant for investment and not with a view
to or for sale in connection with any distribution thereof. The Holder
represents that it is an accredited investor as defined in Regulation D under
the Securities Act.
Section 16. Miscellaneous. This Warrant and any term hereof may be
---------- -------------
amended, modified or waived only by an instrument in writing signed by the
Company and the Holder. This Warrant shall be governed by and construed in
accordance with the General Corporation Law of the State of Delaware and the
internal laws of the Commonwealth of Massachusetts (without regard for its
conflicts of laws principles).
IN WITNESS WHEREOF, this Warrant has been executed and delivered as a
sealed instrument as of the date first above written.
FOUNTAIN VIEW, INC.
By:/s/ Robert Snukal
-----------------
Robert Snukal, President
<PAGE>
FORM OF EXERCISE NOTICE
(To be signed only on exercise of Warrant)
TO: FOUNTAIN VIEW, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* shares of Series C Common Stock of Fountain
View, Inc., and herewith makes payment of $______ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_______________, whose address is _________________________________.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
* Insert here the number of shares as to which the Warrant is being
exercised.
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto __________________ the right represented by the within Warrant to purchase
______ shares of Series C Common Stock of Fountain View, Inc. to which the
within Warrant relates, and appoints _________________ its attorney to transfer
such right on the books of Fountain View, Inc. with full power of substitution
in the premises.
The undersigned represents and warrants that this transfer is permitted by
the restrictions contained in the Warrant, and acknowledges that Fountain View,
Inc. is entitled to require compliance with those restrictions as a condition to
recognition of this transfer. This Warrant is and remains subject to the
restrictions set forth in the Stockholders Agreement referenced in the Warrant.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "SECURITIES
LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS (1)
REGISTERED UNDER THE SECURITIES LAWS OR (2) EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF MARCH 27, 1998
AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE SECRETARY.
No. C-4 Warrant to Purchase 10,371 Shares of Series C Common
Stock
FOUNTAIN VIEW, INC.
Warrant
-------
Void after April 16, 2008
Fountain View, Inc., a Delaware corporation (the "Company"), hereby
-------
certifies that, for value received, Baylor Health Care System or its permitted
assigns (the "Holder"), is entitled, subject to the terms set forth below, to
------
purchase from the Company at any time on or after April 16, 1998, but in any
event not later than 5:00 p.m., Eastern time, on April 16, 2008 (the "Expiration
----------
Date"), up to 10,371 fully paid and nonassessable shares of the Company's Series
- ----
C Common Stock at the purchase price (the "Warrant Price") of $.01 per share and
-------------
otherwise in accordance with the terms hereof.
Section 1. Certain Definitions. As used herein, the following terms have
--------- -------------------
the meanings set forth below:
"Stockholders Agreement" means the Stockholders Agreement dated as of March
----------------------
27, 1998 among the Company, Heritage Fund II, L.P., Heritage Investors II,
L.L.C., Heritage Fund II Investment Corporation, Robert Snukal, Sheila Snukal,
William Scott and certain other parties, as amended from time to time.
Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Stockholders Agreement.
<PAGE>
Section 2. Exercise. This Warrant shall be exercisable in full or in part
--------- --------
at any time prior to the Expiration Date. Except as otherwise provided in
Sections 7 and 8, this Warrant shall be exercisable by delivery by the Holder to
the Company of notice of exercise setting forth the number of shares for which
the Warrant is being exercised and payment in cash or by check of the Warrant
Price for each share for which this Warrant is being exercised.
Section 3. Delivery of Stock Certificates, etc. on Exercise. As soon as
--------- ------------------------------------------------
practicable after the exercise of this Warrant, and in any event within three
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, (i) a certificate or certificates for the number of
fully paid and nonassessable shares of Series C Common Stock to which the Holder
shall be entitled on such exercise, and (ii) a new Warrant to purchase all of
the shares, if any, to which the Holder shall be entitled to receive in
connection with the portion of the Warrant not so exercised.
Section 4. Adjustment for Stock Splits, Stock Dividends,
--------- ---------------------------------------------
Recapitalizations, etc. The Warrant Price and the number of shares of Series C
- ----------------------
Common Stock issuable upon exercise of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
of outstanding shares of Series C Common Stock. In case of any adjustment or
readjustment in the Warrant Price or number of shares of Series C Common Stock
issuable on the exercise of this Warrant, the Company will promptly give written
notice thereof to the Holder in the form of a certificate, certified and
confirmed by the president or treasurer of the Company, setting forth such
adjustment and showing in reasonable detail the facts upon which such adjustment
or readjustment is based.
Section 5. Adjustment for Conversions, Reclassifications, Mergers, etc.
--------- -----------------------------------------------------------
In case of any capital reorganization or any reclassification of the capital
stock of the Company or in case of the consolidation or merger of the Company
with or into another corporation or the conveyance of all or substantially all
of the assets of the Company to another corporation, this Warrant shall
thereafter be exercisable for the number of shares of stock or other securities
or property to which a holder of the number of shares of Series C Common Stock
of the Company deliverable upon exercise of the Warrant would have been entitled
to upon such conversion, reorganization, reclassification, consolidation, merger
or conveyance.
Section 6. Reservation of Shares. The Company (a) will at all times
--------- ---------------------
reserve and keep available a number of its authorized shares of Series C Common
Stock free from all preemptive or similar rights therein, which will be
sufficient to permit the
<PAGE>
exercise of this Warrant, and (b) will take such action as may be necessary or
appropriate so that all shares of Series C Common Stock issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, except for certain restrictions on transfer set forth in
the Stockholders Agreement and under applicable securities laws.
Section 7. Net Issue Exercise. In lieu of exercising this Warrant in
--------- ------------------
accordance with Section 2, the Holder may elect to receive shares equal to the
value of this Warrant (to the extent exercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder a number of shares of the
Company's Series C Common Stock equal to the quotient obtained by dividing (a)
the value of the aggregate number of shares of Series C Common Stock for which
this Warrant is then exercised (determined by subtracting the aggregate Warrant
Price for such shares immediately prior to surrender from the aggregate Fair
Market Value (as hereinafter defined) of such shares), by (b) the Fair Market
Value of one share of Series C Common Stock immediately prior to surrender. For
purposes of this Section, the "Fair Market Value" of the Company's Series C
Common Stock shall mean (i) if the Company has consummated a registered public
offering of its common stock, the average of the closing sale prices of each
share of common stock into which the Company's Series C Common Stock was
converted for the ten (10) business days preceding the date upon which Fair
Market Value is to be determined, or (ii) if the Company has not consummated a
registered public offering of its common stock, the fair market value of each
share of Series C Common Stock, as determined in good faith by the Company's
Board of Directors.
In the event of the surrender of this Warrant, as described above,
certificates for the shares of stock issuable thereon shall be delivered to the
Holder as soon as possible and in any event within three days of receipt of
notice of surrender. If the Warrant is not exercised in full pursuant to such
surrender, a replacement warrant for the portion of the Warrant not so exercised
shall be issued in accordance with Section 3.
Section 8. Surrender of Preferred Stock. Upon the exercise of this
--------- ----------------------------
Warrant by any holder of shares of the Company's Series A Preferred Stock (the
"Preferred Stock"), such holder may, at its option, surrender a portion of such
Preferred Stock to the Company, together with written instructions from such
holder to apply all or a specified portion of the Liquidation Value (as defined
in the Company's Certificate of Incorporation) of the Preferred Stock against
the payment of some or all of the Warrant Price required upon such exercise, in
which case the Company will
<PAGE>
accept such specified portion of the Preferred Stock in lieu of a like amount of
cash payment.
In the event of the surrender of Preferred Stock, as described above,
certificates for the number of shares of Series C Common Stock issuable
hereunder shall be delivered to the holder hereof as soon as possible and in any
event within three days of notice of surrender of the Preferred Stock, together
with a certificate therefor, duly endorsed for transfer and together with this
Warrant, and a certificate for the balance of the Preferred Stock surrendered to
the Company with such notice shall also be issued to the holder hereof as soon
as possible and in any event within such two-day period.
Section 9. Exchange of Warrants. On surrender for exchange of this
--------- --------------------
Warrant, properly endorsed, to the Company, and subject to the restrictions on
transfer set forth in the Stockholders Agreement, the Company at its expense
will issue and deliver to or on the order of the holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder may direct, calling in
the aggregate on the face thereof for the number of shares of Series C Common
Stock called for on the face of the Warrant so surrendered.
Section 10. Replacement of Warrants. On receipt of evidence reasonably
---------- -----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
Section 11. Notices. Any notice or other communication given pursuant to
---------- -------
this Warrant shall be in writing and shall be personally delivered, sent by
nationally recognized overnight courier or express mail, or mailed by first
class certified or registered mail, postage prepaid, return receipt requested,
to the Company, at its address as it appears in the Stockholders Agreement and
(b) to the Holder, at such Holder's address as it appears in the Stockholders
Agreement (or, if not specified therein, at such Holder's address as it appears
in the records of the Company), unless otherwise indicated by the Company or
such Holder, as the case may be, in each case with any copies required by the
Stockholders Agreement.
Section 12. Fractional Shares. The number of shares of Series C Common
---------- -----------------
Stock to be issued upon exercise of this Warrant shall be rounded to the nearest
whole share, with any fractional shares disregarded.
<PAGE>
Section 13. Legend. A legend setting forth or referring to the
---------- ------
restrictions described on page 1 of this Warrant shall be placed on any
replacement hereof and any certificate representing securities issued pursuant
to the exercise of this Warrant.
Section 14. No Rights as Shareholder. This Warrant shall not entitle the
---------- ------------------------
holder to any voting rights or any other rights as a shareholder of the Company,
except the rights stated herein.
Section 15. Investment Intent. By accepting this Warrant, the holder
---------- -----------------
represents that it is acquiring this Warrant for investment and not with a view
to or for sale in connection with any distribution thereof. The Holder
represents that it is an accredited investor as defined in Regulation D under
the Securities Act.
Section 16. Miscellaneous. This Warrant and any term hereof may be
---------- -------------
amended, modified or waived only by an instrument in writing signed by the
Company and the Holder. This Warrant shall be governed by and construed in
accordance with the General Corporation Law of the State of Delaware and the
internal laws of the Commonwealth of Massachusetts (without regard for its
conflicts of laws principles).
IN WITNESS WHEREOF, this Warrant has been executed and delivered as a
sealed instrument as of the date first above written.
FOUNTAIN VIEW, INC.
By:/s/ Robert Snukal
-----------------
Robert Snukal, President
<PAGE>
FORM OF EXERCISE NOTICE
(To be signed only on exercise of Warrant)
TO: FOUNTAIN VIEW, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* shares of Series C Common Stock of Fountain
View, Inc., and herewith makes payment of $______ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_______________, whose address is _________________________________.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
* Insert here the number of shares as to which the Warrant is being
exercised.
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto __________________ the right represented by the within Warrant to purchase
______ shares of Series C Common Stock of Fountain View, Inc. to which the
within Warrant relates, and appoints _________________ its attorney to transfer
such right on the books of Fountain View, Inc. with full power of substitution
in the premises.
The undersigned represents and warrants that this transfer is permitted by
the restrictions contained in the Warrant, and acknowledges that Fountain View,
Inc. is entitled to require compliance with those restrictions as a condition to
recognition of this transfer. This Warrant is and remains subject to the
restrictions set forth in the Stockholders Agreement referenced in the Warrant.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "SECURITIES
LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS (1)
REGISTERED UNDER THE SECURITIES LAWS OR (2) EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF MARCH 27, 1998
AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE SECRETARY.
No. C-5 Warrant to Purchase 4,267 Shares of Series C Common
Stock
FOUNTAIN VIEW, INC.
Warrant
-------
Void after April 16, 2008
Fountain View, Inc., a Delaware corporation (the "Company"), hereby
-------
certifies that, for value received, Buckner Foundation or its permitted assigns
(the "Holder"), is entitled, subject to the terms set forth below, to purchase
------
from the Company at any time on or after April 16, 1998, but in any event not
later than 5:00 p.m., Eastern time, on April 16, 2008 (the "Expiration Date"),
---------------
up to 4,267 fully paid and nonassessable shares of the Company's Series C Common
Stock at the purchase price (the "Warrant Price") of $.01 per share and
-------------
otherwise in accordance with the terms hereof.
Section 1. Certain Definitions. As used herein, the following terms have
--------- -------------------
the meanings set forth below:
"Stockholders Agreement" means the Stockholders Agreement dated as of March
----------------------
27, 1998 among the Company, Heritage Fund II, L.P., Heritage Investors II,
L.L.C., Heritage Fund II Investment Corporation, Robert Snukal, Sheila Snukal,
William Scott and certain other parties, as amended from time to time.
Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Stockholders Agreement.
<PAGE>
Section 2. Exercise. This Warrant shall be exercisable in full or in part
--------- --------
at any time prior to the Expiration Date. Except as otherwise provided in
Sections 7 and 8, this Warrant shall be exercisable by delivery by the Holder to
the Company of notice of exercise setting forth the number of shares for which
the Warrant is being exercised and payment in cash or by check of the Warrant
Price for each share for which this Warrant is being exercised.
Section 3. Delivery of Stock Certificates, etc. on Exercise. As soon as
--------- ------------------------------------------------
practicable after the exercise of this Warrant, and in any event within three
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, (i) a certificate or certificates for the number of
fully paid and nonassessable shares of Series C Common Stock to which the Holder
shall be entitled on such exercise, and (ii) a new Warrant to purchase all of
the shares, if any, to which the Holder shall be entitled to receive in
connection with the portion of the Warrant not so exercised.
Section 4. Adjustment for Stock Splits, Stock Dividends,
--------- ---------------------------------------------
Recapitalizations, etc. The Warrant Price and the number of shares of Series C
- ----------------------
Common Stock issuable upon exercise of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
of outstanding shares of Series C Common Stock. In case of any adjustment or
readjustment in the Warrant Price or number of shares of Series C Common Stock
issuable on the exercise of this Warrant, the Company will promptly give written
notice thereof to the Holder in the form of a certificate, certified and
confirmed by the president or treasurer of the Company, setting forth such
adjustment and showing in reasonable detail the facts upon which such adjustment
or readjustment is based.
Section 5. Adjustment for Conversions, Reclassifications, Mergers, etc.
--------- -----------------------------------------------------------
In case of any capital reorganization or any reclassification of the capital
stock of the Company or in case of the consolidation or merger of the Company
with or into another corporation or the conveyance of all or substantially all
of the assets of the Company to another corporation, this Warrant shall
thereafter be exercisable for the number of shares of stock or other securities
or property to which a holder of the number of shares of Series C Common Stock
of the Company deliverable upon exercise of the Warrant would have been entitled
to upon such conversion, reorganization, reclassification, consolidation, merger
or conveyance.
Section 6. Reservation of Shares. The Company (a) will at all times
--------- ---------------------
reserve and keep available a number of its authorized shares of Series C Common
Stock free from all preemptive or similar rights therein, which will be
sufficient to permit the
<PAGE>
exercise of this Warrant, and (b) will take such action as may be necessary or
appropriate so that all shares of Series C Common Stock issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, except for certain restrictions on transfer set forth in
the Stockholders Agreement and under applicable securities laws.
Section 7. Net Issue Exercise. In lieu of exercising this Warrant in
--------- ------------------
accordance with Section 2, the Holder may elect to receive shares equal to the
value of this Warrant (to the extent exercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder a number of shares of the
Company's Series C Common Stock equal to the quotient obtained by dividing (a)
the value of the aggregate number of shares of Series C Common Stock for which
this Warrant is then exercised (determined by subtracting the aggregate Warrant
Price for such shares immediately prior to surrender from the aggregate Fair
Market Value (as hereinafter defined) of such shares), by (b) the Fair Market
Value of one share of Series C Common Stock immediately prior to surrender. For
purposes of this Section, the "Fair Market Value" of the Company's Series C
Common Stock shall mean (i) if the Company has consummated a registered public
offering of its common stock, the average of the closing sale prices of each
share of common stock into which the Company's Series C Common Stock was
converted for the ten (10) business days preceding the date upon which Fair
Market Value is to be determined, or (ii) if the Company has not consummated a
registered public offering of its common stock, the fair market value of each
share of Series C Common Stock, as determined in good faith by the Company's
Board of Directors.
In the event of the surrender of this Warrant, as described above,
certificates for the shares of stock issuable thereon shall be delivered to the
Holder as soon as possible and in any event within three days of receipt of
notice of surrender. If the Warrant is not exercised in full pursuant to such
surrender, a replacement warrant for the portion of the Warrant not so exercised
shall be issued in accordance with Section 3.
Section 8. Surrender of Preferred Stock. Upon the exercise of this
--------- ----------------------------
Warrant by any holder of shares of the Company's Series A Preferred Stock (the
"Preferred Stock"), such holder may, at its option, surrender a portion of such
Preferred Stock to the Company, together with written instructions from such
holder to apply all or a specified portion of the Liquidation Value (as defined
in the Company's Certificate of Incorporation) of the Preferred Stock against
the payment of some or all of the Warrant Price required upon such exercise, in
which case the Company will
<PAGE>
accept such specified portion of the Preferred Stock in lieu of a like amount of
cash payment.
In the event of the surrender of Preferred Stock, as described above,
certificates for the number of shares of Series C Common Stock issuable
hereunder shall be delivered to the holder hereof as soon as possible and in any
event within three days of notice of surrender of the Preferred Stock, together
with a certificate therefor, duly endorsed for transfer and together with this
Warrant, and a certificate for the balance of the Preferred Stock surrendered to
the Company with such notice shall also be issued to the holder hereof as soon
as possible and in any event within such two-day period.
Section 9. Exchange of Warrants. On surrender for exchange of this
--------- --------------------
Warrant, properly endorsed, to the Company, and subject to the restrictions on
transfer set forth in the Stockholders Agreement, the Company at its expense
will issue and deliver to or on the order of the holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder may direct, calling in
the aggregate on the face thereof for the number of shares of Series C Common
Stock called for on the face of the Warrant so surrendered.
Section 10. Replacement of Warrants. On receipt of evidence reasonably
---------- -----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
Section 11. Notices. Any notice or other communication given pursuant to
---------- -------
this Warrant shall be in writing and shall be personally delivered, sent by
nationally recognized overnight courier or express mail, or mailed by first
class certified or registered mail, postage prepaid, return receipt requested,
to the Company, at its address as it appears in the Stockholders Agreement and
(b) to the Holder, at such Holder's address as it appears in the Stockholders
Agreement (or, if not specified therein, at such Holder's address as it appears
in the records of the Company), unless otherwise indicated by the Company or
such Holder, as the case may be, in each case with any copies required by the
Stockholders Agreement.
Section 12. Fractional Shares. The number of shares of Series C Common
---------- -----------------
Stock to be issued upon exercise of this Warrant shall be rounded to the nearest
whole share, with any fractional shares disregarded.
<PAGE>
Section 13. Legend. A legend setting forth or referring to the
---------- ------
restrictions described on page 1 of this Warrant shall be placed on any
replacement hereof and any certificate representing securities issued pursuant
to the exercise of this Warrant.
Section 14. No Rights as Shareholder. This Warrant shall not entitle the
---------- ------------------------
holder to any voting rights or any other rights as a shareholder of the Company,
except the rights stated herein.
Section 15. Investment Intent. By accepting this Warrant, the holder
---------- -----------------
represents that it is acquiring this Warrant for investment and not with a view
to or for sale in connection with any distribution thereof. The Holder
represents that it is an accredited investor as defined in Regulation D under
the Securities Act.
Section 16. Miscellaneous. This Warrant and any term hereof may be
---------- -------------
amended, modified or waived only by an instrument in writing signed by the
Company and the Holder. This Warrant shall be governed by and construed in
accordance with the General Corporation Law of the State of Delaware and the
internal laws of the Commonwealth of Massachusetts (without regard for its
conflicts of laws principles).
IN WITNESS WHEREOF, this Warrant has been executed and delivered as a
sealed instrument as of the date first above written.
FOUNTAIN VIEW, INC.
By:/s/ Robert Snukal
-----------------
Robert Snukal, President
<PAGE>
FORM OF EXERCISE NOTICE
(To be signed only on exercise of Warrant)
TO: FOUNTAIN VIEW, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* shares of Series C Common Stock of Fountain
View, Inc., and herewith makes payment of $______ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_______________, whose address is _________________________________.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
* Insert here the number of shares as to which the Warrant is being
exercised.
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto __________________ the right represented by the within Warrant to purchase
______ shares of Series C Common Stock of Fountain View, Inc. to which the
within Warrant relates, and appoints _________________ its attorney to transfer
such right on the books of Fountain View, Inc. with full power of substitution
in the premises.
The undersigned represents and warrants that this transfer is permitted by
the restrictions contained in the Warrant, and acknowledges that Fountain View,
Inc. is entitled to require compliance with those restrictions as a condition to
recognition of this transfer. This Warrant is and remains subject to the
restrictions set forth in the Stockholders Agreement referenced in the Warrant.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE "SECURITIES
LAWS"), AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS (1)
REGISTERED UNDER THE SECURITIES LAWS OR (2) EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER
OBLIGATIONS CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AS OF MARCH 27, 1998
AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED WITHOUT COST TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE SECRETARY.
No. C-6 Warrant to Purchase 11,853 Shares of Series C Common
Stock
FOUNTAIN VIEW, INC.
Warrant
-------
Void after April 16, 2008
Fountain View, Inc., a Delaware corporation (the "Company"), hereby
-------
certifies that, for value received, Heritage Fund II Investment Corporation or
its permitted assigns (the "Holder"), is entitled, subject to the terms set
------
forth below, to purchase from the Company at any time on or after April 16,
1998, but in any event not later than 5:00 p.m., Eastern time, on April 16, 2008
(the "Expiration Date"), up to 11,853 fully paid and nonassessable shares of the
---------------
Company's Series C Common Stock at the purchase price (the "Warrant Price") of
-------------
$.01 per share and otherwise in accordance with the terms hereof.
Section 1. Certain Definitions. As used herein, the following terms have
--------- -------------------
the meanings set forth below:
"Stockholders Agreement" means the Stockholders Agreement dated as of March
----------------------
27, 1998 among the Company, Heritage Fund II, L.P., Heritage Investors II,
L.L.C., Heritage Fund II Investment Corporation, Robert Snukal, Sheila Snukal,
William Scott and certain other parties, as amended from time to time.
Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Stockholders Agreement.
<PAGE>
Section 2. Exercise. This Warrant shall be exercisable in full or in part
--------- --------
at any time prior to the Expiration Date. Except as otherwise provided in
Sections 7 and 8, this Warrant shall be exercisable by delivery by the Holder to
the Company of notice of exercise setting forth the number of shares for which
the Warrant is being exercised and payment in cash or by check of the Warrant
Price for each share for which this Warrant is being exercised.
Section 3. Delivery of Stock Certificates, etc. on Exercise. As soon as
--------- ------------------------------------------------
practicable after the exercise of this Warrant, and in any event within three
business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder, (i) a certificate or certificates for the number of
fully paid and nonassessable shares of Series C Common Stock to which the Holder
shall be entitled on such exercise, and (ii) a new Warrant to purchase all of
the shares, if any, to which the Holder shall be entitled to receive in
connection with the portion of the Warrant not so exercised.
Section 4. Adjustment for Stock Splits, Stock Dividends,
--------- ---------------------------------------------
Recapitalizations, etc. The Warrant Price and the number of shares of Series C
- ----------------------
Common Stock issuable upon exercise of this Warrant shall be appropriately
adjusted to reflect any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the number
of outstanding shares of Series C Common Stock. In case of any adjustment or
readjustment in the Warrant Price or number of shares of Series C Common Stock
issuable on the exercise of this Warrant, the Company will promptly give written
notice thereof to the Holder in the form of a certificate, certified and
confirmed by the president or treasurer of the Company, setting forth such
adjustment and showing in reasonable detail the facts upon which such adjustment
or readjustment is based.
Section 5. Adjustment for Conversions, Reclassifications, Mergers, etc.
--------- -----------------------------------------------------------
In case of any capital reorganization or any reclassification of the capital
stock of the Company or in case of the consolidation or merger of the Company
with or into another corporation or the conveyance of all or substantially all
of the assets of the Company to another corporation, this Warrant shall
thereafter be exercisable for the number of shares of stock or other securities
or property to which a holder of the number of shares of Series C Common Stock
of the Company deliverable upon exercise of the Warrant would have been entitled
to upon such conversion, reorganization, reclassification, consolidation, merger
or conveyance.
Section 6. Reservation of Shares. The Company (a) will at all times
--------- ---------------------
reserve and keep available a number of its authorized shares of Series C Common
Stock free from all preemptive or similar rights therein, which will be
sufficient to permit the
<PAGE>
exercise of this Warrant, and (b) will take such action as may be necessary or
appropriate so that all shares of Series C Common Stock issued pursuant to the
exercise of this Warrant will, upon issuance, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, except for certain restrictions on transfer set forth in
the Stockholders Agreement and under applicable securities laws.
Section 7. Net Issue Exercise. In lieu of exercising this Warrant in
--------- ------------------
accordance with Section 2, the Holder may elect to receive shares equal to the
value of this Warrant (to the extent exercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to the Holder a number of shares of the
Company's Series C Common Stock equal to the quotient obtained by dividing (a)
the value of the aggregate number of shares of Series C Common Stock for which
this Warrant is then exercised (determined by subtracting the aggregate Warrant
Price for such shares immediately prior to surrender from the aggregate Fair
Market Value (as hereinafter defined) of such shares), by (b) the Fair Market
Value of one share of Series C Common Stock immediately prior to surrender. For
purposes of this Section, the "Fair Market Value" of the Company's Series C
Common Stock shall mean (i) if the Company has consummated a registered public
offering of its common stock, the average of the closing sale prices of each
share of common stock into which the Company's Series C Common Stock was
converted for the ten (10) business days preceding the date upon which Fair
Market Value is to be determined, or (ii) if the Company has not consummated a
registered public offering of its common stock, the fair market value of each
share of Series C Common Stock, as determined in good faith by the Company's
Board of Directors.
In the event of the surrender of this Warrant, as described above,
certificates for the shares of stock issuable thereon shall be delivered to the
Holder as soon as possible and in any event within three days of receipt of
notice of surrender. If the Warrant is not exercised in full pursuant to such
surrender, a replacement warrant for the portion of the Warrant not so exercised
shall be issued in accordance with Section 3.
Section 8. Surrender of Preferred Stock. Upon the exercise of this
--------- ----------------------------
Warrant by any holder of shares of the Company's Series A Preferred Stock (the
"Preferred Stock"), such holder may, at its option, surrender a portion of such
Preferred Stock to the Company, together with written instructions from such
holder to apply all or a specified portion of the Liquidation Value (as defined
in the Company's Certificate of Incorporation) of the Preferred Stock against
the payment of some or all of the Warrant Price required upon such exercise, in
which case the Company will
<PAGE>
accept such specified portion of the Preferred Stock in lieu of a like amount of
cash payment.
In the event of the surrender of Preferred Stock, as described above,
certificates for the number of shares of Series C Common Stock issuable
hereunder shall be delivered to the holder hereof as soon as possible and in any
event within three days of notice of surrender of the Preferred Stock, together
with a certificate therefor, duly endorsed for transfer and together with this
Warrant, and a certificate for the balance of the Preferred Stock surrendered to
the Company with such notice shall also be issued to the holder hereof as soon
as possible and in any event within such two-day period.
Section 9. Exchange of Warrants. On surrender for exchange of this
--------- --------------------
Warrant, properly endorsed, to the Company, and subject to the restrictions on
transfer set forth in the Stockholders Agreement, the Company at its expense
will issue and deliver to or on the order of the holder thereof a new Warrant of
like tenor, in the name of such holder or as such holder may direct, calling in
the aggregate on the face thereof for the number of shares of Series C Common
Stock called for on the face of the Warrant so surrendered.
Section 10. Replacement of Warrants. On receipt of evidence reasonably
---------- -----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
Section 11. Notices. Any notice or other communication given pursuant to
---------- -------
this Warrant shall be in writing and shall be personally delivered, sent by
nationally recognized overnight courier or express mail, or mailed by first
class certified or registered mail, postage prepaid, return receipt requested,
to the Company, at its address as it appears in the Stockholders Agreement and
(b) to the Holder, at such Holder's address as it appears in the Stockholders
Agreement (or, if not specified therein, at such Holder's address as it appears
in the records of the Company), unless otherwise indicated by the Company or
such Holder, as the case may be, in each case with any copies required by the
Stockholders Agreement.
Section 12. Fractional Shares. The number of shares of Series C Common
---------- -----------------
Stock to be issued upon exercise of this Warrant shall be rounded to the nearest
whole share, with any fractional shares disregarded.
<PAGE>
Section 13. Legend. A legend setting forth or referring to the
---------- ------
restrictions described on page 1 of this Warrant shall be placed on any
replacement hereof and any certificate representing securities issued pursuant
to the exercise of this Warrant.
Section 14. No Rights as Shareholder. This Warrant shall not entitle the
---------- ------------------------
holder to any voting rights or any other rights as a shareholder of the Company,
except the rights stated herein.
Section 15. Investment Intent. By accepting this Warrant, the holder
---------- -----------------
represents that it is acquiring this Warrant for investment and not with a view
to or for sale in connection with any distribution thereof. The Holder
represents that it is an accredited investor as defined in Regulation D under
the Securities Act.
Section 16. Miscellaneous. This Warrant and any term hereof may be
---------- -------------
amended, modified or waived only by an instrument in writing signed by the
Company and the Holder. This Warrant shall be governed by and construed in
accordance with the General Corporation Law of the State of Delaware and the
internal laws of the Commonwealth of Massachusetts (without regard for its
conflicts of laws principles).
IN WITNESS WHEREOF, this Warrant has been executed and delivered as a
sealed instrument as of the date first above written.
FOUNTAIN VIEW, INC.
By:/s/ Robert Snukal
-----------------
Robert Snukal, President
<PAGE>
FORM OF EXERCISE NOTICE
(To be signed only on exercise of Warrant)
TO: FOUNTAIN VIEW, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________* shares of Series C Common Stock of Fountain
View, Inc., and herewith makes payment of $______ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_______________, whose address is _________________________________.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
* Insert here the number of shares as to which the Warrant is being
exercised.
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto __________________ the right represented by the within Warrant to purchase
______ shares of Series C Common Stock of Fountain View, Inc. to which the
within Warrant relates, and appoints _________________ its attorney to transfer
such right on the books of Fountain View, Inc. with full power of substitution
in the premises.
The undersigned represents and warrants that this transfer is permitted by
the restrictions contained in the Warrant, and acknowledges that Fountain View,
Inc. is entitled to require compliance with those restrictions as a condition to
recognition of this transfer. This Warrant is and remains subject to the
restrictions set forth in the Stockholders Agreement referenced in the Warrant.
Dated: __________, ____
_____________________________
(Signature must conform in all
respects to name of holder
specified on the face of the
Warrant)
<PAGE>
EXHIBIT 10.47
================================================================================
CREDIT AGREEMENT
DATED AS OF APRIL 16, 1998,
AMONG
FOUNTAIN VIEW, INC.
THE BANKS PARTY HERETO,
AND
BANK OF MONTREAL,
as Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C>
SECTION 1. THE CREDIT FACILITIES............................................................. 1
Section 1.1. Revolving Credit Commitments................................................. 1
Section 1.2. Letters of Credit............................................................ 1
Section 1.3. Term Loan Commitments........................................................ 4
Section 1.4. Applicable Interest Rates.................................................... 4
Section 1.5. Minimum Borrowing Amounts.................................................... 6
Section 1.6. Manner of Borrowing Loans and Designating Applicable Interest Rates.......... 6
Section 1.7. Interest Periods............................................................. 8
Section 1.8. Maturity of Loans............................................................ 9
Section 1.9. Prepayments.................................................................. 9
Section 1.10. Default Rate................................................................. 12
Section 1.11. The Notes.................................................................... 12
Section 1.12. Funding Indemnity............................................................ 13
Section 1.13. Commitment Terminations...................................................... 14
SECTION 2. FEES AND SUBSTITUTION OF BANKS.................................................... 14
Section 2.1. Fees......................................................................... 14
Section 2.2. Substitution of Banks........................................................ 15
SECTION 3. PLACE AND APPLICATION OF PAYMENTS................................................. 16
SECTION 4. COLLATERAL AND GUARANTIES......................................................... 17
Section 4.1. Collateral................................................................... 17
Section 4.2. Guaranties................................................................... 18
Section 4.3. Further Assurances........................................................... 18
Section 4.4. Liens on Real Property....................................................... 18
SECTION 5. DEFINITIONS; INTERPRETATION....................................................... 19
Section 5.1. Definitions.................................................................. 19
Section 5.2. Interpretation............................................................... 32
Section 5.3. Change in Accounting Principles.............................................. 32
SECTION 6. REPRESENTATIONS AND WARRANTIES.................................................... 32
Section 6.1. Organization and Qualification............................................... 32
Section 6.2. Subsidiaries................................................................. 33
Section 6.3. Authority and Validity of Obligations........................................ 33
Section 6.4. Use of Proceeds; Margin Stock................................................ 34
Section 6.5. Financial Reports............................................................ 34
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 6.6. No Material Adverse Change................................................... 34
Section 6.7. Full Disclosure.............................................................. 35
Section 6.8. Trademarks, Franchises, and Licenses......................................... 35
Section 6.9. Governmental Authority and Licensing......................................... 35
Section 6.10. Good Title................................................................... 35
Section 6.11. Litigation and Other Controversies........................................... 35
Section 6.12. Taxes........................................................................ 35
Section 6.13. Approvals.................................................................... 36
Section 6.14. Affiliate Transactions....................................................... 36
Section 6.15. Investment Company; Public Utility Holding Company........................... 36
Section 6.16. ERISA........................................................................ 36
Section 6.17. Compliance with Laws......................................................... 36
Section 6.18. Other Agreements............................................................. 37
Section 6.19. Solvency..................................................................... 37
Section 6.20. Summit Acquisition........................................................... 37
Section 6.21. Year 2000 Compliance......................................................... 38
Section 6.22. No Default................................................................... 38
SECTION 7. CONDITIONS PRECEDENT.............................................................. 38
Section 7.1. Initial Credit Event......................................................... 38
Section 7.2. All Credit Events............................................................ 40
SECTION 8. COVENANTS......................................................................... 41
Section 8.1. Maintenance of Business...................................................... 41
Section 8.2. Maintenance of Properties.................................................... 41
Section 8.3. Taxes and Assessments........................................................ 41
Section 8.4. Insurance.................................................................... 41
Section 8.5. Financial Reports............................................................ 42
Section 8.6. Inspection................................................................... 43
Section 8.7 Indebtedness for Borrowed Money.............................................. 43
Section 8.8. Liens........................................................................ 44
Section 8.9. Investments, Acquisitions, Loans, Advances and Guaranties.................... 45
Section 8.10. Mergers, Consolidations and Sales............................................ 47
Section 8.11. Maintenance of Subsidiaries.................................................. 48
Section 8.12. Dividends and Certain Other Restricted Payments.............................. 48
Section 8.13. ERISA........................................................................ 48
Section 8.14. Compliance with Laws......................................................... 49
Section 8.15. Burdensome Contracts With Affiliates......................................... 49
Section 8.16. No Changes in Fiscal Year.................................................... 49
Section 8.17. Formation of Subsidiaries.................................................... 49
Section 8.18. Change in the Nature of Business............................................. 49
Section 8.19. Use of Loan Proceeds......................................................... 49
Section 8.20. No Restrictions on Subsidiary Distributions.................................. 49
Section 8.21. Alexandria................................................................... 49
Section 8.22. Subordinated Debt............................................................ 50
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 8.23. Leverage Ratio............................................................... 50
Section 8.24. Senior Leverage Ratio........................................................ 50
Section 8.25. Net Worth.................................................................... 51
Section 8.26. Fixed Charge Coverage Ratio.................................................. 51
Section 8.27. Capital Expenditures......................................................... 51
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.................................................... 51
Section 9.1. Events of Default............................................................ 51
Section 9.2. Non-Bankruptcy Defaults...................................................... 53
Section 9.3. Bankruptcy Defaults.......................................................... 54
Section 9.4. Collateral for Undrawn Letters of Credit..................................... 54
Section 9.5. Notice of Default............................................................ 55
Section 9.6. Expenses..................................................................... 55
SECTION 10. CHANGE IN CIRCUMSTANCES........................................................... 55
Section 10.1. Change of Law................................................................ 55
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR 55
Section 10.3. Increased Cost and Reduced Return............................................ 56
Section 10.4. Lending Offices.............................................................. 57
Section 10.5. Discretion of Bank as to Manner of Funding................................... 57
SECTION 11. THE AGENT AND ISSUING BANK........................................................ 57
Section 11.1. Appointment and Authorization of Agent....................................... 57
Section 11.2. Agent and its Affiliates..................................................... 57
Section 11.3. Action by Agent.............................................................. 58
Section 11.4. Consultation with Experts.................................................... 58
Section 11.5. Liability of Agent; Credit Decision.......................................... 58
Section 11.6. Indemnity.................................................................... 59
Section 11.7. Resignation of Agent and Successor Agent..................................... 59
Section 11.8. Interest Rate Hedging Arrangements........................................... 60
Section 11.9. Issuing Bank................................................................. 60
SECTION 12. MISCELLANEOUS..................................................................... 60
Section 12.1. Withholding Taxes............................................................ 60
Section 12.2. No Waiver, Cumulative Remedies............................................... 61
Section 12.3. Non-Business Days............................................................ 61
Section 12.4. Documentary Taxes............................................................ 61
Section 12.5. Survival of Representations.................................................. 61
Section 12.6. Survival of Indemnities...................................................... 62
Section 12.7. Sharing of Set-Off........................................................... 62
Section 12.8. Notices...................................................................... 62
Section 12.9. Counterparts................................................................. 63
Section 12.10. Successors and Assigns....................................................... 63
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
Section 12.11. Participants................................................................. 63
Section 12.12. Assignment of Commitments by Banks........................................... 64
Section 12.13. Amendments................................................................... 64
Section 12.14. Headings..................................................................... 65
Section 12.15. Costs and Expenses........................................................... 65
Section 12.16. Environmental Indemnification and Waiver..................................... 65
Section 12.17. Set-off...................................................................... 66
Section 12.18. Entire Agreement............................................................. 66
Section 12.19. Governing Law................................................................ 66
Section 12.20. Severability of Provisions................................................... 66
Section 12.21. Excess Interest.............................................................. 66
Section 12.22. Confidentiality.............................................................. 67
Section 12.23. Single Bank.................................................................. 67
Section 12.24. Submission to Jurisdiction; Waiver of Jury Trial............................. 67
Signature Page................................................................................... 68
</TABLE>
Exhibit A - Notice of Payment Request
Exhibit B - Notice of Borrowing
Exhibit C - Notice of Continuation/Conversion
Exhibit D - Revolving Note
Exhibit E - Term Note
Exhibit F - Compliance Certificate
Exhibit G - Assignment and Acceptance
Schedule 6.2 - Subsidiaries
Schedule 6.9 - Governmental Authority and Licensing
Schedule 6.13 - Approvals
Schedule 8.4 - Insurance Matters
Schedule 8.7 - Permitted Existing Indebtedness
Schedule 8.8 - Existing Liens
Schedule 8.9. - Existing Note Receivables
-iv-
<PAGE>
CREDIT AGREEMENT
To each of the Banks signatory hereto
Ladies and Gentlemen:
The undersigned, Fountain View, Inc., a Delaware corporation (the
"Borrower"), applies to you for your several commitments, subject to the terms
and conditions hereof and on the basis of the representations and warranties
hereinafter set forth, to extend credit to the Borrower, all as more fully
hereinafter set forth. Each of you is hereinafter referred to as a "Bank," all
of you are hereinafter referred to collectively as the "Banks," and Bank of
Montreal in its capacity as agent for the Banks hereunder is hereinafter
referred to as the "Agent."
Section 1. The Credit Facilities.
Section 1.1. Revolving Credit Commitments;. Subject to the terms and
conditions hereof, each Bank, by its acceptance hereof, severally agrees to make
a loan or loans (individually a "Revolving Loan" and collectively the "Revolving
Loans") to the Borrower from time to time on a revolving basis up to the amount
of such Bank's revolving credit commitment set forth on the applicable signature
page hereof or pursuant to Section 12.12 hereof (its "Revolving Credit
Commitment" and, cumulatively for all the Banks, the "Revolving Credit
Commitments"), subject to any reductions thereof pursuant to the terms hereof,
before the Revolving Credit Termination Date. The sum of the aggregate principal
amount of Revolving Loans and of L/C Obligations at any time outstanding shall
not exceed the Revolving Credit Commitments in effect at such time. Each
Borrowing of Revolving Loans shall be made ratably from the Banks in proportion
to their respective Revolver Percentages. As provided in Section 1.6(a) hereof,
the Borrower may elect that each Borrowing of Revolving Loans be either Base
Rate Loans or Eurodollar Loans. Revolving Loans may be repaid and the principal
amount thereof reborrowed before the Revolving Credit Termination Date, subject
to the terms and conditions hereof.
Section 1.2. Letters of Credit;. (a) General Terms. Subject to the terms
and conditions hereof, as part of the Revolving Credit, the Issuing Bank shall
issue standby and commercial letters of credit (each a "Letter of Credit") for
the Borrower's account in an aggregate undrawn face amount up to the amount of
the L/C Commitment, provided that the aggregate L/C Obligations at any time
outstanding shall not exceed the difference between the Revolving Credit
Commitments in effect at such time and the aggregate principal amount of
Revolving Loans then outstanding. Each Letter of Credit shall be issued by the
Issuing Bank, but each Bank shall be obligated to reimburse the Issuing Bank for
such Bank's Revolver Percentage of the amount of each drawing thereunder and,
accordingly, each Letter of Credit shall constitute usage of the Revolving
Credit Commitment of each Bank pro rata in accordance with its Revolver
Percentage.
<PAGE>
(b) Applications. At any time before the Revolving Credit Termination
Date, the Issuing Bank shall, at the request of the Borrower, issue one or more
Letters of Credit, in a form satisfactory to the Issuing Bank, with expiration
dates no later than the earlier of 12 months from the date of issuance (or be
cancelable not later than 12 months from the date of issuance and each renewal)
or Revolving Credit Termination Date, in an aggregate face amount as set forth
above, upon the receipt of an application duly executed by the Borrower for the
relevant Letter of Credit in the form then customarily prescribed by the Issuing
Bank for the Letter of Credit requested (each an "Application"). Notwithstanding
anything contained in any Application to the contrary: (i) the Borrower shall
pay fees in connection with each Letter of Credit as set forth in Section 2.1
hereof, (ii) except as otherwise provided in Section 1.9 hereof, before the
occurrence of a Default or an Event of Default, the Issuing Bank will not call
for the funding by the Borrower of any amount under a Letter of Credit before
being presented with a drawing thereunder, and (iii) if the Issuing Bank is not
timely reimbursed for the amount of any drawing under a Letter of Credit on the
date such drawing is paid, the Borrower's obligation to reimburse the Issuing
Bank for the amount of such drawing shall bear interest (which the Borrower
hereby promises to pay) from and after the date such drawing is paid at a rate
per annum equal to the sum of 2% plus the Applicable Margin for Base Rate Loans
plus the Base Rate from time to time in effect. If the Issuing Bank issues any
Letter of Credit with an expiration date that is automatically extended unless
the Issuing Bank gives notice that the expiration date will not so extend beyond
its then scheduled expiration date, the Issuing Bank will give such notice of
non-renewal before the time necessary to prevent such automatic extension if
before such required notice date: (i) the expiration date of such Letter of
Credit if so extended would be after the Revolving Credit Termination Date, (ii)
the Revolving Credit Commitments have been terminated, or (iii) a Default or an
Event of Default exists and the Agent, at the direction of the Required Banks,
has given the Issuing Bank instructions not to so permit the extension of the
expiration date of such Letter of Credit. The Issuing Bank agrees to issue
amendments to the Letter(s) of Credit increasing the amount, or extending the
expiration date, thereof at the request of the Borrower subject to the
conditions of Section 7.2 hereof and the other terms of this Section 1.2 .
(c) The Reimbursement Obligations. Subject to Section 1.2(b) hereof, the
obligation of the Borrower to reimburse the Issuing Bank for all drawings under
a Letter of Credit (a "Reimbursement Obligation") shall be governed by the
Application related to such Letter of Credit, except that reimbursement shall be
made by no later than 12:00 Noon (Chicago time) on the date when each drawing is
paid in immediately available funds at the Issuing Bank's principal office in
Chicago, Illinois or such other office as the Issuing Bank may designate in
writing to the Borrower. If the Borrower does not make any such reimbursement
payment on the date due and the Participating Banks fund their participations
therein in the manner set forth in Section 1.2(d) below, then all payments
thereafter received by the Issuing Bank in discharge of any of the relevant
Reimbursement Obligations shall be distributed in accordance with Section 1.2(d)
below.
(d) The Participating Interests. Each Bank, by its acceptance hereof,
severally agrees to purchase from the Issuing Bank, and the Issuing Bank hereby
agrees to sell to each such Bank (a "Participating Bank"), an undivided
percentage participating interest (a "Participating Interest"), to the extent of
its Revolver Percentage, in each Letter of Credit
-2-
<PAGE>
issued by, and each Reimbursement Obligation owed to, the Issuing Bank. Upon any
failure by the Borrower to pay any Reimbursement Obligation at the time required
on the date the related drawing is paid, as set forth in Section 1.2(c) above,
or if the Issuing Bank is required at any time to return to the Borrower or to a
trustee, receiver, liquidator, custodian, or other Person any portion of any
payment of any Reimbursement Obligation, each Participating Bank shall, not
later than the Business Day it receives a certificate in the form of Exhibit A
hereto from the Issuing Bank to such effect, if such certificate is received
before 1:00 p.m. (Chicago time), or not later than 1:00 p.m. (Chicago time) the
following Business Day, if such certificate is received after such time, pay to
the Issuing Bank an amount equal to such Participating Bank's Revolver
Percentage of such unpaid or recaptured Reimbursement Obligation together with
interest on such amount accrued from the date the related payment was made by
the Issuing Bank to the date of such payment by such Participating Bank at a
rate per annum equal to: (i) from the date the related payment was made by the
Issuing Bank to the date 2 Business Days after payment by such Participating
Bank is due hereunder, the Federal Funds Rate for each such day and (ii) from
the date 2 Business Days after the date such payment is due from such
Participating Bank to the date such payment is made by such Participating Bank,
the Base Rate in effect for each such day. Each such Participating Bank shall
thereafter be entitled to receive its Revolver Percentage of each payment
received in respect of the relevant Reimbursement Obligation and of interest
paid thereon, with the Issuing Bank retaining its Revolver Percentage as a Bank
hereunder.
The several obligations of the Participating Banks to the Issuing Bank
under this Section 1.2 shall be absolute, irrevocable, and unconditional under
any and all circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Participating Bank may have or have
had against the Borrower, the Agent, the Issuing Bank, any other Bank, or any
other Person whatsoever. Without limiting the generality of the foregoing, such
obligations shall not be affected by any Default or Event of Default or by any
reduction or termination of any Commitment of any Bank, and each payment by a
Participating Bank under this Section 1.2 shall be made without any offset,
abatement, withholding, or reduction whatsoever. The Issuing Bank shall be
entitled to offset amounts received for the account of a Bank under this
Agreement against unpaid amounts due from such Bank to the Issuing Bank
hereunder (whether as fundings of participations, indemnities, or otherwise),
but shall not be entitled to offset against amounts owed to the Issuing Bank by
any Bank arising outside of this Agreement.
(e) Indemnification. The Participating Banks shall, to the extent of their
respective Revolver Percentages, indemnify the Issuing Bank (to the extent not
reimbursed by the Borrower) against any cost, expense (including reasonable
counsel fees and disbursements), claim, demand, action, loss, or liability
(except such as result from the Issuing Bank's gross negligence or willful
misconduct) that the Issuing Bank may suffer or incur in connection with any
Letter of Credit. The obligations of the Participating Banks under this Section
1.2(e) and all other parts of this Section 1.2 shall survive termination of this
Agreement and of all Applications, Letters of Credit, and all drafts and other
documents presented in connection with drawings thereunder.
-3-
<PAGE>
Section 1.3. Term Loan Commitments. Subject to the terms and conditions
hereof, each Bank, by its acceptance hereof, severally agrees to make a loan
(individually a "Term Loan" and collectively the "Term Loans") to the Borrower
in the amount of such Bank's Term Loan Commitment as set forth on the applicable
signature page hereof (its "Term Loan Commitment" and, cumulatively for all the
Banks, the "Term Loan Commitments"). The Term Loans shall be made, if at all, on
or before April 20, 1998, at which time the Term Loan Commitments shall expire.
The Term Loans shall be advanced in a single Borrowing and shall be made ratably
by the Banks in proportion to their respective Term Loan Percentages. As
provided in Section 1.6(a) hereof, the Borrower may elect that the Term Loans be
outstanding as Base Rate Loans or Eurodollar Loans. No amount repaid or prepaid
on any Term Loan may be borrowed again.
Section 1.4. Applicable Interest Rates. (a) Base Rate Loans. Each Base
Rate Loan made or maintained by a Bank shall bear interest during each Interest
Period it is outstanding (computed on the basis of a year of 365 or 366 days, as
the case may be, and the actual days elapsed, except that determinations made
under clause (ii) of the definition of Base Rate set forth below shall be
computed on the basis of a year of 360 days and actual days elapsed) on the
unpaid principal amount thereof from the date such Loan is advanced, continued
or created by conversion from a Eurodollar Loan until maturity (whether by
acceleration or otherwise) at a rate per annum equal to the sum of the
Applicable Margin plus the Base Rate from time to time in effect, payable on the
last day of its Interest Period and at maturity (whether by acceleration or
otherwise).
"Base Rate" means for any day the greater of: (i) the rate of interest
announced by the Agent from time to time as its prime commercial rate, or
equivalent, for U.S. Dollar loans to borrowers located in the United States with
any change in the Base Rate resulting from a change in said prime commercial
rate to be effective as of the date of the relevant change in said prime
commercial rate (it being acknowledged and agreed that such rate may not be the
Agent's best or lowest rate) and (ii) the sum of (x) the rate for that day set
forth opposite the caption "Federal Fund (Effective)" in the daily statistical
release designated as "Composite 3:30 P.M. Quotations for U.S. Government
Securities," or any successor publication, published by the Federal Reserve Bank
of New York or, if such publication shall be suspended or terminated, the rate
determined by the Agent (based on quotations received from two or more Federal
funds dealers of recognized standing) to be the prevailing rate per annum
(rounded upward, if necessary, to the nearest 1/100 of 1%) at approximately
10:00 a.m. (Chicago time) (or as soon thereafter as is practicable) on such day
for the purchase at face value of overnight Federal funds in an amount
approximately equal to the principal amount owed to the Agent for which such
rate is being determined, plus (y) 1/2 of 1%.
(b) Eurodollar Loans. Each Eurodollar Loan made or maintained by a Bank
shall bear interest during each Interest Period it is outstanding (computed on
the basis of a year of 360 days and actual days elapsed) on the unpaid principal
amount thereof from the date such Loan is advanced, continued, or created by
conversion from a Base Rate Loan until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the Applicable Margin plus
the Adjusted LIBOR applicable for such Interest Period, payable on the last day
of the Interest Period and at maturity (whether by acceleration or otherwise),
and, if the
-4-
<PAGE>
applicable Interest Period is longer than three months, on each day occurring
every three months after the commencement of such Interest Period.
"Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate per
annum determined in accordance with the following formula:
Adjusted LIBOR = LIBOR
---------------------------------
1 - Eurodollar Reserve Percentage
"LIBOR" means, for an Interest Period for a Borrowing of Eurodollar Loans,
(a) the LIBOR Index Rate for such Interest Period, if such rate is available,
and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of
the rates of interest per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds
are offered to the Agent at 11:00 a.m. (London, England time) 2 Business Days
before the beginning of such Interest Period by 3 or more major banks in the
interbank eurodollar market selected by the Agent for delivery on the first day
of and for a period equal to such Interest Period and in an amount equal or
comparable to the principal amount of the Eurodollar Loan scheduled to be made
by the Agent as part of such Borrowing.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the next higher one hundred-thousandth of a
percentage point) for deposits in U.S. Dollars for a period equal to such
Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London, England time) on the day 2 Business Days before the commencement of
such Interest Period.
"Telerate Page 3750" means the display designated as "Page 3750" on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
"Eurodollar Reserve Percentage" means, for any Borrowing of Eurodollar
Loans, the daily average for the applicable Interest Period of the maximum rate,
expressed as a decimal, at which reserves (including, without limitation, any
supplemental, marginal, and emergency reserves) are imposed during such Interest
Period by the Board of Governors of the Federal Reserve System (or any
successor) on "eurocurrency liabilities", as defined in such Board's Regulation
D (or in respect of any other category of liabilities that includes deposits by
reference to which the interest rate on Eurodollar Loans is determined or any
category of extensions of credit or other assets that include loans by non-
United States offices of any Bank to United States residents), subject to any
amendments of such reserve requirement by such Board or its successor, taking
into account any transitional adjustments thereto. For purposes of this
definition, the Eurodollar Loans shall be deemed to be "eurocurrency
liabilities" as defined in Regulation D without benefit or credit for any
prorations, exemptions or offsets under Regulation D.
-5-
<PAGE>
(d) Rate Determinations. The Agent shall determine each interest rate
applicable to the Loans and the Reimbursement Obligations hereunder, and its
determination thereof shall be conclusive and binding except in the case of
manifest error.
Section 1.5. Minimum Borrowing Amounts. Each Borrowing of Base Rate Loans
advanced under a Credit shall be in an amount not less than $500,000. Each
Borrowing of Eurodollar Loans advanced, continued, or converted under a Credit
shall be in an amount equal to $500,000 or such greater amount which is an
integral multiple of $500,000.
Section 1.6. Manner of Borrowing Loans and Designating Applicable Interest
Rates. (a) Notice to the Agent. The Borrower shall give notice to the Agent by
no later than 11:00 a.m. (Chicago time): (i) at least 3 Business Days before the
date on which the Borrower requests the Banks to advance a Borrowing of
Eurodollar Loans and (ii) on the date the Borrower requests the Banks to advance
a Borrowing of Base Rate Loans. The Loans included in each Borrowing shall bear
interest initially at the type of rate specified in such notice of a new
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Borrowing or, subject to
Section 1.5's minimum amount requirement for each outstanding Borrowing, a
portion thereof, as follows: (i) if such Borrowing is of Eurodollar Loans, on
the last day of the Interest Period applicable thereto, the Borrower may
continue part or all of such Borrowing as Eurodollar Loans or convert part or
all of such Borrowing into Base Rate Loans or (ii) if such Borrowing is of Base
Rate Loans, on any Business Day, the Borrower may convert all or part of such
Borrowing into Eurodollar Loans for an Interest Period or Interest Periods
specified by the Borrower. The Borrower shall give all such notices requesting
the advance, continuation, or conversion of a Borrowing to the Agent by
telephone or telecopy (which notice shall be irrevocable once given and, if by
telephone, shall be promptly confirmed in writing) substantially in the form
attached hereto as Exhibit B (Notice of Borrowing) or Exhibit C (Notice of
Continuation/Conversion), as applicable, or in such other form acceptable to the
Agent. Notices of the continuation of a Borrowing of Eurodollar Loans for an
additional Interest Period or of the conversion of part or all of a Borrowing of
Eurodollar Loans into Base Rate Loans or of Base Rate Loans into Eurodollar
Loans must be given by no later than 11:00 a.m. (Chicago time) at least 3
Business Days before the date of the requested continuation or conversion. All
such notices concerning the advance, continuation, or conversion of a Borrowing
shall specify the date of the requested advance, continuation, or conversion of
a Borrowing (which shall be a Business Day), the amount of the requested
Borrowing to be advanced, continued, or converted, the type of Loans to comprise
such new, continued, or converted Borrowing and, if such Borrowing is to be
comprised of Eurodollar Loans, the Interest Period applicable thereto. The
Borrower agrees that the Agent may rely on any such telephonic or telecopy
notice given by any person the Agent in good faith believes is an Authorized
Representative without the necessity of independent investigation, and in the
event any such notice by telephone conflicts with any written confirmation, such
telephonic notice shall govern if the Agent has acted in reliance thereon.
(b) Notice to the Banks. The Agent shall give prompt telephonic or
telecopy notice to each Bank of any notice from the Borrower received pursuant
to Section 1.6(a) above and, if such notice requests the Banks to make
Eurodollar Loans, the Agent shall give notice to the
-6-
<PAGE>
Borrower and each Bank by like means of the interest rate applicable thereto
promptly after the Agent has made such determination.
(c) Borrower's Failure to Notify; Automatic Continuations and Conversions.
Any outstanding Borrowing of Base Rate Loans shall automatically be continued
for an additional Interest Period on the last day of its then current Interest
Period unless the Borrower has notified the Agent within the period required by
Section 1.6(a) that the Borrower intends to convert such Borrowing, subject to
Section 7.2 hereof, into a Borrowing of Eurodollar Loans or such Borrowing is
prepaid in accordance with Section 1.9(a). If the Borrower fails to give notice
pursuant to Section 1.6(a) above of the continuation or conversion of any
outstanding principal amount of a Borrowing of Eurodollar Loans before the last
day of its then current Interest Period within the period required by Section
1.6(a) or, whether or not such notice has been given, one or more of the
conditions set forth in Section 7.2 for the continuation or conversion of a
Borrowing of Eurodollar Loans would not be satisfied and such Borrowing is not
prepaid in accordance with Section 1.9(a), such Borrowing shall automatically be
converted into a Borrowing of Base Rate Loans.
(d) Disbursement of Loans. Not later than 1:00 p.m. (Chicago time) on the
date of any requested advance of a new Borrowing, subject to Section 7 hereof,
each Bank shall make available its Loan comprising part of such Borrowing in
funds immediately available at the principal office of the Agent in Chicago,
Illinois. The Agent shall make the proceeds of each new Borrowing available to
the Borrower at the Agent's principal office in Chicago, Illinois (or by wire
transfer of funds pursuant to the Borrower's written instructions to the Agent).
(e) Agent Reliance on Bank Funding. Unless the Agent shall have been
notified by a Bank prior to (or, in the case of a Borrowing of Base Rate Loans,
by 1:00 p.m. (Chicago time) on) the date on which such Bank is scheduled to make
payment to the Agent of the proceeds of a Loan (which notice shall be effective
upon receipt) that such Bank does not intend to make such payment, the Agent may
assume that such Bank has made such payment when due and the Agent may in
reliance upon such assumption (but shall not be required to) make available to
the Borrower the proceeds of the Loan to be made by such Bank and, if any Bank
has not in fact made such payment to the Agent, such Bank shall, on demand, pay
to the Agent the amount made available to the Borrower attributable to such Bank
together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Borrower and ending
on (but excluding) the date such Bank pays such amount to the Agent at a rate
per annum equal to (i) from the date the related advance was made by the Agent
to the date 2 Business Days after payment by such Bank is due hereunder, the
Federal Funds Rate for each such day and (ii) from the date 2 Business Days
after the date such payment is due from such Bank to the date such payment is
made by such Bank, the Base Rate in effect for each such day. If such amount is
not received from such Bank by the Agent immediately upon demand, the Borrower
will, on demand, repay to the Agent the proceeds of the Loan attributable to
such Bank with interest thereon at a rate per annum equal to the interest rate
applicable to the relevant Loan, but without such payment being considered a
payment or prepayment of a Loan under Section 1.12 hereof, so that the Borrower
will have no liability under such Section with respect to such payment.
-7-
<PAGE>
Section 1.7. Interest Periods. As provided in Section 1.6(a) hereof, at
the time of each request to advance, continue, or create by conversion a
Borrowing of Eurodollar Loans, the Borrower shall select an Interest Period
applicable to such Loans from among the available options. The term "Interest
Period" means the period commencing on the date a Borrowing of Loans is
advanced, continued, or created by conversion and ending: (a) in the case of
Base Rate Loans, on the last day of the calendar quarter in which such Borrowing
is advanced, continued, or created by conversion (or on the last day of the
following calendar quarter if such Loan is advanced, continued or created by
conversion on the last day of a calendar quarter) and (b) in the case of a
Eurodollar Loan, 1, 2, 3, 6, or 12 months thereafter; provided, however, that:
(a) any Interest Period for a Borrowing of Revolving Loans consisting
of Base Rate Loans that otherwise would end after the Revolving Credit
Termination Date shall end on the Revolving Credit Termination Date, and
any Interest Period for a Borrowing of Term Loans consisting of Base Rate
Loans that otherwise would end after the final maturity date of the Term
Loans shall end on the final maturity date of the Term Loans;
(b) no Interest Period with respect to any portion of the Term Loans
shall extend beyond the final maturity date of the Term Loans, and no
Interest Period with respect to any portion of the Revolving Loans shall
extend beyond the Revolving Credit Termination Date;
(c) no Interest Period with respect to any portion of the Term Loans
consisting of Eurodollar Loans shall extend beyond a date on which the
Borrower is required to make a scheduled payment of principal on the Term
Loans, unless the sum of (a) the aggregate principal amount of Term Loans
that are Base Rate Loans plus (b) the aggregate principal amount of Term
Loans that are Eurodollar Loans with Interest Periods expiring on or before
such date equals or exceeds the principal amount to be paid on the Term
Loans on such payment date;
(d) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall
be extended to the next succeeding Business Day, provided that, if such
extension would cause the last day of an Interest Period for a Borrowing of
Eurodollar Loans to occur in the following calendar month, the last day of
such Interest Period shall be the immediately preceding Business Day; and
(e) for purposes of determining an Interest Period for a Borrowing of
Eurodollar Loans, a month means a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next calendar
month; provided, however, that if there is no numerically corresponding day
in the month in which such an Interest Period is to end or if such an
Interest Period begins on the last Business Day of a calendar month, then
such Interest Period shall end on the last Business Day of the calendar
month in which such Interest Period is to end.
-8-
<PAGE>
Section 1.8. Maturity of Loans. (a) Revolving Loans. Each Revolving Loan
shall mature and become due and payable by the Borrower on the Revolving Credit
Termination Date.
(b) Scheduled Payments of Term Loans. The Borrower shall make principal
payments on the Term Loans in installments on the last day of each March, June,
September and December in each year, commencing with the calendar quarter ending
March 31, 1999, with the amount of each such installment to equal to the amount
set forth in Column B below opposite the relevant due date as set forth in
Column A below:
<TABLE>
<CAPTION>
Column B
Column A Scheduled Principal Payment on
Payment Date Term Notes
<S> <C>
06/30/99 $1,250,000.00
09/30/99 $1,250,000.00
12/31/99 $1,250,000.00
03/31/00 $1,250,000.00
06/30/00 $2,500,000.00
09/30/00 $2,500,000.00
12/31/00 $2,500,000.00
03/31/01 $2,500,000.00
06/30/01 $5,000,000.00
09/30/01 $5,000,000.00
12/31/01 $5,000,000.00
03/31/02 $5,000,000.00
06/30/02 $5,625,000.00
09/30/02 $5,625,000.00
12/31/02 $5,625,000.00
03/31/03 $5,625,000.00
06/30/03 $6,875,000.00
09/30/03 $6,875,000.00
12/31/03 $6,875,000.00
</TABLE>
, with a final payment of both principal and interest not sooner paid on the
Term Loans due and payable on March 31, 2004, the final maturity thereof. Each
such principal payment shall be applied to the Banks holding the Term Notes pro
rata based upon their Term Loan Percentages.
Section 1.9. Prepayments. (a) Optional. The Borrower shall have the
privilege of prepaying without premium or penalty (except as set forth below
with respect to Section 1.12
-9-
<PAGE>
hereof) in whole or in part (but, if in part, then: (i) if such Borrowing is of
Base Rate Loans, in an amount not less than $500,000, (ii) if such Borrowing is
of Eurodollar Loans, in an amount not less than $500,000, and (iii) in each
case, in an amount such that the minimum amount required for a Borrowing
pursuant to Section 1.5 hereof remains outstanding) any Borrowing of Eurodollar
Loans at any time upon 3 Business Days prior notice to the Agent or, in the case
of a Borrowing of Base Rate Loans, notice delivered to the Agent by the Borrower
no later than 11:00 a.m. (Chicago time) on the date of prepayment, such
prepayment to be made by the payment of the principal amount to be prepaid and
accrued interest thereon to the date fixed for prepayment plus any amounts due
the Banks under Section 1.12 hereof. The Agent will promptly advise each Bank of
any such prepayment notice it receives from the Borrower. Any amount of
Revolving Loans paid or prepaid before the Revolving Credit Termination Date
may, subject to the terms and conditions of this Agreement, be borrowed, repaid
and borrowed again. No amount of the Term Loans paid or prepaid may be
reborrowed. The amount of each prepayment of the Term Loans shall be applied on
a ratable basis among all remaining payments on such Term Loans based on the
principal amounts thereof.
(b) Mandatory. (i) The Borrower shall, on each date the Revolving Credit
Commitments are reduced pursuant to Section 1.13 hereof, prepay the Revolving
Loans and, if necessary, prefund the L/C Obligations by the amount, if any,
necessary to reduce the sum of the aggregate principal amount of Revolving Loans
and of L/C Obligations then outstanding to the amount to which the Revolving
Credit Commitments have been so reduced.
(ii) If the Borrower or any Subsidiary shall at any time or from time to
time make or agree to make a Disposition or shall suffer an Event of Loss
resulting in Net Cash Proceeds in excess of $1,000,000 in any fiscal year of the
Borrower, then (x) the Borrower shall promptly notify the Agent of such proposed
Disposition or Event of Loss (including the amount of the estimated Net Cash
Proceeds to be received by the Borrower or such Subsidiary in respect thereof)
and (y) promptly upon, and in no event later than the Business Day after,
receipt by the Borrower or the Subsidiary of the Net Cash Proceeds of such
Disposition or Event of Loss, the Borrower shall prepay the Term Loans in an
aggregate amount equal to 100% of the amount of such Net Cash Proceeds; provided
that in the case of each Disposition and Event of Loss, if the Borrower states
in its notice of such event that the Borrower or the applicable Subsidiary
intends to reinvest, within 180 days of the applicable Disposition or receipt of
Net Cash Proceeds from an Event of Loss (such period to be extended to 360 days
in the aggregate if within 180 days of the applicable Disposition or receipt of
Net Cash Proceeds from an Event of Loss the Borrower or the relevant Subsidiary
has entered into a binding commitment letter with a non-Affiliated Person to
reinvest such proceeds in accordance with the terms hereof), the Net Cash
Proceeds thereof in assets similar to the assets which were subject to such
Disposition or Event of Loss, then so long as no Default or Event of Default
then exists, the Borrower shall not be required to make a mandatory prepayment
under this Section 1.9(b)(ii) in respect of such Net Cash Proceeds to the extent
such Net Cash Proceeds are actually reinvested in such similar assets within a
180 day period (or 360-day period, to the extent permitted above). Promptly
after the end of such 180-day period (or 360-day period, to the extent permitted
above), the Borrower shall notify the Agent whether the Borrower or such
Subsidiary has reinvested such Net Cash Proceeds in assets in an Eligible Line
of Business,
-10-
<PAGE>
and to the extent such Net Cash Proceeds have not been so reinvested, the
Borrower shall promptly prepay the Term Loans in the amount of such Net Cash
Proceeds not so reinvested. The amount of each such prepayment shall be applied
on a ratable basis among all remaining payments on such Term Loans based on the
principal amounts thereof. The Borrower acknowledges that its performance
hereunder shall not limit the rights and remedies of the Banks for any breach of
Section 8.10 hereof.
(iii) If after the date of this Agreement the Borrower or any Subsidiary
shall issue new equity securities (whether common or preferred stock or
otherwise), other than capital stock issued in connection with the exercise of
employee stock options and capital stock issued in connection with an
Acquisition permitted hereby to the extent the net proceeds thereof are paid to
or for the account of the seller of such Acquired Business, the Borrower shall
promptly notify the Agent of the estimated Net Cash Proceeds of such issuance to
be received by or for the account of the Borrower or such Subsidiary in respect
thereof. Promptly upon, and in no event later than the Business Day after,
receipt by the Borrower or such Subsidiary of Net Cash Proceeds of such
issuance, the Borrower shall prepay the Term Loans in an aggregate amount equal
to 100% of the amount of such Net Cash Proceeds. The amount of each such
prepayment shall be applied on a ratable basis among all remaining payments on
such Term Loans based on the principal amounts thereof.
(iv) If after the date of this Agreement the Borrower or any Subsidiary
shall issue any Indebtedness for Borrowed Money, other than Indebtedness for
Borrowed Money permitted by Section 8.7 hereof, the Borrower shall promptly
notify the Agent of the estimated Net Cash Proceeds of such issuance to be
received by or for the account of the Borrower or such Subsidiary in respect
thereof. Promptly upon, and in no event later than the Business Day after,
receipt by the Borrower or such Subsidiary of Net Cash Proceeds of such
issuance, the Borrower shall prepay the Term Loans in an aggregate amount equal
to 100% of the amount of such Net Cash Proceeds. The amount of each such
prepayment shall be applied on a ratable basis among all remaining payments on
such Term Loans based on the principal amounts thereof. The Borrower
acknowledges that its performance hereunder shall not limit the rights and
remedies of the Banks arising from any breach of Section 8.7 hereof.
(v) If after the date of this Agreement the Borrower or any Subsidiary
shall issue any Subordinated Debt, the Borrower shall promptly notify the Agent
of the estimated Net Cash Proceeds of such issuance to be received by or for the
account of the Borrower or such Subsidiary in respect thereof. Promptly upon,
and in no event later than the Business Day after, receipt by the Borrower or
such Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay
the Term Loans in an aggregate amount equal to 100% of the amount of such Net
Cash Proceeds. The amount of each such prepayment shall be applied on a ratable
basis among all remaining payments on such Term Loans based on the principal
amounts thereof.
(vi) On April 15th of each year, beginning April 15, 1999, the Borrower
shall prepay the Term Loans by an amount equal to 85% of Excess Cash Flow of
Borrower and its Subsidiaries for the most recently completed fiscal year of the
Borrower (herein, "Excess
-11-
<PAGE>
Cash Flow Net Proceeds"); provided, however, that (x) in the event the
outstanding principal balance of the Revolving Credit on the relevant April 15th
payment date exceeds $7,500,000 (including outstanding Letters of Credit) in the
aggregate, the Borrower may elect that all or any part of the Excess Cash Flow
Net Proceeds be applied as a reduction to the Revolving Credit pursuant to
Section 1.9(a) hereof, with the balance of Excess Cash Flow Net Proceeds not so
applied to be applied to the Term Loans in accordance with the terms set forth
above and (y) the Borrower shall not be required to make such prepayment with
respect to any fiscal year in which the Leverage Ratio (determined as of the
last day of such fiscal year) is less than or equal to 4.5 to 1.0. The amount of
each such prepayment shall be applied on a ratable basis among all remaining
payments on each such Term Loans based on the principal amounts thereof.
(vii) Unless the Borrower otherwise directs, prepayments of Loans under
this Section 1.9(b) shall be applied first to Borrowings of Base Rate Loans
until payment in full thereof with any balance applied to Borrowings of
Eurodollar Loans in the order in which their Interest Periods expire. Each
prepayment of Loans under this Section 1.9(b) shall be made by the payment of
the principal amount to be prepaid and accrued interest thereon to the date of
prepayment together with any amounts due the Banks under Section 1.12 hereof.
Each prefunding of L/C Obligations shall be made in accordance with Section 9.4
hereof.
Section 1.10. Default Rate. Notwithstanding anything to the contrary
contained in Section 1.4 hereof, while any Event of Default exists or after
acceleration, the Borrower shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal amount of all
Loans (computed on the basis of a year of 360 days and actual days elapsed) at a
rate per annum equal t o:
(a) for any Base Rate Loan, the sum of 2% plus the Applicable
Margin plus the Base Rate from time to time in effect; and
(b) for any Eurodollar Loan, the sum of 2% plus the rate of
interest in effect thereon at the time of such default until the end of the
Interest Period applicable thereto and, thereafter, at a rate per annum equal to
the sum of 2% plus the Applicable Margin for Base Rate Loans plus the Base Rate
from time to time in effect;
provided, however, that in the absence of acceleration, any adjustments pursuant
to this Section 1.10 shall be made at the election of the Required Banks with
written notice to the Borrower. While any Event of Default exists or after
acceleration, interest shall be paid on demand of the Agent at the request or
with the consent of the Required Banks.
Section 1.11. The Notes. (a) The Revolving Loans made to the Borrower by
a Bank shall be evidenced by a single promissory note of the Borrower issued to
such Bank in the form of Exhibit D hereto. Each such promissory note is
hereinafter referred to as a "Revolving Note" and collectively such promissory
notes are referred to as the "Revolving Notes."
-12-
<PAGE>
(b) The Term Loans made to the Borrower by a Bank shall be evidenced by a
single promissory note of the Borrower issued to such Bank in the form of
Exhibit E hereto. Each such promissory note is hereinafter referred to as a
"Term Note" and collectively such promissory notes are referred to as the "Term
Notes."
(c) Each Bank shall record on its books and records or on a schedule to
its appropriate Note the amount of each Loan advanced, continued or converted by
it, all payments of principal and interest and the principal balance from time
to time outstanding thereon, the type of such Loan, and, for any Eurodollar
Loan, the Interest Period and the interest rate applicable thereto. The record
thereof, whether shown on such books and records of a Bank or on a schedule to
the relevant Note, shall be prima facie evidence as to all such matters;
provided, however, that the failure of any Bank to record any of the foregoing
or any error in any such record shall not limit or otherwise affect the
obligation of the Borrower to repay all Loans made to it hereunder together with
accrued interest thereon. At the request of any Bank and upon such Bank
tendering to the Borrower the appropriate Note to be replaced, the Borrower
shall furnish a new Note to such Bank to replace any outstanding Note, and at
such time the first notation appearing on a schedule on the reverse side of, or
attached to, such Note shall set forth the aggregate unpaid principal amount of
all Loans, if any, then outstanding thereon.
Section 1.12. Funding Indemnity. If any Bank shall incur any loss, cost
or expense (including, without limitation, any loss of profit, and any loss,
cost or expense incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Bank to fund or maintain any Eurodollar
Loan or the relending or reinvesting of such deposits or amounts paid or prepaid
to such Bank) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan
on a date other than the last day of its Interest Period,
(b) any failure (because of a failure to meet the conditions
of Section 7 or otherwise) by the Borrower to borrow or continue a
Eurodollar Loan, or to convert a Base Rate Loan into a Eurodollar Loan,
on the date specified in a notice given pursuant to Section 1.6(a),
(c) any failure by the Borrower to make any payment of
principal on any Eurodollar Loan when due (whether by acceleration or
otherwise), or
(d) any acceleration of the maturity of a Eurodollar Loan as a
result of the occurrence of any Event of Default hereunder,
then, upon the demand of such Bank, the Borrower shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense. If any Bank
makes such a claim for compensation, it shall provide to the Borrower, with a
copy to the Agent, a certificate setting forth the amount of such loss, cost or
expense in reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on such
certificate shall be deemed prima facie correct.
-13-
<PAGE>
Section 1.13. Commitment Terminations. (a) Optional Revolving
Credit Terminations. The Borrower shall have the right at any time and from
time to time, upon 3 Business Days prior written notice to the Agent, to
terminate the Revolving Credit Commitments without premium or penalty and in
whole or in part, any partial termination to be (i) in an amount not less than
$1,000,000 and (ii) allocated ratably among the Banks in proportion to their
respective Revolver Percentages, provided that the Revolving Credit Commitments
may not be reduced to an amount less than the sum of the aggregate principal
amount of Revolving Loans and of L/C Obligations then outstanding. Any
termination of the Revolving Credit Commitments below $4,000,000 shall reduce
the L/C Commitment by a like amount. The Agent shall give prompt notice to each
Bank of any such termination of the Revolving Credit Commitments.
(b) Mandatory Revolving Credit Terminations. If at any time Net Cash
Proceeds or Excess Cash Flow Net Proceeds remain after the prepayment of the
Term Loans in full pursuant to Section 1.9(b) hereof, the Revolving Credit
Commitments shall ratably terminate by an amount equal to 100% of such excess
proceeds.
(c) Mandatory Termination Upon a Change of Control. After the
occurrence of a Change of Control, the Required Banks may, by written notice to
the Borrower at any time on or before the date occurring 90 days after the date
the Borrower notifies the Banks of such Change of Control, terminate the
remaining Commitments and all other obligations of the Banks hereunder on the
date stated in such notice (which shall in no event be sooner than 30 days after
the occurrence of such Change of Control). On the date the Commitments are so
terminated, all outstanding Obligations (including, without limitation, all
principal of and accrued interest on the Notes) shall forthwith be due and
payable without further demand, presentment, protest, or notice of any kind and
the Borrower shall immediately pay to the Banks the full amount then available
for drawing under each Letter of Credit, such amount to be held in the Account
referred to in Section 9.4 hereof (the Borrower agreeing to immediately make
such payment on the date the Commitments are so terminated and acknowledging and
agreeing that the Banks would not have an adequate remedy at law for the failure
by the Borrower to honor any such demand and that the Banks, and the Agent on
their behalf, shall have the right to require the Borrower to specifically
perform such undertaking whether or not any drawings or other demands for
payment have been made under any of the Letters of Credit).
(d) Any termination of the Commitments pursuant to this Section 1.13
may not be reinstated.
SECTION 2. FEES AND SUBSTITUTION OF BANKS.
Section 2.1. Fees. (a) Revolving Credit Commitment Fee. The
Borrower shall pay to the Agent for the ratable account of the Banks in
accordance with their Revolver Percentages a commitment fee at the rate per
annum equal to the Applicable Margin (computed on the basis of a year of 360
days and the actual number of days elapsed) on the average daily Unused
Revolving Credit Commitments. Such commitment fee shall be payable quarter-
annually in arrears on the last day of each March, June, September and December
in each year
-14-
<PAGE>
(commencing June 30, 1998) and on the Revolving Credit Termination Date, unless
the Revolving Credit Commitments are terminated in whole on an earlier date, in
which event the commitment fee for the period to the date of such termination in
whole shall be paid on the date of such termination.
(b) Letter of Credit Fees. Quarterly in arrears, on the last day of each
calendar quarter, commencing June 30, 1998, the Borrower shall pay to the
Issuing Bank for its own account a facing fee equal to .125% per annum (computed
on the basis of a year of 360 days and the actual number of days elapsed)
applied to the daily average face amount of standby Letters of Credit
outstanding during such quarter. Quarterly in arrears, on the last day of each
calendar quarter, commencing on June 30, 1998, the Borrower shall pay to the
Agent, for the ratable benefit of the Banks in accordance with their Revolver
Percentages, a letter of credit fee at a rate per annum equal to the Applicable
Margin (computed on the basis of a year of 360 days and the actual number of
days elapsed) in effect during each day of such quarter applied to the daily
average face amount of Letters of Credit outstanding during such quarter. In
addition, the Borrower shall pay to the Issuing Bank for its own account the
Issuing Bank's standard drawing, negotiation, amendment, and other
administrative fees for each Letter of Credit. Such standard fees referred to
in the preceding sentence may be established by the Agent from time to time.
(c) Agent Fees. The Borrower shall pay to the Agent, for its own use and
benefit, the fees set forth in that certain commitment letter dated February 6,
1998, by and among Heritage Partners Management Company, Inc., the Borrower, and
Bank of Montreal, or as otherwise agreed to by the Agent and the Borrower.
(d) Audit Fees. The Borrower shall pay to the Agent for its own use and
benefit charges for audits of the Collateral performed by the Agent or its
agents or representatives in such amounts as the Agent may from time to time
request (the Agent acknowledging and agreeing that such charges shall be
computed in the same manner as it at the time customarily uses for the
assessment of charges for similar collateral audits); provided, however, that in
the absence of any Default and Event of Default, the Borrower shall not be
required to pay the Agent for more than one such audit during any calendar year.
Section 2.2. Substitution of Banks. Upon the receipt by the Borrower of
(a) a claim from any Bank for compensation under Section 10.3 or 12.1 hereof or
(b) notice by any Bank to the Borrower of any illegality pursuant to Section
10.1 hereof, or in the event any Bank is in default in any material respect with
respect to its obligations under the Loan Documents (herein, a "Defaulting
Bank") (any such Bank referred to in clause (a) or (b) above, or any such
Defaulting Bank, being hereinafter referred to as an "Affected Bank"), the
Borrower may, in addition to any other rights the Borrower may have hereunder or
under applicable law, require, at its expense, any such Affected Bank to assign,
at par plus accrued interest and fees, without recourse, all of its interest,
rights and obligations hereunder (including all of its Commitments and the Loans
and participation interests in Letters of Credit and other amounts at any time
owing to it hereunder and the other Loan Documents) to a bank or other
institutional lender specified by the Borrower, provided that (i) such
assignment shall not conflict with or violate any law, rule, or regulation or
order of any court or other governmental
-15-
<PAGE>
authority, (ii) the Borrower shall have received the written consent of the
Agent, which consent shall not be unreasonably withheld, to such assignment,
(iii) the Borrower shall have paid to the Affected Bank all monies (together
with amounts due such Affected Bank under Section 1.12 hereof as if the Loans
owing to it were prepaid rather than assigned) other than such principal and
accrued interest and fees, and (iv) the assignment is entered into in accordance
with the other requirements of Section 12.12 hereof.
SECTION 3. PLACE AND APPLICATION OF PAYMENTS.
All payments of principal of and interest on the Loans and the
Reimbursement Obligations, and of all other Obligations payable by the Borrower
under this Agreement and the other Loan Documents, shall be made by the Borrower
to the Agent by no later than 12:00 Noon (Chicago time) on the due date thereof
at the office of the Agent in Chicago, Illinois (or such other location in the
State of Illinois as the Agent may designate to the Borrower) for the benefit of
the Bank or Banks entitled thereto. Any payments received after such time shall
be deemed to have been received by the Agent on the next Business Day. All such
payments shall be made in U.S. Dollars, in immediately available funds at the
place of payment, in each case without set-off or counterclaim. The Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal or interest on Loans and on Reimbursement Obligations in which the
Banks have purchased Participating Interests ratably to the Banks and like funds
relating to the payment of any other amount payable to any Bank to such Bank, in
each case to be applied in accordance with the terms of this Agreement.
Anything contained herein to the contrary notwithstanding, all payments and
collections received in respect of the Obligations and all proceeds of the
Collateral received, in each instance, by the Agent or any of the Banks after
the occurrence and during the continuation of an Event of Default shall be
remitted to the Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and expenses
reasonably incurred by the Agent, and any security trustee therefor, in
monitoring, verifying, protecting, preserving or enforcing the Liens on the
Collateral or by the Agent, and any security trustee therefor, in
protecting, preserving or enforcing rights under the Loan Documents, and in
any event all costs and expenses of a character which the Borrower has
agreed to pay the Agent under Section 12.15 hereof (such funds to be
retained by the Agent for its own account unless it has previously been
reimbursed for such costs and expenses by the Banks, in which event such
amounts shall be remitted to the Banks to reimburse them for payments
theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or other fees
or amounts due under the Notes and the other Loan Documents, in each case
other than for principal on the Loans or in reimbursement or
collateralization of L/C Obligations, pro rata as among the Agent and the
Banks in accord with the amount of such interest and other fees or amounts
owing each;
(c) third, to the payment of the principal of the Notes and any
unpaid Reimbursement Obligations and to the Agent to be held as collateral
security for any
-16-
<PAGE>
other L/C Obligations (until the Agent is holding an amount of cash equal
to the then outstanding amount of all such L/C Obligations), the aggregate
amount paid to or held as collateral security for the Banks to be allocated
pro rata as among the Banks in accord with the aggregate unpaid principal
balances of their Loans and interests in the Letters of Credit;
(d) fourth, to the Agent and the Banks ratably in accordance with
the amounts of any other indebtedness, obligations or liabilities of the
Borrower and its Subsidiaries owing to each of them and secured by the
Collateral Documents (other than for Hedging Liability described in
subsection (e) below), unless and until all such indebtedness, obligations
and liabilities have been fully paid and satisfied;
(e) fifth, to the payment of the Hedging Liability (if any) pro rata
as among the Banks and their Affiliates to whom such Hedging Liability is
owed in accordance with the then respective unpaid amounts of such
liability; and
(f) sixth, to the Borrower or whoever else may be lawfully entitled
thereto.
SECTION 4. COLLATERAL AND GUARANTIES.
Section 4.1. Collateral. The Obligations shall be secured by valid,
perfected, and enforceable Liens on all right, title, and interest of the
Borrower and each Subsidiary in all capital stock or other equity interests held
by such Person in each of its Subsidiaries, whether now owned or hereafter
formed or acquired, and all proceeds thereof, and by valid, perfected (subject
to the proviso appearing at the end of this sentence) and enforceable Liens on
all right, title, and interest of the Borrower and each Subsidiary in all
accounts and account receivables, notes and note receivables, contract rights,
instruments, documents, chattel paper, general intangibles (including, without
limitation, patents, trademarks, tradenames, copyrights, and other intellectual
property rights), investment property, deposit accounts, inventory, machinery
and equipment, and real estate, whether now owned or hereafter acquired or
arising, and all proceeds thereof; provided, however, that: (a) Liens need be
granted on leasehold interests in nursing home properties leased by the Borrower
or any of its Subsidiaries on the date of this Agreement, other than the Snukal
Properties, to the extent the owner of the relevant Property fails to consent to
the leasehold mortgage requested by the Agent or refuses to consent thereto
without payment of a fee (other than a de minimus fee in the nature of a
processing fee and/or an agreement to pay all costs and expenses of the
consenting party), but only so long as the Borrower and the relevant
Subsidiaries have and continue at all times to use their commercially reasonable
efforts to obtain such consents and such efforts fail (the Borrower hereby
agreeing to provide the Agent on a monthly basis a status report as to
outstanding consents and the efforts made to date to obtain the same), (b) the
Lien of the Agent on Property subject to a Capital Lease or conditional sale
agreement or subject to a purchase money lien in each instance permitted hereby
shall be subject to the rights of the lessor or lender thereunder, (c) until an
Event of Default has occurred and is continuing and thereafter until otherwise
required by the Agent or the Required Banks, (i) Liens on deposit accounts
maintained by the Borrower or any Subsidiary with financial institutions other
than the Lenders need not be perfected provided the total value of such property
at any one time not so perfected does not exceed $500,000 in the aggregate, (ii)
a Lien on the note receivable owing to the Borrower by William Scott in the
principal amount not exceeding $2,600,000 need not be perfected, (iii) Liens on
note receivables need not be perfected provided the total value of such property
at any one time not so perfected does not exceed $500,000 in the aggregate, (iv)
Liens on vehicles which are subject to a certificate of title law need not be
perfected provided that the total value of such property at any one time not so
-17-
<PAGE>
perfected does not exceed $500,000 in the aggregate, and (v) no Lien need be
granted upon the capital stock of Alexandria Convalescent Hospital, Inc., a
California corporation (herein, "Alexandria") or upon its equipment, so long as
the Borrower is in compliance with Section 8.21 hereof. The Borrower
acknowledges and agrees that the Liens on the Collateral shall be granted to the
Agent for the benefit of itself and the Banks and the Issuing Bank and shall be
valid and perfected first priority Liens subject, however, to the proviso
appearing at the end of the immediately preceding sentence, in each case
pursuant to one or more Collateral Documents from such Persons, each in form and
substance satisfactory to the Agent.
Section 4.2. Guaranties. The payment and performance of the
Obligations shall at all times be guaranteed by each direct and indirect
Subsidiary of the Borrower pursuant to one or more guaranty agreements in form
and substance acceptable to the Agent, as the same may be amended, modified or
supplemented from time to time (individually a "Guaranty" and collectively the
'Guaranties").
Section 4.3. Further Assurances. The Borrower agrees that it
shall, and shall cause each Subsidiary to, from time to time at the request of
the Agent or the Required Banks, execute and deliver such documents and do such
acts and things as the Agent or the Required Banks may reasonably request in
order to provide for or perfect or protect such Liens on the Collateral. In the
event the Borrower or any Subsidiary forms or acquires any other Subsidiary
after the date hereof, the Borrower shall within 10 Business Days of such
formation or acquisition cause such newly formed or acquired Subsidiary to
execute a Guaranty and such Collateral Documents as the Agent may then require,
and the Borrower shall also deliver to the Agent, or cause such Subsidiary to
deliver to the Agent, at the Borrower's cost and expense, such other
instruments, documents, certificates, and opinions reasonably required by the
Agent in connection therewith.
Section 4.4. Liens on Real Property. In the event that the
Borrower or any Subsidiary owns or hereafter acquires any real property
(including, without limitation, any leasehold interests), the Borrower shall, or
shall cause such Subsidiary to, execute and deliver to the Agent (or a security
trustee therefor) a mortgage or deed of trust acceptable in form and substance
to the Agent for the purpose of granting to the Agent for the benefit of the
Banks a Lien on such real property to secure the Obligations, shall pay all
taxes, costs and expenses incurred by the Agent in recording such mortgage or
deed of trust, and shall at its expense supply to the Agent a survey,
environmental report, hazard insurance policy, and a mortgagee's policy of title
insurance from a title insurer reasonably acceptable to the Agent insuring the
validity of such mortgage or deed of trust and its status as a first Lien
(subject to Liens permitted by this Agreement) on the real property encumbered
thereby and such other instrument, documents, certificates, and opinions
reasonably required by the Agent in connection therewith, provided that (i)
Liens on leasehold interests in real property need not be
-18-
<PAGE>
granted to the extent set forth in Section 4.1(a) above, and (ii) the Borrower
shall have sixty (60) days after the date of this Agreement to provide to the
Agent Liens on real property owned or leased by the Borrower and its
Subsidiaries on the date of this Agreement and to deliver the title policies,
surveys, environmental reports, hazard insurance policies and other items
referred to above with respect thereto.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall
have the following meanings:
"Account" is defined in Section 9.4 hereof.
"Acquired Business" means the entity or assets acquired by the Borrower or
a Subsidiary in an Acquisition, whether before or after the date hereof.
"Acquisition EBITDA" means, with reference to any period and any Acquired
Business of a Target, the total net income (as determined in accordance with
GAAP) of such Target arising out of the Acquired Business plus the sum of all
amounts deducted in arriving at such net income amount in respect of (x)
interest expense for such period, (y) federal, state, and local income taxes for
such period, and (z) depreciation of fixed assets and amortization of intangible
assets for such period, and adjusted for non-recurring expenses and income
reasonably determined by the Borrower in good faith and established to the
reasonable satisfaction of the Agent.
"Acquisition " means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Borrower or the Subsidiary is the
surviving entity.
"Acquisition Corp." means the Borrower's Wholly-owned Subsidiary, FV-SCC
Acquisition Corp., a Delaware corporation.
"Adjusted EBITDAR" means, with reference to any period, EBITDAR for such
period calculated on a pro forma basis in good faith by the Borrower and
established to the reasonable satisfaction of the Agent, in accordance with the
balance sheets, income statements and other related financial statements
furnished to the Agent and the Banks prior to the date hereof (including,
without limitation, such financial statements reflecting the Briarcliff and
Summit acquisitions and the cost savings relating thereto as reflected on the
opening day covenant compliance certificate delivered by the Borrower on the
date of this Agreement) or, with respect to future periods, pursuant to Section
8.9(j) hereof, as if each Acquisition which occurred prior to the date of this
Agreement and each Acquisition occurring on or after the
-19-
<PAGE>
date of this Agreement and permitted by Section 8.9(j) hereof occurring during
such period had taken place on the first day of such period.
"Adjusted LIBOR" is defined in Section 1.4(b) hereof.
"Affiliate" means any Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise; provided that, in any event for
purposes of this definition, any Person that owns, directly or indirectly, 5% or
more of the securities having the ordinary voting power for the election of
directors or governing body of a corporation or 5% or more of the partnership or
other ownership interest of any other Person (other than as a limited partner of
such other Person) will be deemed to control such corporation or other Person.
"Agent" means Bank of Montreal, and any successor pursuant to Section 11.7
hereof.
"Alexandria" is defined in Section 4.1 hereof.
"Applicable Margin" means, with respect to Loans, Reimbursement
Obligations, and the Revolving Credit Commitment fees and letter of credit fees
payable under Section 2.1 hereof, from the date of this Agreement through the
first Pricing Date the rate per annum specified below:
<TABLE>
<S> <C>
Applicable Margin for Base Rate Loans and
Reimbursement Obligations: 1.75%
Applicable Margin for Eurodollar Loans: 2.75%
Applicable Margin for Revolving Credit Commitment
fee: .50%
Applicable Margin for letter of credit fee: 2.75%
</TABLE>
; provided that the Applicable Margin shall be subject to quarterly adjustments
on the first Pricing Date, and thereafter from one Pricing Date to the next, so
that the Applicable Margin means a rate per annum determined in accordance with
the following schedule:
-20-
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin Applicable Margin
for Base Rate for Eurodollar for Revolving
Leverage Ratio Loans and Loans and Letter Credit Commitment
for Such Pricing Reimbursement of credit Fee Fee Shall Be:
Date Obligations shall Shall Be:
be:
<S> <C> <C> <C>
Greater than or 1.75% 2.75% .50%
equal to 6.0 to 1.0
Less than 6.0 to 1.0, but
greater than or equal to 1.5% 2.5% .50%
5.5 to 1.0
Less than 5.5 to 1.25% 2.25% .50%
1.0, but greater
than or equal to
5.0 to 1.0
Less than 5.0 to 1.0% 2.00% .50%
1.0, but greater
than or equal to
4.5 to 1.0
Less than 4.5 to .75% 1.75% .50%
1.0
</TABLE>
For purposes hereof, the term "Pricing Date" means, for any fiscal quarter of
the Borrower ending on or after March 31, 1998, the date on which the Agent is
in receipt of the Borrower's most recent financial statements for the fiscal
quarter then ended, pursuant to Section 8.5(a) or (b) hereof. The Applicable
Margin shall be established based on the Leverage Ratio for the most recently
completed fiscal quarter and the Applicable Margin established on a Pricing Date
shall remain in effect until the next Pricing Date. If the Borrower has not
delivered its financial statements by the date such financial statements (and,
in the case of the year-end financial statements, audit report) are required to
be delivered under Section 8.5(a) or (b) hereof, and such Default remains
uncured for a period of 10 Business Days, until such financial statements and
audit report are delivered, the Applicable Margin shall be the highest
Applicable Margin (i.e., the Leverage Ratio shall be deemed to be greater than
6.0 to 1.0). If the Borrower subsequently delivers such financial statements
before the next Pricing Date, the Applicable Margin established by such late
delivered financial statements shall take effect from the date of delivery until
the next Pricing Date. In all other circumstances, the Applicable Margin
established by such financial statements shall be in effect from the Pricing
Date that occurs immediately after the end of the Borrower's fiscal quarter
covered by such financial statements until the next Pricing Date. Each
determination of the Applicable Margin made by the Agent in accordance with the
foregoing shall be conclusive and binding on the Borrower and the Banks if
reasonably determined.
"Application" is defined in Section 1.2(b) hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Borrower pursuant to Section 7.1(h) hereof or on any
update of any such list provided
-21-
<PAGE>
by the Borrower to the Agent, or any further or different officer of the
Borrower so named by any Authorized Representative of the Borrower in a written
notice to the Agent.
"Bank" is defined in the introductory paragraph of this Agreement and
includes each assignee bank pursuant to Section 12.12 hereof.
"Base Rate" is defined in Section 1.4(a) hereof.
"Base Rate Loan" means a Loan bearing interest at a rate specified in
Section 1.4(a) hereof.
"Borrower" is defined in the introductory paragraph of this Agreement.
"Borrowing" means the total of Loans of a single type advanced, continued
for an additional Interest Period, or converted from a different type into such
type by the Banks under a Credit on a single date and, in the case of Eurodollar
Loans, for a single Interest Period. Borrowings of Loans are made and
maintained ratably from each of the Banks under a Credit according to their
Percentages of such Credit. A Borrowing is "advanced" on the day Banks advance
funds comprising such Borrowing to the Borrower, is "continued" on the date a
new Interest Period for the same type of Loans commences for such Borrowing, and
is "converted" when such Borrowing is changed from one type of Loans to the
other, all as requested by the Borrower pursuant to Section 1.6(a).
"Business Day" means any day (other than a Saturday or Sunday) on which
banks are not authorized or required to close in Chicago, Illinois and, if the
applicable Business Day relates to the advance or continuation of, or conversion
into, or payment of a Eurodollar Loan, on which banks are dealing in U.S. Dollar
deposits in the interbank eurodollar market in London, England.
"Capital Expenditures" means, with respect to any Person for any period,
the aggregate amount of all expenditures (whether paid in cash or accrued as a
liability) by such Person during that period which, in accordance with GAAP, are
or should be included as "additions to property, plant or equipment" or similar
items reflected in the statement of cash flows of such Person.
"Capital Lease" means any lease of Property which in accordance with GAAP
is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means, for any Person, the amount of the
liability shown on the balance sheet of such Person in respect of a Capital
Lease determined in accordance with GAAP.
"Change of Control" means the occurrence of any of the following: (a) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than one or more
-22-
<PAGE>
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 45% of the Voting Stock of the
Borrower (measured by voting power rather than number of shares), (b) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any person (as defined above), other
than one or more Principals and their Related Parties, becomes the "beneficial
owner" (as defined above), directly or indirectly, of more than 35% of the
Voting Stock of the Borrower (measured by voting power rather than number of
shares) and the Principals and their Related Parties in the aggregate
"beneficially own" (as defined above) less than 35% of the Voting Stock of the
Borrower (measured by voting power rather than number of shares) or, in the
event the Borrower has consummated a public offering of its common stock, less
than 25% of the Voting Stock of the Borrower (measured by voting power rather
than number of shares), (c) the failure of individuals who are members of the
board of directors of the Borrower on the date of this Agreement (together with
any new or replacement directors whose initial nomination for election was
approved by a majority of the directors who were either directors on the date of
this Agreement or previously so approved) to constitute a majority of the board
of directors of the Borrower, or (d) any "Change of Control" (or words of like
import), as defined in any instrument, agreement or indenture relating to any
issue of Subordinated Debt, shall occur, the effect of which is to cause the
acceleration of any Subordinated Debt or to enable the holder of any
Subordinated Debt to cause the Borrower or any Subsidiary to repurchase, redeem,
repay, or otherwise retire any Subordinated Debt.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Collateral" means all properties, rights, interests and privileges from
time to time subject to the Liens granted to the Agent, or any security trustee
therefor, by the Collateral Documents.
"Collateral Documents" means the Mortgages, the Security Agreement, the
Pledge Agreement, and all other mortgages, deeds of trust, security agreements,
pledge agreements, assignments, financing statements and other documents as
shall from time to time secure or relate to the Obligations or any part thereof.
"Commitments" means the Revolving Credit Commitments, the L/C Commitment,
and the Term Loan Commitments.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any Subsidiary, are treated as a single
employer under Section 414 of the Code.
"Credit" means any of the Revolving Credit or the Term Credit.
-23-
<PAGE>
"Credit Event" means the advancing of any Loan, the continuation of or
conversion into a Eurodollar Loan, or the issuance of, or extension of the
expiration date or increase in the amount of, any Letter of Credit.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Disposition" means the sale, lease, conveyance, or other disposition of
Property, other than sales or other dispositions expressly permitted under
Section 8.10(a) or 8.10(b) hereof.
"EBITDAR" means, with reference to any period, Net Income for such period
plus the sum (without duplication) of all amounts deducted in arriving at such
Net Income amount in respect of (w) Interest Expense for such period, (x)
federal, state and local income taxes for such period, (y) depreciation of fixed
assets and amortization of intangible assets for such period, and (z) Rental
Expense for such period (plus, to the extent deducted in arriving at EBITDAR for
the relevant period, expenses incurred pursuant to the August 1997 Fountain
View, Inc. recapitalization and expenses incurred pursuant to the Summit Merger
and the financing associated with it).
"Eligible Line of Business" means any business engaged in as of the date of
this Agreement by the Borrower and its Subsidiaries relating to owning or
operating a skilled nursing care facility or post-acute care facility or a line
of business reasonably related thereto (including businesses related to therapy,
medical equipment and supplies, and pharmacy) in the healthcare industry.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute thereto.
"Eurodollar Loan" means a Loan bearing interest at the rate specified in
Section 1.4(b) hereof.
"Eurodollar Reserve Percentage" is defined in Section 1.4(b) hereof.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
"Event of Loss" means, with respect to any Property, any of the follows:
(a) any loss, destruction or damage of such Property or (b) any condemnation,
seizure, or taking, by exercise of the power of eminent domain or otherwise, of
such Property, or confiscation of such Property or the requisition of the use of
such Property.
"Excess Cash Flow" means, with respect to any period, the amount (if any)
by which (A) the difference (if any) of (i) Net Income for such period plus the
sum of all amounts deducted in arriving at such Net Income amount in respect of
all charges for (x) depreciation of fixed assets and amortization of intangible
assets for such period, (y) deferred taxes for such period, and (z) all other
non-cash items to Net Income for such period, minus (plus)
-24-
<PAGE>
(ii) additions (reductions) to non-cash working capital of the Borrower and its
Subsidiaries for such period (i.e., the increase or decrease in consolidated
non-cash current assets of the Borrower and Subsidiaries minus the consolidated
current liabilities (excluding the current maturities of long-term debt) of the
Borrower and its Subsidiaries from the beginning to the end of such period)
exceeds (B) the sum of (i) the aggregate amount of payments required to be made
by the Borrower and its Subsidiaries during such period in respect of all
principal on all Indebtedness for Borrowed Money (whether at maturity, as a
result of mandatory sinking fund redemption, mandatory prepayment, acceleration
or otherwise), plus (ii) the aggregate amount of Capital Expenditures incurred
by the Borrower and its Subsidiaries during such period, plus (iii) cash paid by
the Borrower or any of its Subsidiaries as part of the Total Consideration for
an Acquisition permitted by this Agreement.
"Excess Cash Flow Net Proceeds" is defined in Section 1.9(b)(vi) hereof.
"Existing Credit Agreements" means, collectively, (i) that certain Credit
Agreement dated as of March 6, 1998 between the Borrower and Bank of Montreal,
individually and as agent, and the other lenders party thereto, (ii) that
certain Credit Agreement dated as of March 6, 1998, between FV-SCC Acquisition
Corp. and Bank of Montreal, individually and as agent, and the other lenders
party thereto, and (iii) that certain Third Amended and Restated Credit
Agreement dated as of December 15, 1995, between, by and among Summit Care
Corporation, Bank of Montreal, individually and as agent, and the other lenders
party thereto.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate appearing in
Section 1.4(a) hereof.
"Fixed Asset Maintenance Expenditures" means, for any period, Capital
Expenditures incurred during such period in order to repair, replace, or
otherwise maintain the Borrower's and each of its Subsidiary's operating
facilities, and all the equipment and real property relating thereto, in good
working order and condition.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable statute and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
"Hedging Liability" means the liability of the Borrower to any of the Banks
in respect of any interest rate swaps, interest rate caps, interest rate
collars, or other interest rate hedging arrangements as the Borrower may from
time to time enter into with any one or more of the Banks party to this
Agreement or their Affiliates. Unless and until the amount of the Hedging
Liability is fixed and determined, the Hedging Liability shall be deemed to be
4% per annum of the notional amount of the hedge from the date of computation to
the date the hedge expires.
-25-
<PAGE>
"Hostile Acquisition" means the acquisition of the capital stock or other
equity interests of a Person through a tender offer or similar solicitation of
the owners of such capital stock or other equity interests which has not been
approved (prior to such acquisition) by resolutions of the Board of Directors of
such Person or by similar action if such Person is not a corporation, and as to
which such approval has not been withdrawn.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any manner by
such Person representing money borrowed (including by the issuance of debt
securities), (ii) all indebtedness for the deferred purchase price of property
or services (other than trade accounts payable and wages arising in the ordinary
course of business), (iii) all indebtedness secured by any Lien upon Property of
such Person, whether or not such Person has assumed or become liable for the
payment of such indebtedness, (iv) all Capitalized Lease Obligations of such
Person and (v) all obligations of such Person on or with respect to letters of
credit, bankers' acceptances and other extensions of credit whether or not
representing obligations for borrowed money.
"Interest Expense" means, with reference to any period, the sum of all
interest charges (including imputed interest charges with respect to Capitalized
Lease Obligations and all amortization of debt discount and expense) of the
Borrower and its Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
"Interest Period" is defined in Section 1.7 hereof.
"Issuing Bank" means Bank of Montreal.
"L/C Commitment" means $4,000,000, as reduced pursuant to the terms hereof.
"L/C Obligations" means the aggregate undrawn face amounts of all
outstanding Letters of Credit and all unpaid Reimbursement Obligations.
"Lending Office" is defined in Section 10.4 hereof.
"Letter of Credit" is defined in Section 1.2(a) hereof.
"Leverage Ratio" means, as of the last day of any fiscal quarter of the
Borrower, the ratio of (a) the sum of Total Funded Debt of the Borrower and its
Subsidiaries as of the last day of such fiscal quarter, plus the product of
Rental Expense of the Borrower and its Subsidiaries for the four fiscal quarters
then ended multiplied by 8, to (b) Adjusted EBITDAR of the Borrower and its
Subsidiaries for the four fiscal quarters then ended.
"LIBOR" is defined in Section 1.4(b) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.
-26-
<PAGE>
"Loan" means a Base Rate Loan or Eurodollar Loan, each of which is a "type"
of Loan hereunder, outstanding as a Revolving Loan or Term Loan, as applicable.
"Loan Documents" means this Agreement, the Notes, the Applications, the
Collateral Documents, the Guaranties, and each other instrument or document to
be delivered hereunder or thereunder or otherwise in connection therewith.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower, or the Borrower and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of the
Borrower or any Subsidiary to perform its obligations under any Loan Document;
or (c) a material adverse effect upon the legality, validity, binding effect or
enforceability against the Borrower or any Subsidiary of any Loan Document.
"Moody's" means Moody's Investors Service, Inc.
"Mortgages" means all mortgages and deeds of trust from time to time
executed and delivered by the Borrower and its Subsidiaries pursuant to Section
4 of this Agreement granting the Agent, or any security trustee therefor, Liens
on real property as security for the Obligations or any part thereof.
"Net Cash Proceeds" means, as applicable, (a) with respect to any
Disposition by a Person, cash and cash equivalent proceeds received by or for
such Person's account, net of (i) reasonable direct costs relating to such
Disposition, (ii) sale, use, or other transactional taxes paid or payable by
such Person as a direct result of such Disposition, and (iii) amounts required
to be applied to repay principal of, premium, if any, and interest on any
Indebtedness for Borrowed Money secured by a Lien on the Property (or portion
thereof) sold or otherwise disposed of (other than the Obligations hereunder)
which is required to be and is repaid in connection with such Disposition; (b)
with respect to any Event of Loss of a Person, cash and cash equivalent
proceeds received by or for such Person's account (whether as a result of
payments made under any applicable insurance policy therefor or in connection
with condemnation proceedings or otherwise), net of reasonable direct costs
incurred in connection with the collection of such proceeds, awards or other
payments; and (c) with respect to any offering of equity securities of a Person
or the issuance of any Indebtedness for Borrowed Money by a Person, cash and
cash equivalent proceeds received by or for such Person's account, net of
reasonable legal, underwriting, and other fees and expenses incurred as a direct
result thereof.
"Net Income" means, with reference to any period, the net income (or net
loss) of the Borrower and its Subsidiaries for such period computed on a
consolidated basis in accordance with GAAP.
"Net Worth" means, at any time the same is to be determined, total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) which would appear on the
balance sheet of the Borrower and its Subsidiaries prepared on a consolidated
basis in accordance with GAAP.
-27-
<PAGE>
"Notes" means and includes the Revolving Notes and Term Notes.
"Obligations" means all fees payable hereunder, all obligations of the
Borrower to pay principal and interest on Loans and Reimbursement Obligations,
and all other payment obligations of the Borrower or any Subsidiary arising
under or in relation to any Loan Document, in each case whether now existing or
hereafter arising.
"Participating Bank" is defined in Section 1.2(d) hereof.
"Participating Interest" is defined in Section 1.2(d) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Percentage" means for any Bank its Revolver Percentage or Term Loan
Percentage, as applicable.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
either (i) is maintained by a member of the Controlled Group for employees of a
member of the Controlled Group or (ii) is maintained pursuant to a collective
bargaining agreement or any other arrangement under which more than one employer
makes contributions and to which a member of the Controlled Group is then making
or accruing an obligation to make contributions or has within the preceding five
plan years made contributions.
"Pledge Agreement" means that certain Pledge Agreement dated of even date
herewith among the Borrower, certain of its Subsidiaries, and the Agent, as the
same may be amended, modified or restated from time to time.
"Principals" means Heritage Partners Management Company, Inc. and Heritage
Fund II, L.P.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Reimbursement Obligation" is defined in Section 1.2(c) hereof.
"Related Party" with respect to any Principal means (a) any controlling
holder of equity interests, 80% (or more) owned subsidiary, or spouse or ex-
spouse or immediate family member (in the case of an individual) of such
Principal, or (b) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal
-28-
<PAGE>
and/or such other Persons referred to in the immediately preceding clause (a),
or (c) any investment fund, whether a limited partnership, limited liability
company or corporation or other entity managed or controlled by Heritage
Partners Management Company, Inc.
"Rental Expense" means, for any period, all rental expense of the Borrower
and its Subsidiaries with respect to any and all real and personal property
leases for such period as determined on a consolidated basis in accordance with
GAAP.
"Required Banks" means, at any time, Banks whose outstanding Loans and
interests in Letters of Credit and Unused Revolving Credit Commitments
constitute more than 50% of the sum of the total outstanding Loans, interests in
Letters of Credit and Unused Revolving Credit Commitments of the Banks.
"Revolving Credit" means the credit facility for making Revolving Loans and
issuing Letters of Credit described in Sections 1.1 and 1.2 hereof.
"Revolver Percentage" means, for each Bank, the percentage of the Revolving
Credit Commitments represented by such Bank's Revolving Credit Commitment or, if
the Revolving Credit Commitments have been terminated, the percentage held by
such Bank (including through participation interests in Reimbursement
Obligations) of the aggregate principal amount of all Revolving Loans and L/C
Obligations then outstanding.
"Revolving Credit Commitment" is defined in Section 1.1 hereof.
"Revolving Credit Termination Date" means April 16, 2004, or such earlier
date on which the Revolving Credit Commitments are terminated in whole pursuant
to Section 1.13, 9.2 or 9.3 hereof.
"Revolving Loan" is defined in Section 1.1 hereof and, as so defined,
includes a Base Rate Loan or a Eurodollar Loan, each of which is a "type" of
Revolving Loan hereunder.
"Revolving Note" is defined in Section 1.11(a) hereof.
"S&P" means Standard & Poor's Ratings Services Group, a division of The
McGraw-Hill Companies, Inc.
"Security Agreement" means that certain Security Agreement dated of even
date herewith among the Borrower, certain of its Subsidiaries, and the Agent, as
the same may be amended, modified or restated from time to time.
"Senior Leverage Ratio" means, as of the last day of any fiscal quarter of
the Borrower, the ratio of (a) the sum of Total Senior Funded Debt of the
Borrower and its Subsidiaries as of the last day of such fiscal quarter, plus
the product of Rental Expense of the Borrower and its Subsidiaries for the four
fiscal quarters then ended multiplied by 8, to (b) Adjusted EBITDAR of the
Borrower and its Subsidiaries for the four fiscal quarters then ended.
-29-
<PAGE>
"Snukal Properties" means the real property leased by the Borrower or any
of its Subsidiaries which is owned or controlled by Robert M. Snukal and Sheila
S. Snukal, or either of them (or any Person controlled by either of them).
"Subordinated Debt" means Indebtedness for Borrowed Money of the Borrower
or any Subsidiary owing to any Person on terms and conditions, and in such
amounts, acceptable to the Agent and the Required Banks in their sole discretion
and which is subordinated in right of payment to the prior payment in full of
the Obligations pursuant to written subordination provisions approved in writing
by the Agent and the Required Banks.
"Subordinated Note Indenture" means that certain Indenture dated April 16,
1998, among the Borrower, the Subsidiaries party thereto as guarantors, and
State Street Bank and Trust Company, relating to the Borrower's issuance of
$120,000,000 of Senior Subordinated Notes due 2008 thereunder.
"subsidiary" means, as to any particular parent corporation or
organization, any other corporation or organization more than 50% of the
outstanding Voting Stock of which is at the time directly or indirectly owned by
such parent corporation or organization or by any one or more other entities
which are themselves subsidiaries of such parent corporation or organization.
The term "Subsidiary" means a subsidiary of the Borrower or of any of its direct
or indirect Subsidiaries.
"Summit" means Summit Care Corporation, a California corporation.
"Summit Merger" means the merger of Acquisition Corp. with and into Summit
pursuant to the terms of the Summit Merger Agreement, with Summit surviving the
merger.
"Summit Merger Agreement" means that certain Agreement and Plan of Merger
dated as of February 6, 1998, by and among Summit, the Borrower, Acquisition
Corp., and Heritage Fund I, L.P., all exhibits, schedules, and attachments
thereto, and all instruments and documents to be executed and delivered in
connection therewith.
"Target" means the Persons whose assets or equity interests are the subject
of an Acquisition.
"Term Credit" means the credit facility for Term Loans described in Section
1.3 hereof.
"Term Loan Commitment" is defined in Section 1.3 hereof.
"Term Loan" is defined in Section 1.3 hereof and, as so defined, includes a
Base Rate Loan or a Eurodollar Loan, each of which is a "type" of Term Loan
hereunder.
"Term Note" is defined in Section 1.11(b) hereof.
"Term Loan Percentage" means, for each Bank, the percentage of the Term
Loan Commitments represented by such Bank's Term Loan Commitment or, if the Term
Loan
-30-
<PAGE>
Commitments have been terminated or have expired, the percentage held by such
Bank of the aggregate principal amount of all Term Loans then outstanding.
"Total Consideration" means the total amount (but without duplication) of
(a) cash paid in connection with any Acquisition, plus (b) indebtedness payable
to the seller in connection with such Acquisition, plus (c) the fair market
value of any equity securities, including any warrants or options therefor,
delivered in connection with any Acquisition, plus (d) the present value of
covenants not to compete entered into in connection with such Acquisition or
other future payments which are required to be made over a period of time and
are not contingent upon the Borrower or its Subsidiary meeting financial
performance objectives (discounted at the Base Rate), but only to the extent not
included in clause (a), (b), or (c) above, plus (e) the amount of indebtedness
assumed in connection with such Acquisition.
"Total Funded Debt" means, at any time the same is to be determined, the
aggregate of all Indebtedness for Borrowed Money of the Borrower and its
Subsidiaries at such time, including all Indebtedness for Borrowed Money of any
other Person which is directly or indirectly guaranteed by the Borrower or any
of its Subsidiaries or which the Borrower or any of its Subsidiaries has agreed
to purchase or otherwise acquire or in respect of which the Borrower or any of
its Subsidiaries has otherwise assured a creditor against loss.
"Total Senior Funded Debt" means, at any time the same is to be determined,
Total Funded Debt at such time minus the aggregate amount of Subordinated Debt
then outstanding.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Controlled Group to the PBGC or the Plan
under Title IV of ERISA.
"U.S. Dollars" and "$" each means the lawful currency of the United States
of America.
"Unused Revolving Credit Commitments" means, at any time, the difference
between the Revolving Credit Commitments then in effect and the aggregate
outstanding principal amount of Revolving Loans and L/C Obligations.
"Voting Stock" of any Person means capital stock or other equity interests
of any class or classes (however designated) having ordinary power for the
election of directors or other similar governing body of such Person, other than
stock or other equity interests having such power only by reason of the
happening of a contingency.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA.
"Wholly-owned Subsidiary" means a Subsidiary of which all of the issued and
outstanding shares of capital stock (other than directors' qualifying shares as
required by law)
-31-
<PAGE>
or other equity interests are owned by the Borrower and/or one or more Wholly-
owned Subsidiaries within the meaning of this definition.
Section 5.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The words
"hereof", "herein", and "hereunder" and words of like import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All references to time of day herein are references
to Chicago, Illinois time unless otherwise specifically provided. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined or any consolidation or other accounting computation
is required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement.
Section 5.3. Change in Accounting Principles. If, after the date of this
Agreement, there shall occur any change in GAAP from those used in the
preparation of the financial statements referred to in Section 6.5 hereof and
such change shall result in a change in the method of calculation of any
financial covenant, standard or term found in this Agreement, either the
Borrower or the Required Banks may by notice to the Banks and the Borrower,
respectively, require that the Banks and the Borrower negotiate in good faith to
amend such covenants, standards, and term so as equitably to reflect such change
in accounting principles, with the desired result being that the criteria for
evaluating the financial condition of the Borrower and its Subsidiaries shall be
the same as if such change had not been made. No delay by the Borrower or the
Required Banks in requiring such negotiation shall limit their right to so
require such a negotiation at any time after such a change in accounting
principles. Until any such covenant, standard, or term is amended in accordance
with this Section 5.3, financial covenants shall be computed and determined in
accordance with GAAP in effect prior to such change in accounting principles.
Without limiting the generality of the foregoing, the Borrower shall neither be
deemed to be in compliance with any financial covenant hereunder nor out of
compliance with any financial covenant hereunder if such state of compliance or
noncompliance, as the case may be, would not exist but for the occurrence of a
change in accounting principles after the date hereof.
Section 6. Representations and Warranties.
The Borrower represents and warrants to the Agent and the Banks as follows:
Section 6.1. Organization and Qualification. The Borrower is duly
organized, validly existing and in good standing as a corporation under the laws
of the state of its incorporation, has full and adequate corporate power to own
its Property and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to do so would
not have a Material Adverse Effect.
-32-
<PAGE>
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, as the case may be, has full and adequate power to
own its Property and conduct its business as now conducted, and is duly licensed
or qualified and in good standing in each jurisdiction in which the nature of
the business conducted by it or the nature of the Property owned or leased by it
requires such licensing or qualifying, except where the failure to do so would
not have a Material Adverse Effect. Schedule 6.2 hereto (as the same may be
deemed amended pursuant to Section 8.10(c) or 8.17 hereof) identifies each
Subsidiary, the jurisdiction of its incorporation or organization, as the case
may be, the percentage of issued and outstanding shares of each class of its
capital stock or other equity interests owned by the Borrower and the other
Subsidiaries and, if such percentage is not 100% (excluding directors'
qualifying shares as required by law), a description of each class of its
authorized capital stock and other equity interests and the number of shares of
each class issued and outstanding. All of the outstanding shares of capital
stock and other equity interests of each Subsidiary are validly issued and
outstanding and fully paid and nonassessable and all such shares and other
equity interests indicated on Schedule 6.2 (as the same may be deemed amended
pursuant to Section 8.10(c) or 8.17 hereof) as owned by the Borrower or a
Subsidiary are owned, beneficially and of record, by the Borrower or such
Subsidiary free and clear of all Liens other than the Liens granted in favor of
the Agent pursuant to the Collateral Documents. There are no outstanding
commitments or other obligations of any Subsidiary to issue, and no options,
warrants or other rights of any Person to acquire, any shares of any class of
capital stock or other equity interests of any Subsidiary.
Section 6.3. Authority and Validity of Obligations. The Borrower has full
right and authority to enter into this Agreement and the other Loan Documents
executed by it, to make the borrowings herein provided for, to issue its Notes
in evidence thereof, to grant to the Agent the Liens described in the Collateral
Documents executed by the Borrower, and to perform all of its obligations
hereunder and under the other Loan Documents executed by it. Each Subsidiary has
full right and authority to enter into the Loan Documents executed by it, to
guarantee the Obligations, to grant to the Agent the Liens described in the
Collateral Documents executed by such Person, and to perform all of its
obligations under the Loan Documents executed by it. The Loan Documents
delivered by the Borrower and by each Subsidiary have been duly authorized,
executed and delivered by such Person and constitute valid and binding
obligations of such Person enforceable in accordance with their terms except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law); and this Agreement and the other Loan
Documents do not, nor does the performance or observance by the Borrower or any
Subsidiary of any of the matters and things herein or therein provided for, (a)
contravene or constitute a default under any provision of law or any judgment,
injunction, order or decree binding upon the Borrower or any Subsidiary or any
provision of the charter, articles of incorporation, by-laws or comparable
constituent documents of the Borrower or any Subsidiary, (b) contravene or
constitute a default under any covenant, indenture or agreement of or affecting
the Borrower or any Subsidiary or any of its Property, in each case where such
contravention or default is reasonably likely to have a Material Adverse Effect,
or (c) result in the creation or imposition of any Lien on any Property
-33-
<PAGE>
of the Borrower or any Subsidiary other than the Liens granted in favor of the
Agent pursuant to the Collateral Documents.
Section 6.4. Use of Proceeds; Margin Stock. The Borrower shall use the
proceeds of the Loans and other extensions of credit made available hereunder
for the purpose of retiring the indebtedness outstanding under the Existing
Credit Agreements and for its general working capital purposes and such other
legal and proper purposes as are consistent with all applicable laws. Neither
the Borrower nor any Subsidiary is engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of any Loan or any other extension of credit made hereunder
will be used to purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying any such margin stock. Margin
stock (as hereinabove defined) constitutes less than 25% of those assets of the
Borrower and its Subsidiaries which are subject to any limitation on sale,
pledge, or other restriction hereunder.
Section 6.5. Financial Reports. (a) The consolidated balance sheet of the
Borrower and its Subsidiaries (other than Summit Care Corporation and its
subsidiaries) as at December 31, 1997, and the related consolidated statements
of income, retained earnings and cash flows of the Borrower and its Subsidiaries
(other than Summit Care Corporation and its subsidiaries) for the fiscal year
then ended, and accompanying notes thereto, which financial statements are
accompanied by the audit report of its independent public accountants,
heretofore furnished to the Banks, fairly present in all material respects the
consolidated financial condition of the Borrower and its Subsidiaries (other
than Summit Care Corporation and its subsidiaries) as at said dates and the
consolidated results of their operations and cash flows for the periods then
ended in conformity with GAAP applied on a consistent basis.
(b) The consolidated balance sheet of Summit Care Corporation and its
subsidiaries as at December 31, 1997, and the related consolidated statements of
income, retained earnings and cash flows of Summit Care Corporation and its
subsidiaries for the fiscal year then ended, and accompanying notes thereto,
which financial statements are accompanied by the audit report of its
independent public accountants, heretofore furnished to the Banks, fairly
present in all material respects the consolidated financial condition of Summit
Care Corporation and its subsidiaries as at said dates and the consolidated
results of their operations and cash flows for the periods then ended in
conformity with GAAP applied on a consistent basis.
(c) Neither the Borrower nor any Subsidiary has contingent liabilities
which are material to it other than as indicated on the financial statements
referred to above or, with respect to future periods, on the financial
statements furnished pursuant to Section 8.5 hereof.
Section 6.6. No Material Adverse Change. Since December 31, 1997, there
has been no change in the condition (financial or otherwise) or business
prospects of the Borrower or any Subsidiary, except those occurring in the
ordinary course of business and those contemplated by the Summit Merger
Agreement, none of which individually or in the aggregate have been materially
adverse.
-34-
<PAGE>
Section 6.7. Full Disclosure. The statements and information furnished by
or on behalf of the Borrower to the Banks in connection with the negotiation of
this Agreement and the other Loan Documents and the commitments by the Banks to
provide all or part of the financing contemplated hereby do not contain any
untrue statements of a fact or omit a fact necessary to make the material
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading if the correct or complete facts would, if
they constituted a change from the facts as originally disclosed or stated, have
been reasonably likely to have a Material Adverse Effect; the Banks
acknowledging that, as to any projections and other forward-looking statements
regarding future expectations and the beliefs (the "Statements") furnished by
the Borrower to the Banks, the Borrower only represents that, at the time the
Statements were made by the Borrower to the Banks the Borrower did not know of
any material facts that would cause the Statements to be untrue.
Section 6.8. Trademarks, Franchises, and Licenses. The Borrower and each
of the Subsidiaries own, possess, or have the right to use all necessary
patents, licenses, franchises, trademarks, trade names, trade styles,
copyrights, trade secrets, know how and confidential commercial and proprietary
information to conduct their businesses as now conducted, without known conflict
with any patent, license, franchise, trademark, trade name, trade style,
copyright or other proprietary right of any other Person.
Section 6.9. Governmental Authority and Licensing. The Borrower and each
of the Subsidiaries have received all licenses, permits, and approvals of all
Federal, state, local, and foreign governmental authorities, if any, necessary
to conduct their business, in each case where the failure to obtain or maintain
the same is reasonably likely to have a Material Adverse Effect. Except as
disclosed in writing on Schedule 6.9 attached hereto, no investigation or
proceeding which, if adversely determined, is reasonably likely to result in
revocation or denial of any material license, permit, or approval, or of any
right to receive reimbursement or payments under Medicare or other governmental
third-party reimbursement or prospective payment program, is pending or, to the
knowledge of the Borrower, threatened.
Section 6.10. Good Title. The Borrower and each of the Subsidiaries have
good and defensible title (or valid leasehold interests) to their assets as
reflected on the most recent consolidated balance sheet of the Borrower and its
Subsidiaries furnished to the Banks (except for sales of assets in the ordinary
course of business), subject to no Liens other than such thereof as are
permitted by Section 8.8 hereof.
Section 6.11. Litigation and Other Controversies. There is no litigation
or governmental proceeding or labor controversy pending, nor to the knowledge of
the Borrower threatened, against the Borrower or any Subsidiary which if
adversely determined is reasonably likely to have a Material Adverse Effect.
Section 6.12. Taxes. All tax returns required to be filed by the Borrower
or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Borrower or any
Subsidiary or upon any of its respective Property, income or franchises, which
are shown to be due and payable in such returns, have been paid, except such
taxes, assessments, fees and governmental charges, if any, as are being
-35-
<PAGE>
contested in good faith and by appropriate proceedings which prevent enforcement
of the matter under contest and as to which adequate reserves established in
accordance with GAAP have been provided. The Borrower does not know of any
proposed additional tax assessment against the Borrower or any Subsidiary for
which adequate provisions in accordance with GAAP have not been made on their
accounts. Adequate provisions in accordance with GAAP for taxes on the books of
the Borrower and each Subsidiary have been made for all open years, and for its
current fiscal period.
Section 6.13. Approvals. No authorization, consent, license, or exemption
from, or filing or registration with, any court or governmental department,
agency or instrumentality, nor any approval or consent of the stockholders of
the Borrower or any Subsidiary, or of any other Person, is or will be necessary
to the valid execution, delivery or performance by the Borrower or any
Subsidiary of this Agreement or any other Loan Document, except as disclosed on
Schedule 6.13 and for such approvals which have been obtained prior to the date
of this Agreement and remain in full force and effect.
Section 6.14. Affiliate Transactions. Neither the Borrower nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
on terms and conditions which are less favorable to the Borrower or such
Subsidiary than would be usual and customary in similar contracts or agreements
between Persons not affiliated with each other.
Section 6.15. Investment Company; Public Utility Holding Company. Neither
the Borrower nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "public utility holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.16. ERISA. The Borrower and each of its Subsidiaries, and each
member of its Controlled Group, have fulfilled their obligations under the
minimum funding standards of, and are in compliance in all material respects
with, ERISA and the Code to the extent applicable to any Plan maintained by any
one or more of them or for the benefit of their employees and have not incurred
any liability to the PBGC or a Plan under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA. Neither the
Borrower nor any Subsidiary has any material contingent liabilities with respect
to any post-retirement benefits under a Welfare Plan, other than liability for
continuation coverage described in article 6 of Title I of ERISA.
Section 6.17. Compliance with Laws. The Borrower and each of its
Subsidiaries are in compliance with the requirements of all federal, state and
local laws, rules and regulations applicable to or pertaining to their
Properties or business operations (including, without limitation, the
Occupational Safety and Health Act of 1970, the Americans with Disabilities Act
of 1990, laws and regulations relating to the providing of health care services
and products, and laws and regulations establishing quality criteria and
standards for air, water, land and toxic or hazardous wastes and substances),
where any such non-compliance, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect. Neither the Borrower nor any
Subsidiary has received notice to the effect that its operations
-36-
<PAGE>
are not in compliance with any of the requirements of applicable federal, state
or local environmental, health and safety statutes and regulations or are the
subject of any governmental investigation evaluating whether any remedial action
is needed to respond to a release of any toxic or hazardous waste or substance
into the environment, where any such non-compliance or remedial action,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect.
Section 6.18. Other Agreements. Neither the Borrower nor any Subsidiary
is in default under the terms of any covenant, indenture or agreement of or
affecting such Persons or any of their Properties, which default if uncured is
reasonably likely to have a Material Adverse Effect.
Section 6.19. Solvency. The Borrower and its Subsidiaries are able to pay
their debts as they become due and have sufficient capital to carry on their
businesses and all businesses in which they are about to engage in; and the
amount that will be required to pay the Borrower's and each Subsidiary's
probable liabilities as they become absolute and mature is less than the sum of
the present fair sale value of its assets as a going concern.
Section 6.20. Summit Acquisition. The Borrower has heretofore delivered
to the Banks a true and correct copy of the Summit Merger Agreement and, except
to the extent consented to in writing by the Agent, the Summit Merger Agreement
has not been amended or modified in any respect and no condition to the
effectiveness thereof or the obligations of the Borrower or Acquisition Corp.
thereunder has been waived. The Borrower and Acquisition Corp. and, to the best
of the Borrower's knowledge, Summit have all necessary right, power, and
authority to consummate the transactions contemplated by the Summit Merger
Agreement and to perform all of their obligations thereunder. The Summit Merger
Agreement has been duly authorized, executed, and delivered by the Borrower and
Acquisition Corp. and, to the best of the Borrower's knowledge, Summit and the
Summit Merger Agreement constitutes the valid and binding obligation of the
Borrower and Acquisition Corp. and, to the best of the Borrower's knowledge,
Summit, enforceable against each of them in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting creditors' rights generally and general principles of
equity (regardless of whether the application of such principles is considered
in a proceeding in equity or at law); and the Summit Merger Agreement does not,
nor does the observance or performance by the Borrower or Acquisition Corp. or,
to the best of the Borrower's knowledge, Summit of any of the matters and things
therein provided for, contravene or constitute a default under any provision of
law or any judgment, injunction, order, or decree binding upon such Person or
any provision of the charter, articles of incorporation, or by-laws of such
Person or any covenant, indenture, or agreement of or affecting such Person or
any of its Property, or result in the creation or imposition of any Lien on any
such Person's Property. No authorization, consent, license, or exemption from,
or filing or registration with, any court or governmental department, agency, or
instrumentality, nor any approval or consent of any other Person, is or will be
necessary to the valid execution, delivery, or performance by the Borrower or
Acquisition Corp. or, to the best of the Borrower's knowledge, Summit of the
Summit Merger Agreement or of any other instrument or document executed and
delivered in connection therewith, except for such thereof that have heretofore
been obtained and remain in
-37-
<PAGE>
full force and effect. Neither the Borrower nor Acquisition Corp. nor, to the
best of the Borrower's knowledge, Summit are in default in any of their
respective obligations under the Summit Merger Agreement. The fees and expenses
incurred or to be paid in connection with the Acquisition of Summit, the Summit
Merger, and the refinancing of the indebtedness of the Borrower and Summit
pursuant to this Agreement and the Subordinated Note Indenture, and the other
instruments and documents entered into in connection therewith, will not exceed
$35,000,000 (including make-whole premiums).
Section 6.21. Year 2000 Compliance. The Borrower and its Subsidiaries have
conducted and are continuing to conduct a review and assessment of its computer
applications, and have made and are continuing to make inquiry of their material
suppliers, vendors and customers, with respect to any defect in computer
software, data bases, hardware, controls and peripherals related to the
occurrence of the year 2000 or the use of any date after December 31, 1999, in
connection therewith. Based on the foregoing review, assessment and inquiry,
except with respect to matters brought to the Borrower's attention after the
date of this Agreement to the extent disclosed to the Agent and the Banks in
writing, the Borrower believes that no such defect could reasonably be expected
to have a Material Adverse Effect.
Section 6.22. No Default. No Default or Event of Default has occurred and
is continuing.
Section 7. Conditions Precedent.
The obligation of each Bank to advance, continue or convert any Loan (other
than the continuation of, or conversion into, a Base Rate Loan) or of the
Issuing Bank to issue, extend the expiration date (including by not giving
notice of non-renewal) of or increase the amount of any Letter of Credit under
this Agreement, shall be subject to the following conditions precedent:
Section 7.1. Initial Credit Event. Before or concurrently with the
initial Credit Event:
(a) the Agent shall have received for each Bank this Agreement duly
executed by the Borrower and the Banks;
(b) the Agent shall have received for each Bank such Bank's duly
executed Notes of the Borrower dated the date hereof and otherwise in
compliance with the provisions of Section 1.11 hereof;
(c) the Agent shall have received the Security Agreement and the
Pledge Agreement duly executed by the Borrower and each Subsidiary, and the
Guaranty duly executed by each Subsidiary, together with (i) original stock
certificates or other similar instruments or securities representing all of
the issued and outstanding shares of capital stock or other equity interest
of each Subsidiary as of the date of this Agreement (other than Alexandria
Convalescent Hospital, Inc.), (ii) stock powers for the Collateral
consisting of the stock or other equity interest of each Subsidiary (other
than Alexandria Convalescent Hospital, Inc.), each to be executed in blank
and undated, and (iii) UCC
-38-
<PAGE>
financing statements to be filed against the Borrower and each Subsidiary,
as debtor, in favor of the Agent, as secured party;
(d) the Agent shall have received evidence of insurance required to
be maintained under the Loan Documents, naming the Agent as loss payee;
(e) the Agent shall have received for each Bank copies of the
Borrower's and each Subsidiary's articles of incorporation and bylaws (or
comparable constituent documents) and any amendments thereto, certified in
each instance by its Secretary or Assistant Secretary;
(f) the Agent shall have received for each Bank copies of resolutions
of the Borrower's and of each Subsidiary's Board of Directors authorizing
the execution, delivery and performance of this Agreement and the other
Loan Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby, together with specimen
signatures of the persons authorized to execute such documents on the
Borrower's and such Subsidiary's behalf, all certified in each instance by
its Secretary or Assistant Secretary;
(g) the Agent shall have received for each Bank copies of the
certificates of good standing for the Borrower and for each Subsidiary
(dated no earlier than 30 days prior to the date hereof) from the office of
the secretary of the state of its incorporation and of each state in which
it is qualified to do business as a foreign corporation;
(h) the Agent shall have received for each Bank a list of the
Borrower's Authorized Representatives;
(i) the Agent shall have received for itself and for the Banks the
initial fees called for by Section 2.1 hereof;
(j) each Bank shall have received such evaluations and certifications
as it may reasonably require (including an officer's certificate as to the
solvency of the Borrower and its Subsidiaries after giving effect to the
transactions contemplated hereby and a compliance certificate in the form
attached hereto as Exhibit F containing compliance calculations of the
financial covenants as of the date of this Agreement after giving effect to
the Summit Merger) in order to satisfy itself as to the value of the
Collateral, the financial condition of the Borrower and its Subsidiaries,
and the lack of material contingent liabilities of the Borrower and its
Subsidiaries;
(k) the Agent shall have received pay-off and lien release letters
from secured creditors of the Borrower and its Subsidiaries setting forth,
among other things, the total amount of indebtedness outstanding and owing
to them (or outstanding letters of credit issued for the account of the
Borrower or any of its Subsidiaries) and containing an undertaking to cause
to be delivered to the Agent UCC termination statements and any other lien
release instrument necessary to release its Lien on all assets of the
Borrower
-39-
<PAGE>
and its Subsidiaries, which pay-off and lien release letters shall be in
form and substance acceptable to the Agent;
(l) the Agent shall have received evidence of the Summit Merger in
accordance with the terms of the Summit Merger Agreement (without giving
effect to any amendment, modification or waiver thereto not consented to in
writing by the Agent) and its effectiveness;
(m) the Borrower shall have issued Subordinated Debt in the principal
amount of not less than $120,000,000, on terms and conditions acceptable to
the Agent, and the Borrower shall have received the proceeds thereof;
(n) the Borrower shall have issued pay-in-kind preferred stock in the
amount of not less than $15,000,000, on terms and conditions acceptable to
the Agent, and the Borrower shall have received the proceeds thereof;
(o) the Agent shall have received for each Bank the favorable written
opinions of counsel to the Borrower and its Subsidiaries, in form and
substance reasonably satisfactory to the Agent.
Section 7.2. All Credit Events. As of the time of each Credit Event
hereunder:
(a) in the case of a Borrowing the Agent shall have received the
notice required by Section 1.6 hereof, in the case of the issuance of any
Letter of Credit the Agent shall have received a duly completed Application
for such Letter of Credit together with any fees called for by Section 2.1
hereof and, in the case of an extension or increase in the amount of a
Letter of Credit, a written request therefor in a form acceptable to the
Agent together with fees called for by Section 2.1 hereof;
(b) each of the representations and warranties set forth in Section 6
hereof shall be and remain true and correct as of such time, except to the
extent that any such representation or warranty relates solely to an
earlier time or that any change therein is not reasonably likely to have a
Material Adverse Effect;
(c) the Borrower shall be in compliance with all of the terms and
conditions hereof, and no Default or Event of Default shall have occurred
and be continuing hereunder or would occur as a result of such Credit
Event; and
(d) such Credit Event shall not violate any order, judgment or decree
of any court or other authority or any provision of law or regulation
applicable to any Bank (including, without limitation, Regulation U of the
Board of Governors of the Federal Reserve System).
Each request for a Borrowing hereunder and each request for the issuance
of, increase in the amount of, or extension of the expiration date of, a Letter
of Credit shall be deemed to be a
-40-
<PAGE>
representation and warranty by the Borrower on the date on such Credit Event as
to the facts specified in subsections (a) through (c), both inclusive, this
Section 7.2.
SECTION 8. COVENANTS.
The Borrower agrees that, so long as any Note or any L/C Obligation is
outstanding or any Commitment is available to or in use by the Borrower
hereunder, except to the extent compliance in any case or cases is waived in
writing by the Required Banks:
Section 8.1. Maintenance of Business. The Borrower shall, and shall
cause each Subsidiary to, preserve and maintain its existence, except as
otherwise provided in Section 8.10(c) hereof. The Borrower shall, and shall
cause each Subsidiary to, preserve and keep in force and effect all licenses,
permits, franchises, approvals, patents, trademarks, trade names, trade styles,
copyrights, and other proprietary rights necessary to the proper conduct of its
business where the failure to do so is reasonably likely to have a Material
Adverse Effect.
Section 8.2. Maintenance of Properties. The Borrower shall, and shall
cause each Subsidiary to, maintain, preserve and keep its property, plant and
equipment in good repair, working order and condition (ordinary wear and tear
excepted) and shall from time to time make all needful and proper repairs,
renewals, replacements, additions and betterments thereto so that at all times
the efficiency thereof shall be fully preserved and maintained, except to the
extent that, in the reasonable business judgment of such Person, any such
Property is no longer necessary for the proper conduct of the business of such
Person.
Section 8.3. Taxes and Assessments. The Borrower shall duly pay and
discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees and governmental charges upon or against it or its
Properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor.
Section 8.4. Insurance. The Borrower shall insure and keep insured, and
shall cause each Subsidiary to insure and keep insured, with insurance companies
with a general policyholder service rating of not less than A as rated in the
most current available Best's Insurance Report (except to the extent disclosed
on Schedule 8.4 hereof), all insurable Property owned by it which is of a
character usually insured by Persons similarly situated and operating like
Properties against loss or damage from such hazards and risks, and in such
amounts, as are insured by Persons similarly situated and operating like
Properties; and the Borrower shall insure, and shall cause each Subsidiary to
insure, such other hazards and risks (including professional liability,
employers' and public liability risks) with insurance companies with a general
policyholder service rating of not less than A as rated in the most current
available Best's Insurance Report as and to the extent usually insured by
Persons similarly situated and conducting similar businesses. The Borrower shall
in any event maintain, and cause each Subsidiary to maintain, insurance on the
Collateral to the extent required by the Collateral Documents. The Borrower
shall, upon the request of the Agent,
-41-
<PAGE>
furnish to the Agent and each Bank a certificate setting forth in summary form
the nature and extent of the insurance maintained pursuant to this Section.
Section 8.5. Financial Reports. The Borrower shall, and shall cause each
Subsidiary to, maintain a standard system of accounting in accordance with GAAP
and shall furnish to the Agent, each Bank and each of their duly authorized
representatives such information respecting the business and financial condition
of the Borrower and each Subsidiary as the Agent or such Bank may reasonably
request; and without any request, shall furnish to the Agent and the Banks:
(a) as soon as available, and in any event within 45 days after the
close of each fiscal quarter of each fiscal year of the Borrower, a copy of
the consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the last day of such period and the consolidated and
consolidating statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the fiscal quarter and for the fiscal
year-to-date period then ended, each in reasonable detail showing in
comparative form the figures for the corresponding date and period in the
previous fiscal year, prepared by the Borrower in accordance with GAAP and
certified to by the Borrower's chief financial officer, or another officer
of the Borrower reasonably acceptable to the Agent;
(b) as soon as available, and in any event within 90 days after the
close of each fiscal year of the Borrower, a copy of the consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries as of the
last day of the period then ended and the consolidated and consolidating
statements of income, retained earnings and cash flows of the Borrower and
its Subsidiaries for the period then ended, and accompanying notes thereto,
each in reasonable detail showing in comparative form the figures for the
previous fiscal year, accompanied in the case of the Borrower's
consolidated financial statements by an unqualified opinion of a Big Six
accounting firm or another firm of independent public accountants of
recognized national standing, selected by the Borrower and reasonably
satisfactory to the Required Banks, to the effect that the consolidated
financial statements have been prepared in accordance with GAAP and present
fairly, in all material respects, in accordance with GAAP the consolidated
financial condition of the Borrower and its Subsidiaries as of the close of
such fiscal year and the results of their operations and cash flows for the
fiscal year then ended and that an examination of such accounts in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and, accordingly, such examination
included such tests of the accounting records and such other auditing
procedures as were considered necessary in the circumstances;
(c) promptly after the sending or filing thereof, copies of each
financial statement, report, notice or proxy statement sent by the Borrower
or any Subsidiary to its stockholders, and copies of each regular, periodic
or special report, registration statement or prospectus (including all Form
10-K, Form 10-Q, and Form 8-K reports and proxy statements) filed by the
Borrower or any Subsidiary with any securities exchange or the Securities
and Exchange Commission or any successor agency;
-42-
<PAGE>
(d) promptly after receipt thereof, a copy of each audit made by any
regulatory agency of the books and records of the Borrower or any
Subsidiary or of any notice of material noncompliance with any applicable
law, regulation, or guideline relating to the Borrower or any Subsidiary or
any of their respective businesses;
(e) as soon as available, and in any event prior to the end of each
fiscal year of the Borrower, a copy of the Borrower's consolidated and
consolidating business plan for the following fiscal year, such business
plan to show the Borrower's projected consolidated and consolidating
revenues, expenses, and balance sheet on month-by-month basis, such
business plan to be in reasonable detail prepared by the Borrower and in
form reasonably satisfactory to the Agent which shall include a summary of
all assumptions made in preparing such business plan;
(g) notice of any Change of Control; and
(h) promptly after knowledge thereof shall have come to the attention
of any responsible officer of the Borrower, written notice of any
threatened or pending litigation or governmental proceeding or labor
controversy against the Borrower or any Subsidiary which, if adversely
determined, is reasonably likely to have a Material Adverse Effect or of
the occurrence of any Default or Event of Default hereunder.
Each of the financial statements furnished to the Banks pursuant to subsections
(a) and (b) of this Section 8.5 shall be accompanied by a written certificate in
the form attached hereto as Exhibit F signed by the chief financial officer of
the Borrower, or another officer of the Borrower reasonably acceptable to the
Agent, to the effect that to the best of such officer's knowledge and belief no
Default or Event of Default has occurred during the period covered by such
statements or, if any such Default or Event of Default has occurred during such
period, setting forth a description of such Default or Event of Default and
specifying the action, if any, taken by the Borrower or any Subsidiary to remedy
the same. Such certificate shall also set forth the calculations supporting
such statements in respect of Sections 8.23, 8.24, 8.25, 8.26 and 8.27 of this
Agreement.
Section 8.6. Inspection. The Borrower shall, and shall cause each
Subsidiary to, permit the Agent, each Bank and each of their duly authorized
representatives and agents to visit and inspect any of its Properties, corporate
books and financial records, to examine and make copies of its books of accounts
and other financial records, and to discuss its affairs, finances and accounts
with, and to be advised as to the same by, its officers, employees and
independent public accountants (and by this provision the Borrower hereby
authorizes such accountants to discuss with the Agent and such Banks the
finances and affairs of the Borrower and each Subsidiary) at such reasonable
times and intervals as the Agent or any such Bank may designate.
Section 8.7 Indebtedness for Borrowed Money. The Borrower shall not,
nor shall it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing shall not restrict nor operate to prevent:
-43-
<PAGE>
(a) the Obligations of the Borrower owing to the Agent and the Banks
hereunder;
(b) purchase money indebtedness and Capitalized Lease Obligations
(including purchase money indebtedness and Capitalized Lease Obligations
incurred in connection with the acquisition of real property) of the
Borrower and of its Subsidiaries in an aggregate amount not to exceed
$40,000,000 at any one time outstanding;
(c) obligations of the Borrower arising out of interest rate hedging
agreements entered into with financial institutions in the ordinary course
of business;
(d) guaranties expressly permitted by Section 8.9 hereof;
(e) indebtedness from time to time owing by the Borrower to any
Subsidiary or by any Subsidiary to the Borrower or any other Subsidiary;
(f) unsecured Subordinated Debt of the Borrower;
(g) indebtedness outstanding under the Existing Credit Agreements
which is paid and satisfied in full out of proceeds of the initial Credit
Event hereunder;
(h) other indebtedness existing on the date of this Agreement and
described on Schedule 8.7 attached hereto and made a part hereof, as
reduced from time to time by repayments thereof; and
(i) other indebtedness of the Borrower and its Subsidiaries not
otherwise permitted by this Section in an aggregate amount not to exceed
$1,000,000 at any one time outstanding.
Section 8.8. Liens. The Borrower shall not, nor shall it permit any other
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by any such Person; provided, however, that the foregoing shall
not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, statutory obligations or other similar
charges, good faith cash deposits in connection with tenders, contracts or
leases to which the Borrower or any Subsidiary is a party or other cash
deposits required to be made in the ordinary course of business, provided
in each case that the obligation is not for borrowed money and that the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves have been established therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers', or
other similar Liens arising in the ordinary course of business with respect
to obligations which
-44-
<PAGE>
are not due or which are being contested in good faith by appropriate
proceedings which prevent enforcement of the matter under contest;
(c) the pledge of assets for the purpose of securing an appeal, stay
or discharge in the course of any legal proceeding, provided that the
aggregate amount of liabilities of the Borrower and its Subsidiaries
secured by a pledge of assets permitted under this subsection, including
interest and penalties thereon, if any, shall not be in excess of
$2,000,000 at any one time outstanding;
(d) the Liens granted in favor of the Agent for the benefit of the
Agent and the Banks pursuant to the Collateral Documents;
(e) Liens on property of the Borrower or any Subsidiary created
solely for the purpose of securing indebtedness permitted by Section 8.7(b)
hereof, representing or incurred to finance, refinance or refund the
purchase price of Property, provided that no such Lien shall extend to or
cover other Property of the Borrower or such Subsidiary other than the
respective Property so acquired, and the principal amount of indebtedness
secured by any such Lien shall at no time exceed the original purchase
price of such Property;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not materially
detract from the value of the Property subject thereto or materially
interfere with the ordinary conduct of the business of the Borrower or any
Subsidiary;
(g) Liens described on Schedule 8.8 hereof securing the indebtedness
described therein;
(h) any interest or title of a lessor under any operating lease; and
(i) Liens on equipment not otherwise permitted by this Section
securing obligations in an aggregate amount not to exceed $500,000 at any
one time outstanding.
Section 8.9. Investments, Acquisitions, Loans, Advances and Guaranties.
The Borrower shall not, nor shall it permit any Subsidiary to, directly or
indirectly, make, retain or have outstanding any investments (whether through
purchase of stock or obligations or otherwise) in, or loans or advances (other
than for travel advances and other similar cash advances made to employees in
the ordinary course of business) to, any other Person, or acquire all or any
substantial part of the assets or business of any other Person or division
thereof, or be or become liable as endorser, guarantor, surety or otherwise for
any debt, obligation or undertaking of any other Person, or otherwise agree to
provide funds for payment of the obligations of another, or supply funds thereto
or invest therein or otherwise assure a creditor of another against loss, or
apply for or become liable to the issuer of a letter of credit which supports an
obligation of another, or subordinate any claim or demand it may have to
-45-
<PAGE>
the claim or demand of any other Person; provided, however, that the foregoing
shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of America
or of any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America, provided
that any such obligations shall mature within one year of the date of
issuance thereof;
(b) investments in commercial paper rated at least P-1 by Moody's and
at least A-1 by S&P maturing within one year of the date of issuance
thereof;
(c) investments in certificates of deposit issued by any Bank or by
any United States commercial bank having capital and surplus of not less
than $100,000,000 which have a maturity of one year or less;
(d) endorsement of items for deposit or collection of commercial
paper received in the ordinary course of business;
(e) the Borrower's investments from time to time in its Subsidiaries,
and investments made from time to time by a Subsidiary in one or more of
its Subsidiaries;
(f) guaranties issued by the Borrower or any Subsidiary guaranteeing
or otherwise supporting the repayment of indebtedness of the Borrower or
another Subsidiary otherwise permitted by Section 8.7 hereof;
(g) trade receivables from time to time owing to the Borrower or any
Subsidiary created or acquired in the ordinary course of its business;
(h) guaranties by the Borrower or any Subsidiary of the obligations
of any other Subsidiary, as lessee, under any real estate leases entered
into in the ordinary course of its business;
(i) intercompany advances made from time to time between the Borrower
and one or more Subsidiaries or between Subsidiaries;
(j) the Acquisition of Summit pursuant to the terms of the Summit
Merger Agreement, and other Acquisitions with respect to which all of the
following conditions have been satisfied: (i) the Acquired Business is in
an Eligible Line of Business, (ii) the Acquisition is not a Hostile
Acquisition, (iii) if the Total Consideration paid for the Target is more
than $5,000,000, the Acquisition EBITDA of the Target for the most recently
completed 12 month period must be greater than $1, (iv) the Total
Consideration for any single Acquisition does not exceed $25,000,000 and
the Total Consideration for all Acquisitions during any single fiscal year
of the Borrower does not exceed $25,000,000 in the aggregate, (v) prior to
consummating an Acquisition, the Borrower shall have notified the Agent and
the Banks in writing of the proposed Acquisition in reasonable detail
(including sources and uses of funds therefor) and
-46-
<PAGE>
furnished the Agent and the Banks historic and pro forma financial
information and compliance calculations reasonably satisfactory to the
Agent, and (vi) after giving effect to the Acquisition, no Default or Event
of Default shall exist, including with respect to the covenants contained
in Section 8 hereof on a pro forma basis;
(k) existing note receivable owing by William Scott in the principal
amount of not more than $2,600,000, and existing other note receivables
described on Schedule 8.9 hereof, in each case as reduced from time to time
by repayments of principal thereon; and
(l) other investments, loans, and advances in addition to those
otherwise permitted by this Section in an aggregate amount not to exceed
$4,000,000 at any one time outstanding.
In determining the amount of investments, acquisitions, loans, advances and
guaranties permitted under this Section, investments and acquisitions shall
always be taken at the original cost thereof (regardless of any subsequent
appreciation or depreciation therein), loans and advances shall be taken at the
principal amount thereof then remaining unpaid, and guaranties shall be taken at
the amount of the obligations guaranteed thereby.
Section 8.10. Mergers, Consolidations and Sales. The Borrower shall not,
nor shall it permit any Subsidiary to, be a party to any merger or
consolidation, or sell, transfer, lease or otherwise dispose of its Property,
including any disposition of Property as part of a sale and leaseback
transaction, or in any event sell or discount (with or without recourse) any of
its notes or accounts receivable; provided, however, that this Section shall not
apply to nor operate to prevent:
(a) the sale or lease of inventory in the ordinary course of
business;
(b) the sale, transfer, lease, or other disposition of Property of
the Borrower or any Subsidiary to one another in the ordinary course of its
business;
(c) a merger of any Subsidiary with and into the Borrower or any
other Subsidiary or a merger of a Target with and into a Subsidiary or the
Borrower pursuant to an Acquisition permitted by Section 8.9(j) hereof;
provided that, in the case of any merger involving the Borrower, the
Borrower is the corporation surviving the merger;
(d) the sale of delinquent notes or accounts receivable in the
ordinary course of business for purposes of collection only (and not for
the purpose of any bulk sale or securitization transaction);
(e) the sale, transfer, or other disposition of any tangible personal
property that, in the reasonable business judgment of the Borrower or its
Subsidiary, has become uneconomical, obsolete, or worn out, and which is
disposed of in the ordinary course of business; and
-47-
<PAGE>
(f) the sale, transfer, lease, or other disposition of Property of
the Borrower or any Subsidiary aggregating for the Borrower and its
Subsidiaries not more than $1,000,000 during any 12-month period;
In the event of any merger permitted by Section 8.10(c) above, the Borrower
shall give the Agent and the Banks prior written notice of any such event and,
immediately after giving effect to any such merger, Schedule 6.2 of this
Agreement shall be deemed amended excluding reference to any such Subsidiary
merged out of existence. So long as no Default or Event of Default has occurred
and is continuing or would arise as a result thereof, upon the written request
of the Borrower, the Agent shall release its Lien on any Property sold pursuant
to subsections (a), (d), (e), or (f) above.
Section 8.11. Maintenance of Subsidiaries. The Borrower shall not assign,
sell or transfer, nor shall it permit any Subsidiary to issue, assign, sell or
transfer, any shares of capital stock of a Subsidiary; provided, however, that
the foregoing shall not operate to prevent (i) the Lien on the capital stock of
each Subsidiary granted to the Agent pursuant to the Collateral Documents, (ii)
the issuance, sale and transfer to any person of any shares of capital stock of
a Subsidiary solely for the purpose of qualifying, and to the extent legally
necessary to qualify, such person as a director of such Subsidiary, and (iii)
any transaction permitted by Section 8.10(c) above.
Section 8.12. Dividends and Certain Other Restricted Payments. The
Borrower shall not, nor shall it permit any Subsidiary to, (i) declare or pay
any dividends on or make any other distributions in respect of any class or
series of its capital stock (other than dividends payable solely in its capital
stock) or (ii) directly or indirectly purchase, redeem or otherwise acquire or
retire any of its capital stock; provided, however, that the foregoing shall not
operate to prevent (a) the making of dividends or distributions by any Wholly-
Owned Subsidiary to its parent corporation or (b) the purchase by the Borrower
of its capital stock from former officers or employees, or their estates, who
have been terminated or have died with an aggregate purchase price of not more
than $200,000 during any calendar year so long as at the time of any such
purchase, and after giving effect thereto, no Default or Event of Default
exists.
Section 8.13. ERISA. The Borrower shall, and shall cause each
Subsidiary to, promptly pay and discharge all obligations and liabilities
arising under ERISA pertaining to a Plan of a character which if unpaid or
unperformed is reasonably likely to result in the imposition of a Lien against
any of its Properties. The Borrower shall, and shall cause each Subsidiary to,
promptly notify the Agent of (i) the occurrence of any reportable event (as
defined in ERISA) with respect to a Plan, (ii) receipt of any notice from the
PBGC of its intention to seek termination of any Plan or appointment of a
trustee therefor, (iii) its intention to terminate or withdraw from any Plan,
and (iv) the occurrence of any event with respect to any Plan which would result
in the incurrence by the Borrower or any Subsidiary of any material liability,
fine or penalty, or any material increase in the contingent liability of the
Borrower or any Subsidiary with respect to any post-retirement Welfare Plan
benefit.
-48-
<PAGE>
Section 8.14. Compliance with Laws. The Borrower shall, and shall cause
each Subsidiary to, comply in all respects with the requirements of all federal,
state and local laws, rules, regulations, ordinances and orders applicable to or
pertaining to its Properties or business operations, where any such non-
compliance, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect or is reasonably likely to result in a Lien upon any of
their Property.
Section 8.15. Burdensome Contracts With Affiliates. The Borrower shall not,
nor shall it permit any Subsidiary to, enter into any contract, agreement or
business arrangement with any of its Affiliates on terms and conditions which
are less favorable to the Borrower or such Subsidiary than would be usual and
customary in similar contracts, agreements or business arrangements between
Persons not affiliated with each other.
Section 8.16. No Changes in Fiscal Year. The Borrower shall not change
its fiscal year from its present basis without the prior written consent of the
Required Banks.
Section 8.17. Formation of Subsidiaries. Promptly upon the formation or
Agent and the Banks written notice thereof and shall do such acquisition of any
Subsidiary, the Borrower shall provide the acts and things as are required of it
to comply with Section 4 hereof, and then and thereafter Schedule 6.2 of this
Agreement shall be deemed amended from and after such date to include reference
to any such Subsidiary.
Section 8.18. Change in the Nature of Business. The Borrower shall not,
nor shall it permit any Subsidiary to, engage in any business or activity if as
a result the general nature of the business of the Borrower or any Subsidiary
would be changed in any material respect from the general nature of the business
engaged in by it as of the date of this Agreement or as of the date such Person
becomes a Subsidiary hereunder.
Section 8.19. Use of Loan Proceeds. The Borrower shall use the credit
extended under this Agreement solely for the purposes set forth in, or otherwise
permitted by, Section 6.4 hereof.
Section 8.20. No Restrictions on Subsidiary Distributions. Except as
provided herein, the Borrower shall not, nor shall it permit any Subsidiary to,
directly or indirectly create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of the Borrower or any Subsidiary to: (a) guarantee the Obligations and grant
Liens on its assets to the Agent for the benefit of the Banks as required by
Section 4 hereof; (b) in the case of any Subsidiary, pay dividends or make any
other distribution on any of such Subsidiary's capital stock or other equity
interests owned by the Borrower or any Subsidiary; (c) pay any indebtedness owed
to the Borrower or any Subsidiary; (d) make loans or advances to the Borrower or
any Subsidiary; or (e) transfer any of its property or assets to the Borrower or
any Subsidiary.
Section 8.21. Alexandria. So long as Alexandria is a Subsidiary,
directly or indirectly, of the Borrower and the capital stock of Alexandria is
not subject to a first priority, perfected Lien in favor of the Agent pursuant
to the Collateral Documents, the Borrower shall not permit
-49-
<PAGE>
the total tangible assets of Alexandria to have a book value in excess of 2% of
the Borrower's consolidated total tangible assets or the gross revenues of
Alexandria to be in excess of 4% of the Borrowers consolidated total revenues.
Section 8.22. Subordinated Debt. The Borrower shall at all times ensure
that all Obligations now existing or hereafter arising constitute "Senior Debt",
or words of like import, under each indenture, instrument, or agreement
evidencing or otherwise setting forth the terms or conditions applicable to any
outstanding Subordinated Debt. Without limiting the foregoing, the Borrower
hereby irrevocably designates the Obligations, whether now existing or hereafter
arising, as Senior Debt under the terms of the Subordinated Note Indenture. The
Borrower shall not, nor shall it permit any Subsidiary to, amend or modify any
of the terms and conditions relating to any Subordinated Debt or make any
voluntary prepayment thereof or affect any voluntary redemption thereof or make
any payment on account of Subordinated Debt which is prohibited under the terms
of any instrument or agreement subordinating the same to the Obligations.
Section 8.23. Leverage Ratio. As of the last day of each fiscal quarter
of the Borrower ending on or about June 30th and December 31st of each year
occurring during the periods specified below, the Borrower shall not permit the
Leverage Ratio as of the last day of the relevant fiscal quarter to be greater
than or equal to:
<TABLE>
<CAPTION>
RATIO SHALL NOT BE GREATER
FROM AND INCLUDING TO AND INCLUDING THAN OR EQUAL TO
<S> <C> <C>
the date hereof 12/31/98 6.5 to 1.0
01/01/99 06/30/99 6.25 to 1.0
07/01/99 12/31/99 6.0 to 1.0
01/01/2000 06/30/2000 5.5 to 1.0
07/01/2000 12/31/2000 5.0 to 1.0
01/01/2001 06/30/2001 4.75 to 1.0
07/01/2001 12/31/2001 4.5 to 1.0
01/01/2002 at all times thereafter 4.25 to 1.0
</TABLE>
Section 8.24. Senior Leverage Ratio. As of the last day of each
fiscal quarter of the Borrower ending on or about June 30th and December 31st of
each year occurring during the periods specified below, the Borrower shall not
permit the Senior Leverage Ratio as of the last day of the relevant fiscal
quarter to be greater than or equal to:
-50-
<PAGE>
RATIO SHALL NOT BE GREATER
FROM AND INCLUDING TO AND INCLUDING THAN OR EQUAL TO
the date hereof 12/31/98 4.5 to 1.0
01/01/99 06/30/99 4.0 to 1.0
07/01/99 12/31/99 3.75 to 1.0
01/01/2000 at all times thereafter 3.5 to 1.0
Section 8.25. Net Worth. The Borrower shall, at all times, maintain Net
Worth of not less than the sum of (a) 87% of the Borrower's Net Worth on the
date of this Agreement (such amount to be reasonably determined by the Borrower
and established to the reasonable satisfaction of the Agent based on the
Borrower's closing date balance sheet to be furnished to the Agent within 30
days of the date hereof), plus (b) 75% of Net Income for each fiscal quarter of
the Borrower ending after the date of this Agreement for which such Net Income
is a positive amount (i.e., there shall be no reduction to the amount of Net
Worth required to be maintained hereunder for any such period in which Net
Income is less than zero), plus (c) 100% of the Net Cash Proceeds received by
the Borrower from any offering of equity securities of the Borrower after the
date of this Agreement, plus (d) 100% of the amount of any Indebtedness for
Borrowed Money converted into equity securities of the Borrower after the date
of this Agreement.
Section 8.26. Fixed Charge Coverage Ratio. As of the last day of each
fiscal quarter of the Borrower, the Borrower shall maintain a ratio of (a)
EBITDAR for the four fiscal quarters of the Borrower then ended less the sum of
(x) Fixed Asset Maintenance Expenditures incurred during such period and (y)
cash payments made during such period with respect to federal, state, and local
income taxes to (b) the aggregate amount of payments required to be made by the
Borrower and its Subsidiaries during the four fiscal quarters of the Borrower
then ended in respect of all principal on all Indebtedness for Borrowed Money
(whether at maturity, as a result of mandatory sinking fund redemption,
mandatory prepayment, acceleration or otherwise) plus Interest Expense and
Rental Expense for the same four fiscal quarter period then ended, of not less
than 1.15 to 1.0.
Section 8.27. Capital Expenditures. The Borrower shall not, nor shall it
permit any other Subsidiary to, incur Capital Expenditures (excluding from the
determination of Capital Expenditures hereunder Acquisitions permitted by
Section 8.9(j) of this Agreement) in an aggregate amount in excess of (a)
$10,000,000 during the 12-month period ending on June 30, 1999, and (b)
$15,000,000 during any 12-month period ending on June 30th of each year ending
thereafter.
Section 9. Events of Default and Remedies.
Section 9.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" hereunder:
-51-
<PAGE>
(a) default in the payment when due of all or any part of the
principal of or interest on any Note (whether at the stated maturity
thereof or at any other time provided for in this Agreement), or default in
the payment when due of any Reimbursement Obligation or of any fee or other
Obligation payable hereunder or under any other Loan Document;
(b) default in the observance or performance of any covenant set forth
in Section 8 hereof or of any provision in any Loan Document dealing with
the use, disposition or remittance of the proceeds of Collateral or
requiring the maintenance of insurance thereon;
(c) default in the observance or performance of any other provision
hereof or of any other Loan Document which is not remedied within 30 days
after the earlier of (i) the date on which such failure shall first become
known to any responsible officer of the Borrower or (ii) written notice
thereof is given to the Borrower by the Agent;
(d) any representation or warranty made herein or in any other Loan
Document or in any certificate furnished to the Agent or the Banks pursuant
hereto or thereto or in connection with any transaction contemplated hereby
or thereby proves untrue in any material respect as of the date of the
issuance or making or deemed making thereof;
(e) any event occurs or condition exists (other than those described
in subsections (a) through (d) above) which is specified as an event of
default under any of the other Loan Documents, or any of the Loan Documents
shall for any reason not be or shall cease to be in full force and effect
or is declared to be null and void, or any of the Collateral Documents
shall for any reason fail to create a valid and perfected first priority
Lien in favor of the Agent in any Collateral purported to be covered
thereby except as expressly permitted by the terms thereof, or any
Subsidiary takes any action for the purpose of terminating, repudiating or
rescinding any Loan Document executed by it or any of its obligations
thereunder;
(f) default shall occur under any Indebtedness for Borrowed Money
aggregating in excess of $2,000,000 issued, assumed or guaranteed by the
Borrower or any Subsidiary, or under any indenture, agreement or other
instrument under which the same may be issued, and such default shall
continue for a period of time sufficient to permit the acceleration of the
maturity of any such Indebtedness for Borrowed Money (whether or not such
maturity is in fact accelerated), or any such Indebtedness for Borrowed
Money shall not be paid when due (whether by demand, lapse of time,
acceleration or otherwise);
(g) any judgment or judgments, writ or writs or warrant or warrants of
attachment, or any similar process or processes in an aggregate amount in
excess of $2,000,000 in excess of any applicable insurance coverage shall
be entered or filed against the Borrower or any Subsidiary, or against any
of its Property, and which remains undischarged, unvacated, unbonded or
unstayed for a period of 30 days;
-52-
<PAGE>
(h) the Borrower or any Subsidiary, or any member of its Controlled
Group, shall fail to pay when due an amount or amounts aggregating in
excess of $2,000,000 which it shall have become liable to pay to the PBGC
or to a Plan under Title IV of ERISA; or notice of intent to terminate a
Plan or Plans having aggregate Unfunded Vested Liabilities in excess of
$2,000,000 (collectively, a "Material Plan") shall be filed under Title IV
of ERISA by the Borrower or any Subsidiary, or any other member of its
Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding shall be instituted by a fiduciary of any
Material Plan against the Borrower or any Subsidiary, or any member of its
Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
(i) the Borrower or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of creditors, (iv) apply for, seek, consent to,
or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part of
its Property, (v) institute any proceeding seeking to have entered against
it an order for relief under the United States Bankruptcy Code, as amended,
to adjudicate it insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it
or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action in furtherance of any matter
described in parts (i) through (v) above, or (vii) fail to contest in good
faith any appointment or proceeding described in Section 9.1(j) hereof;
(j) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any Subsidiary or any
substantial part of any of its Property, or a proceeding described in
Section 9.1(i)(v) shall be instituted against the Borrower or any
Subsidiary, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of 30 days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default other than
those described in subsection (i) or (j) of Section 9.1 hereof has occurred and
is continuing, the Agent shall, by written notice to the Borrower: (a) if so
directed by the Required Banks, terminate the remaining Commitments and all
other obligations of the Banks hereunder on the date stated in such notice
(which may be the date thereof); (b) if so directed by the Required Banks,
declare the principal of and the accrued interest on all outstanding Notes to be
forthwith due and payable and thereupon all outstanding Notes, including both
principal and interest thereon, shall be and become immediately due and payable
together with all other amounts payable under the Loan Documents without further
demand, presentment, protest or notice of any kind; and (c) if so directed by
the Required Banks, demand that the Borrower
-53-
<PAGE>
immediately pay to the Agent the full amount then available for drawing under
each or any Letter of Credit, and the Borrower agrees to immediately make such
payment and acknowledges and agrees that the Banks would not have an adequate
remedy at law for failure by the Borrower to honor any such demand and that the
Agent, for the benefit of the Banks, shall have the right to require the
Borrower to specifically perform such undertaking whether or not any drawings or
other demands for payment have been made under any Letter of Credit. The Agent,
after giving notice to the Borrower pursuant to Section 9.1(c) or this Section
9.2, shall also promptly send a copy of such notice to the other Banks, but the
failure to do so shall not impair or annul the effect of such notice.
Section 9.3. Bankruptcy Defaults. When any Event of Default described in
subsections (i) or (j) of Section 9.1 hereof has occurred and is continuing,
then all outstanding Notes shall immediately become due and payable together
with all other amounts payable under the Loan Documents without presentment,
demand, protest or notice of any kind, the obligation of the Banks to extend
further credit pursuant to any of the terms hereof shall immediately terminate
and the Borrower shall immediately pay to the Agent the full amount then
available for drawing under all outstanding Letters of Credit, the Borrower
acknowledging and agreeing that the Banks would not have an adequate remedy at
law for failure by the Borrower to honor any such demand and that the Banks, and
the Agent on their behalf, shall have the right to require the Borrower to
specifically perform such undertaking whether or not any draws or other demands
for payment have been made under any of the Letters of Credit.
Section 9.4. Collateral for Undrawn Letters of Credit. (a) If the
prepayment of the amount available for drawing under any or all outstanding
Letters of Credit is required under Section 1.9(b) or under Section 9.2 or 9.3
above, the Borrower shall forthwith pay the amount required to be so prepaid, to
be held by the Agent as provided in subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above shall be held by
the Agent in a separate collateral account (such account, and the credit
balances, properties and any investments from time to time held therein, and any
substitutions for such account, any certificate of deposit or other instrument
evidencing any of the foregoing and all proceeds of and earnings on any of the
foregoing being collectively called the "Account") as security for, and for
application by the Agent (to the extent available) to, the reimbursement of any
payment under any Letter of Credit then or thereafter made by the Agent, and to
the payment of the unpaid balance of any Loans and all other Obligations. The
Account shall be held in the name of and subject to the exclusive dominion and
control of the Agent for the benefit of the Agent and the Banks. If and when
requested by the Borrower, the Agent shall invest funds held in the Account from
time to time in direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America with a remaining maturity of one year or less, provided that the Agent
is irrevocably authorized to sell investments held in the Account when and as
required to make payments out of the Account for application to amounts due and
owing from the Borrower to the Agent or Banks; provided, however, that if (i)
the Borrower shall have made payment of all such obligations referred to in
subsection (a) above, (ii) all relevant preference or other disgorgement periods
relating to the receipt of such payments have passed, and (iii) no Letters of
Credit,
-54-
<PAGE>
Commitments, Loans or other Obligations remain outstanding hereunder, then the
Agent shall release to the Borrower any remaining amounts held in the Account.
Section 9.5. Notice of Default. The Agent shall give notice to the
Borrower under Section 9.1(c) hereof promptly upon being requested to do so by
any Bank and shall thereupon notify all the Banks thereof.
Section 9.6. Expenses. The Borrower agrees to pay to the Agent and each
Bank, and any other holder of any Note outstanding hereunder, all expenses
reasonably incurred or paid by the Agent and such Bank or any such holder,
including reasonable attorneys' fees and court costs, in connection with any
Default or Event of Default by the Borrower hereunder or in connection with the
enforcement of any of the Loan Documents.
Section 10. Change in Circumstances.
Section 10.1. Change of Law. Notwithstanding any other provisions of this
Agreement or any Note, if at any time any change in applicable law or regulation
or in the interpretation thereof makes it unlawful for any Bank to make or
continue to maintain any Eurodollar Loans or to perform its obligations as
contemplated hereby, such Bank shall promptly give notice thereof to the
Borrower and such Bank's obligations to make or maintain Eurodollar Loans under
this Agreement shall be suspended until it is no longer unlawful for such Bank
to make or maintain Eurodollar Loans. The Borrower shall prepay on demand the
outstanding principal amount of any such affected Eurodollar Loans, together
with all interest accrued thereon and all other amounts then due and payable to
such Bank under this Agreement; provided, however, subject to all of the terms
and conditions of this Agreement, the Borrower may then elect to borrow the
principal amount of the affected Eurodollar Loans from such Bank by means of
Base Rate Loans from such Bank, which Base Rate Loans shall not be made ratably
by the Banks but only from such affected Bank.
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or
Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period
for any Borrowing of Eurodollar Loans:
(a) the Agent determines that deposits in U.S. Dollars (in the
applicable amounts) are not being offered to it in the interbank eurodollar
market for such Interest Period, or that by reason of circumstances
affecting the interbank eurodollar market adequate and reasonable means do
not exist for ascertaining the applicable LIBOR, or
(b) the Required Banks advise the Agent that (i) LIBOR as determined
by the Agent will not adequately and fairly reflect the cost to such Banks
of funding their Eurodollar Loans for such Interest Period or (ii) that the
making or funding of Eurodollar Loans become impracticable,
then the Agent shall forthwith give notice thereof to the Borrower and the
Banks, whereupon until the Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist, the obligations of the Banks to
make Eurodollar Loans shall be suspended.
-55-
<PAGE>
Section 10.3. Increased Cost and Reduced Return. (a) If, on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Lending Office) to any tax, duty
or other charge with respect to its Eurodollar Loans, its Notes, its
Letter(s) of Credit, or its participation in any thereof, any Reimbursement
Obligations owed to it or its obligation to make Eurodollar Loans, issue a
Letter of Credit, or to participate therein, or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the principal
of or interest on its Eurodollar Loans, Letter(s) of Credit, or
participations therein or any other amounts due under this Agreement or any
other Loan Document in respect of its Eurodollar Loans, Letter(s) of
Credit, any participation therein, any Reimbursement Obligations owed to
it, or its obligation to make Eurodollar Loans, or issue a Letter of
Credit, or acquire participations therein (except for changes in the rate
of tax on the overall net income of such Bank or its Lending Office imposed
by the jurisdiction in which such Bank's principal executive office or
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Eurodollar Loans any such
requirement included in an applicable Eurodollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Bank (or its Lending Office) or shall impose on any Bank (or its
Lending Office) or on the interbank market any other condition affecting
its Eurodollar Loans, its Notes, its Letter(s) of Credit, or its
participation in any thereof, any Reimbursement Obligation owed to it, or
its obligation to make Eurodollar Loans, or to issue a Letter of Credit, or
to participate therein;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Eurodollar Loan, issuing or
maintaining a Letter of Credit, or participating therein, or to reduce the
amount of any sum received or receivable by such Bank (or its Lending Office)
under this Agreement or under any other Loan Document with respect thereto, by
an amount deemed by such Bank to be material, then, within 15 days after demand
by such Bank (with a copy to the Agent), the Borrower shall be obligated to pay
to such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If, after the date hereof, any Bank or the Agent shall have determined
that the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Lending Office) with any request or directive
-56-
<PAGE>
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has had the effect of reducing the
rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's policies
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by such Bank (with
a copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such reduction.
(c) A certificate of a Bank claiming compensation under this Section
9.3 and setting forth the additional amount or amounts to be paid to it
hereunder shall be prima facie correct. In determining such amount, such Bank
may use any reasonable averaging and attribution methods.
Section 10.4. Lending Offices. Each Bank may, at its option, elect to make
its Loans hereunder at the branch, office or affiliate specified on the
appropriate signature page hereof (each a "Lending Office") for each type of
Loan available hereunder or at such other of its branches, offices or affiliates
as it may from time to time elect and designate in a written notice to the
Borrower and the Agent.
Section 10.5. Discretion of Bank as to Manner of Funding. Notwithstanding
any other provision of this Agreement, each Bank shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder with respect to Eurodollar Loans shall be made as if
each Bank had actually funded and maintained each Eurodollar Loan through the
purchase of deposits in the interbank eurodollar market having a maturity
corresponding to such Loan's Interest Period and bearing an interest rate equal
to LIBOR for such Interest Period.
Section 11. The Agent and Issuing Bank;.
Section 11.1. Appointment and Authorization of Agent. Each Bank hereby
appoints Bank of Montreal as the Agent under the Loan Documents and hereby
authorizes the Agent to take such action as Agent on its behalf and to exercise
such powers under the Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto. The
Banks expressly agree that the Agent is not acting as a fiduciary of the Banks
in respect of the Loan Documents, the Borrower or otherwise, and nothing herein
or in any of the other Loan Documents shall result in any duties or obligations
on the Agent or any of the Banks except as expressly set forth herein.
Section 11.2. Agent and its Affiliates. The Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any other
Bank and may exercise or refrain from exercising such rights and power as though
it were not the Agent, and the Agent and its affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Borrower or any Affiliate of the Borrower as if it were not the Agent under the
Loan Documents. The term "Bank" as used herein and in all other Loan Documents,
-57-
<PAGE>
unless the context otherwise clearly requires, includes the Agent in its
individual capacity as a Bank. References in Section 1 hereof to the Agent's
Loans, or to the amount owing to the Agent for which an interest rate is being
determined, refer to the Agent in its individual capacity as a Bank.
Section 11.3. Action by Agent. If the Agent receives from the Borrower a
written notice of an Event of Default pursuant to Section 8.5 hereof, the Agent
shall promptly give each of the Banks written notice thereof. The obligations of
the Agent under the Loan Documents are only those expressly set forth therein.
Without limiting the generality of the foregoing, the Agent shall not be
required to take any action hereunder with respect to any Default or Event of
Default, except as expressly provided in Sections 9.2 and 9.5. Upon the
occurrence of an Event of Default, the Agent shall take such action to enforce
its Lien on the Collateral and to preserve and protect the Collateral as may be
directed by the Required Banks. Unless and until the Required Banks give such
direction, the Agent may (but shall not be obligated to) take or refrain from
taking such actions as it deems appropriate and in the best interest of all the
Banks. In no event, however, shall the Agent be required to take any action in
violation of applicable law or of any provision of any Loan Document, and the
Agent shall in all cases be fully justified in failing or refusing to act
hereunder or under any other Loan Document unless it first receives any further
assurances of its indemnification from the Banks that it may require, including
prepayment of any related expenses and any other protection it requires against
any and all costs, expense, and liability which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall be entitled to
assume that no Default or Event of Default exists unless notified in writing to
the contrary by a Bank or the Borrower. In all cases in which the Loan Documents
do not require the Agent to take specific action, the Agent shall be fully
justified in using its discretion in failing to take or in taking any action
thereunder. Any instructions of the Required Banks, or of any other group of
Banks called for under the specific provisions of the Loan Documents, shall be
binding upon all the Banks and the holders of the Obligations.
Section 11.4. Consultation with Experts. The Agent may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
Section 11.5. Liability of Agent; Credit Decision. Neither the Agent nor
any of its directors, officers, agents, or employees shall be liable for any
action taken or not taken by it in connection with the Loan Documents: (i) with
the consent or at the request of the Required Banks or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify: (i) any statement, warranty or
representation made in connection with this Agreement, any other Loan Document
or any Credit Event; (ii) the performance or observance of any of the covenants
or agreements of the Borrower or any Subsidiary contained herein or in any other
Loan Document; (iii) the satisfaction of any condition specified in Section 7
hereof, except receipt of items required to be delivered to the Agent; or (iv)
the validity, effectiveness, genuineness, enforceability, perfection, value,
worth or collectibility hereof or of any other Loan Document or of any other
documents or writing
-58-
<PAGE>
furnished in connection with any Loan Document or of any Collateral; and the
Agent makes no representation of any kind or character with respect to any such
matter mentioned in this sentence. The Agent may execute any of its duties under
any of the Loan Documents by or through employees, agents, and attorneys-in-fact
and shall not be answerable to the Banks, the Borrower, or any other Person for
the default or misconduct of any such agents or attorneys-in-fact selected with
reasonable care. The Agent shall not incur any liability by acting in reliance
upon any notice, consent, certificate, other document or statement (whether
written or oral) believed by it to be genuine or to be sent by the proper party
or parties. In particular and without limiting any of the foregoing, the Agent
shall have no responsibility for confirming the accuracy of any compliance
certificate or other document or instrument received by it under the Loan
Documents. The Agent may treat the payee of any Note as the holder thereof until
written notice of transfer shall have been filed with the Agent signed by such
payee in form satisfactory to the Agent. Each Bank acknowledges that it has
independently and without reliance on the Agent or any other Bank, and based
upon such information, investigations and inquiries as it deems appropriate,
made its own credit analysis and decision to extend credit to the Borrower in
the manner set forth in the Loan Documents. It shall be the responsibility of
each Bank to keep itself informed as to the creditworthiness of the Borrower and
its Subsidiaries, and the Agent shall have no liability to any Bank with respect
thereto.
Section 11.6. Indemnity. The Banks shall ratably, in accordance with their
respective Percentages, indemnify and hold the Agent, and its directors,
officers, employees, agents and representatives harmless from and against any
liabilities, losses, costs or expenses suffered or incurred by it under any Loan
Document or in connection with the transactions contemplated thereby, regardless
of when asserted or arising, except to the extent they are promptly reimbursed
for the same by the Borrower and except to the extent that any event giving rise
to a claim was caused by the gross negligence or willful misconduct of the party
seeking to be indemnified. The obligations of the Banks under this Section shall
survive termination of this Agreement.
Section 11.7. Resignation of Agent and Successor Agent. The Agent may
resign at any time by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation of the Agent, the Required Banks shall have
the right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation then
the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be any Bank hereunder or any commercial bank organized under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $200,000,000. Upon the acceptance of its
appointment as the Agent hereunder, such successor Agent shall thereupon succeed
to and become vested with all the rights and duties of the retiring Agent under
the Loan Documents, and the retiring Agent shall be discharged from its duties
and obligations thereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 11 and all protective provisions of the
other Loan Documents shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.
-59-
<PAGE>
Section 11.8. Interest Rate Hedging Arrangements. By virtue of a Bank's
execution of this Agreement or an Assignment Agreement, as the case may be, any
Affiliate of such Bank with whom the Borrower has entered into an agreement
creating Hedging Liability shall be deemed a Bank party hereto for purpose of
any reference in a Loan Document to the parties for whom the Agent is acting, it
being understood and agreed that the rights and benefits of such Affiliate under
the Loan Documents consist exclusively of such Affiliate's right to share in
payments and collections out of the Collateral and the guaranties as more fully
set forth in other provisions hereof.
Section 11.9. Issuing Bank. The Issuing Bank shall act on behalf of the
Banks with respect to any Letters of Credit issued by it and the documents
associated therewith. The Issuing Bank shall have all of the benefits and
immunities (i) provided to the Agent in this Section 11 with respect to any acts
taken or omissions suffered by the Issuing Bank in connection with Letters of
Credit issued by it or proposed to be issued by it and the Applications
pertaining to such Letters of Credit as fully as if the term "Agent", as used in
this Section 11, included Issuing Bank with respect to such acts or omissions
and (ii) as additionally provided in this Agreement with respect to such Issuing
Bank.
Section 12. Miscellaneous;.
Section 12.1. Withholding Taxes. (a) Payments Free of Withholding. Except
as otherwise required by law and subject to Section 12.1(b) hereof, each payment
by the Borrower under this Agreement or the other Loan Documents shall be made
without withholding for or on account of any present or future taxes (other than
overall net income taxes on the recipient) imposed by or within the jurisdiction
in which the Borrower is domiciled, any jurisdiction from which the Borrower
makes any payment, or (in each case) any political subdivision or taxing
authority thereof or therein. If any such withholding is so required, the
Borrower shall make the withholding, pay the amount withheld to the appropriate
governmental authority before penalties attach thereto or interest accrues
thereon and forthwith pay such additional amount as may be necessary to ensure
that the net amount actually received by each Bank and the Agent free and clear
of such taxes (including such taxes on such additional amount) is equal to the
amount which that Bank or the Agent (as the case may be) would have received had
such withholding not been made. If the Agent or any Bank pays any amount in
respect of any such taxes, penalties or interest, the Borrower shall reimburse
the Agent or such Bank for that payment on demand in the currency in which such
payment was made. If the Borrower pays any such taxes, penalties or interest, it
shall deliver official tax receipts evidencing that payment or certified copies
thereof to the Bank or Agent on whose account such withholding was made (with a
copy to the Agent if not the recipient of the original) on or before the
thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Agent on or before the earlier of the date the
initial Credit Event is made hereunder and 30 days after the date hereof, two
duly completed and signed copies of either Form 1001 (relating to such Bank and
entitling it to a complete exemption from withholding under the Code on all
amounts to be received by such Bank, including fees, pursuant to the Loan
-60-
<PAGE>
Documents and the Loans) or Form 4224 (relating to all amounts to be received by
such Bank, including fees, pursuant to the Loan Documents and the Loans) of the
United States Internal Revenue Service. Thereafter and from time to time, each
Bank shall submit to the Borrower and the Agent such additional duly completed
and signed copies of one or the other of such Forms (or such successor forms as
shall be adopted from time to time by the relevant United States taxing
authorities) as may be (i) requested by the Borrower in a written notice,
directly or through the Agent, to such Bank and (ii) required under then-current
United States law or regulations to avoid or reduce United States withholding
taxes on payments in respect of all amounts to be received by such Bank,
including fees, pursuant to the Loan Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Bank determines, as a
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrower or the Agent any form or certificate that such Bank is obligated to
submit pursuant to subsection (b) of this Section 12.1 or that such Bank is
required to withdraw or cancel any such form or certificate previously submitted
or any such form or certificate otherwise becomes ineffective or inaccurate,
such Bank shall promptly notify the Borrower and Agent of such fact and the Bank
shall to that extent not be obligated to provide any such form or certificate
and will be entitled to withdraw or cancel any affected form or certificate, as
applicable.
Section 12.2. No Waiver, Cumulative Remedies. No delay or failure on the
part of the Agent or any Bank or on the part of the holder or holders of any of
the Obligations in the exercise of any power or right under any Loan Document
shall operate as a waiver thereof or as an acquiescence in any default, nor
shall any single or partial exercise of any power or right preclude any other or
further exercise thereof or the exercise of any other power or right. The rights
and remedies hereunder of the Agent, the Banks and of the holder or holders of
any of the Obligations are cumulative to, and not exclusive of, any rights or
remedies which any of them would otherwise have.
Section 12.3. Non-Business Days. If any payment hereunder becomes due and
payable on a day which is not a Business Day, the due date of such payment shall
be extended to the next succeeding Business Day on which date such payment shall
be due and payable. In the case of any payment of principal falling due on a day
which is not a Business Day, interest on such principal amount shall continue to
accrue during such extension at the rate per annum then in effect, which accrued
amount shall be due and payable on the next scheduled date for the payment of
interest.
Section 12.4. Documentary Taxes. The Borrower agrees to pay on demand any
documentary, stamp or similar taxes payable in respect of this Agreement or any
other Loan Document, including interest and penalties, in the event any such
taxes are assessed, irrespective of when such assessment is made and whether or
not any credit is then in use or available hereunder.
Section 12.5. Survival of Representations. All representations and
warranties made herein or in any other Loan Document or in certificates given
pursuant hereto or thereto shall
-61-
<PAGE>
survive the execution and delivery of this Agreement and the other Loan
Documents, and shall continue in full force and effect with respect to the date
as of which they were made as long as any credit is in use or available
hereunder.
Section 12.6. Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the Banks of amounts sufficient to
protect the yield of the Banks with respect to the Loans and Letters of Credit,
including, but not limited to, Sections 1.12, 10.3 and 12.15 hereof, shall
survive the termination of this Agreement and the other Loan Documents and the
payment of the Obligations.
Section 12.7. Sharing of Set-Off. Each Bank agrees with each other Bank a
party hereto that if such Bank shall receive and retain any payment, whether by
set-off or application of deposit balances or otherwise, on any of the Loans or
Reimbursement Obligations in excess of its ratable share of payments on all such
Obligations then outstanding to the Banks, then such Bank shall purchase for
cash at face value, but without recourse, ratably from each of the other Banks
such amount of the Loans or Reimbursement Obligations, or participations
therein, held by each such other Banks (or interest therein) as shall be
necessary to cause such Bank to share such excess payment ratably with all the
other Banks; provided, however, that if any such purchase is made by any Bank,
and if such excess payment or part thereof is thereafter recovered from such
purchasing Bank, the related purchases from the other Banks shall be rescinded
ratably and the purchase price restored as to the portion of such excess payment
so recovered, but without interest. For purposes of this Section, amounts owed
to or recovered by the Issuing Bank in connection with Reimbursement Obligations
in which Banks have been required to fund their participation shall be treated
as amounts owed to or recovered by the Issuing Bank as a Bank hereunder.
Section 12.8. Notices. Except as otherwise specified herein, all notices
hereunder and under the other Loan Documents shall be in writing (including,
without limitation, notice by telecopy) and shall be given to the relevant party
at its address or telecopier number set forth below, or such other address or
telecopier number as such party may hereafter specify by notice to the Agent and
the Borrower given by courier, by United States certified or registered mail, by
telecopy or by other telecommunication device capable of creating a written
record of such notice and its receipt. Notices under the Loan Documents to the
Banks and the Agent shall be addressed to their respective addresses or
telecopier numbers set forth on the signature pages hereof, and to the Borrower
to:
Fountain View, Inc.
11900 West Olympic Blvd., Suite 680
Los Angeles, California 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
-62-
<PAGE>
with a copy to:
Heritage Partners Management Company, Inc.
30 Rowes Whart, Suite 300
Boston, Massachusetts 02440
Attention: Mark Jrolf
Telephone: (617) 428-0108
Telecopy: (617) 439-0689
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section or on the signature pages hereof and a confirmation of
such telecopy has been received by the sender, (ii) if given by mail, 5 days
after such communication is deposited in the mail, certified or registered with
return receipt requested, addressed as aforesaid or (iii) if given by any other
means, when delivered at the addresses specified in this Section or on the
signature pages hereof; provided that any notice given pursuant to Section 1
hereof shall be effective only upon receipt.
Section 12.9. Counterparts. This Agreement may be executed in any number
of counterparts, and by the different parties hereto on separate counterpart
signature pages, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 12.10. Successors and Assigns. This Agreement shall be binding
upon the Borrower and its successors and assigns, and shall inure to the benefit
of the Agent and each of the Banks and the benefit of their respective
successors and assigns, including any subsequent holder of any of the
Obligations. The Borrower may not assign any of its rights or obligations under
any Loan Document without the written consent of all of the Banks.
Section 12.11. Participants. Each Bank shall have the right at its own
cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made and Reimbursement Obligations
and/or Commitments held by such Bank at any time and from time to time to one or
more other Persons; provided that no such participation shall relieve any Bank
of any of its obligations under this Agreement, and, provided, further that no
such participant shall have any rights under this Agreement except as provided
in this Section, and the Agent shall have no obligation or responsibility to
such participant. Any agreement pursuant to which such participation is granted
shall provide that the granting Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower under this Agreement
and the other Loan Documents including, without limitation, the right to approve
any amendment, modification or waiver of any provision of the Loan Documents,
except that such agreement may provide that such Bank will not agree to any
modification, amendment or waiver of the Loan Documents that would reduce the
amount of or postpone any fixed date for payment of any Obligation in which such
participant has an interest. Any party to which such a participation has been
granted shall have the benefits of Section 1.12 and Section 10.3 hereof. The
Borrower authorizes each Bank to disclose to any participant or prospective
participant under this Section any financial or other information pertaining to
the Borrower.
-63-
<PAGE>
Section 12.12. Assignment of Commitments by Banks. Each Bank shall have
the right at any time, with the prior consent of the Agent and, so long as no
Event of Default then exists, the Borrower (which consent of the Borrower shall
not be unreasonably withheld) to sell, assign, transfer or negotiate all or any
part of its Commitments (including the same percentage of its Notes, outstanding
Loans and Reimbursement Obligations owed to it) to one or more commercial banks
or other financial institutions or investors, provided that such assignment
shall be of a fixed percentage (and not by its terms of varying percentage) of
the assigning Bank's Commitments; provided, however, that in order to make any
such assignment (i) unless the assignee Bank is assigning all of its
Commitments, the assigning Bank shall retain at least $5,000,000 in outstanding
Loans, interests in Letters of Credit and unused Commitments, (ii) the assignee
bank shall have outstanding Loans, interests in Letters of Credit and unused
Commitments of at least $5,000,000, (iii) each such assignment shall be
evidenced by a written agreement (substantially in the form attached hereto as
Exhibit G or in such other form acceptable to the Agent) executed by such
assigning Bank, such assignee bank or banks, the Agent and, if required as
provided above, the Borrower, which agreement shall specify in each instance the
portion of the Obligations which are to be assigned to the assignee bank and the
portion of the Commitments of the assigning Bank to be assumed by the assignee
bank or banks, and (iv) the assigning Bank shall pay to the Agent a processing
fee of $3,500 and any out-of-pocket attorneys' fees and expenses incurred by the
Agent in connection with any such assignment agreement. Any such assignee shall
become a Bank for all purposes hereunder to the extent of the Commitments it
assumes and the assigning Bank shall be released from its obligations, and will
have released its rights, under the Loan Documents to the extent of such
assignment. The Borrower authorizes each Bank to disclose to any purchaser or
prospective purchaser of an interest in the Loans and Reimbursement Obligations
owed to it or its Commitments under this Section any financial or other
information pertaining to the Borrower.
Section 12.13. Amendments. Any provision of this Agreement or the other
Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by (a) the Borrower, (b) the Required Banks,
and (c) if the rights or duties of the Agent are affected thereby, the Agent;
provided that:
(i) no amendment or waiver pursuant to this Section 12.13 shall (A)
increase any Commitment of any Bank without the consent of such Bank or (B)
reduce the amount of or postpone the scheduled due date for payment of any
principal of or interest on any Loan or of any Reimbursement Obligation or of
any fee payable hereunder without the consent of the Bank to which such payment
is owing or which has committed to make such Loan or Letter of Credit (or
participate therein) hereunder; and
(ii) no amendment or waiver pursuant to this Section 12.13 shall,
unless signed by each Bank, change the definitions of Revolving Credit
Termination Date, or Required Banks, change the provisions of this Section
12.13, Section 7, Section 9, release any guarantor or all or any substantial
part of the Collateral (except as otherwise provided for in the Loan Documents),
or affect the number of Banks required to take any action hereunder or under any
other Loan Document.
-64-
<PAGE>
Section 12.14. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 12.15. Costs and Expenses. The Borrower agrees to pay all costs
and expenses of the Agent in connection with the preparation, negotiation, and
administration of the Loan Documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Agent, in connection with
the preparation and execution of the Loan Documents, and any amendment, waiver
or consent related thereto, whether or not the transactions contemplated herein
are consummated, together with any fees and charges suffered or incurred by the
Agent in connection with periodic environmental audits, fixed asset appraisals,
title insurance policies, collateral filing fees and lien searches. The Borrower
further agrees to indemnify the Agent, each Bank, and their respective
directors, officers and employees, against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all reasonable expenses of litigation or preparation therefor, whether or not
the indemnified Person is a party thereto, or any settlement arrangement arising
from or relating to any such litigation) which any of them may pay or incur
arising out of or relating to any Loan Document or any of the transactions
contemplated thereby or the direct or indirect application or proposed
application of the proceeds of any Loan or Letter of Credit, other than those
which arise from the gross negligence or willful misconduct of, or material
breach of the Loan Documents by, the party claiming indemnification. The
Borrower, upon demand by the Agent or a Bank at any time, shall reimburse the
Agent or such Bank for any legal or other expenses incurred in connection with
investigating or defending against any of the foregoing (including any
settlement costs relating to the foregoing) except if the same is directly due
to the gross negligence or willful misconduct of the party to be indemnified.
The obligations of the Borrower under this Section shall survive the termination
of this Agreement.
Section 12.16. Environmental Indemnification and Waiver. The Borrower
unconditionally agrees to forever indemnify, defend and hold harmless, and
covenants not to sue for any claim for contribution against, the Agent, the
Issuing Bank and the Banks for any damages, costs, loss or expense, including
without limitation, response, remedial or removal costs, arising out of any of
the following: (i) any presence, release, threatened release or disposal of any
hazardous or toxic substance or petroleum by the Borrower or any Subsidiary or
otherwise occurring on or with respect to its property, (ii) the operation or
violation of any environmental law, whether federal, state, or local, and any
regulations promulgated thereunder, by the Borrower or any Subsidiary or
otherwise occurring on or with respect to its property, (iii) any claim for
personal injury or property damage in connection with the Borrower or any
Subsidiary or otherwise occurring on or with respect to its property, and (iv)
the inaccuracy or breach of any environmental representation, warranty or
covenant by the Borrower or any Subsidiary made herein or in any promissory
note, mortgage, deed of trust, security agreement or any other instrument or
document evidencing or securing any Obligations or setting forth terms and
conditions applicable thereto or otherwise relating thereto, except for damages
arising from the willful misconduct or gross negligence of, or material breach
of the Loan Documents by, the party claiming indemnification. This
indemnification shall survive the payment and satisfaction of all Obligations
and the termination of this Agreement, and shall remain in force beyond the
expiration of any applicable statute of limitations and payment or satisfaction
in full of any single claim under
-65-
<PAGE>
this indemnification. This indemnification shall be binding upon the successors
and assigns of the Borrower and shall inure to the benefit of Agent, the Issuing
Bank and the Banks and their directors, officers, employees, agents, and
collateral trustees, and their successors and assigns.
Section 12.17. Set-off. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, each Bank and each subsequent holder of any
Obligation is hereby authorized by the Borrower at any time or from time to
time, without notice to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set-off and to appropriate and to apply any
and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts, and in whatever currency denominated) and any
other indebtedness at any time held or owing by that Bank or that subsequent
holder to or for the credit or the account of the Borrower, whether or not
matured, against and on account of the Obligations of the Borrower to that Bank
or that subsequent holder under the Loan Documents, including, but not limited
to, all claims of any nature or description arising out of or connected with the
Loan Documents, irrespective of whether or not (a) that Bank or that subsequent
holder shall have made any demand hereunder or (b) the principal of or the
interest on the Loans or Notes and other amounts due hereunder shall have become
due and payable pursuant to Section 9 and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
Section 12.18. Entire Agreement. The Loan Documents constitute
the entire understanding of the parties thereto with respect to the subject
matter thereof and any prior agreements, whether written or oral, with respect
thereto are superseded hereby.
Section 12.19. Governing Law. This Agreement and the other Loan Documents,
and the rights and duties of the parties hereto, shall be construed and
determined in accordance with the internal laws of the State of Illinois.
Section 12.20. Severability of Provisions. Any provision of any Loan
Document which is unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 12.21. Excess Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, no such provision shall
require the payment or permit the collection of any amount in excess of the
maximum amount of interest permitted by applicable law to be charged for the use
or detention, or the forbearance in the collection, of all or any portion of the
Loans or other obligations outstanding under this Agreement or any other Loan
Document ("Excess Interest"). If any Excess Interest is provided for, or is
adjudicated to be provided for, herein or in any other Loan Document, then in
such event (a) the provisions of this Section 12.21 shall govern and control;
(b) neither the Borrower nor any guarantor or endorser shall be obligated to pay
any Excess Interest; (c) any Excess Interest that the Agent or any Bank may have
received hereunder shall, at the option of the Agent, be (i) applied as a credit
against the then outstanding principal amount of Loans hereunder, accrued and
unpaid interest thereon (not to exceed the maximum amount permitted by
applicable law) and any
-66-
<PAGE>
other obligations, or all of the foregoing; (ii) refunded to the Borrower, or
(iii) any combination of the foregoing; (d) the interest rate payable hereunder
or under any other Loan Document shall be automatically subject to reduction to
the maximum lawful contract rate allowed under applicable usury laws, and this
Agreement and the other Loan Documents shall be deemed to have been, and shall
be, reformed and modified to reflect such reduction in the relevant interest
rate; and (e) neither the Borrower nor any guarantor or endorser shall have any
action against the Agent or any Bank for any damages whatsoever arising out of
the payment or collection of any Excess Interest.
Section 12.22. Confidentiality. Any information disclosed by the Borrower
or any of its Subsidiaries to the Agent or any Bank which was designated
proprietary or confidential at the time of its receipt by the Agent or such
Bank, and which it is not otherwise in the public domain, shall not be disclosed
by the Agent or such Bank to any other Person except (i) to its independent
accountants and legal counsel (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
information and instructed to keep such information confidential), (ii) pursuant
to statutory and regulatory requirements, (iii) pursuant to any mandatory court
order, subpoena or other legal process, (iv) to the Agent or any other Bank, (v)
pursuant to any agreement heretofore or hereafter made between such Bank and the
Borrower which permits such disclosure, (vi) in connection with the exercise of
any remedy under the Loan Documents, or (vii) subject to an agreement containing
provisions substantially the same as those of this Section, to any participant
in or assignee of, or prospective participant in or assignee of, any Obligation
or Commitments.
Section 12.23. Single Bank. If and so long as Bank of Montreal is the only
Bank hereunder, Bank of Montreal shall have all rights, powers and privileges
afforded to the Agent, the Banks, and the Required Banks hereunder and under the
other Loan Documents.
Section 12.24. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Northern District of Illinois and of any Illinois State
court sitting in the Cook County, Illinois for purposes of all legal proceedings
arising out of or relating to this Agreement, the other Loan Documents or the
transactions contemplated hereby or thereby. The Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. THE BORROWER, THE AGENT AND EACH BANK HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY.
[SIGNATURE PAGES TO FOLLOW]
-67-
<PAGE>
Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.
Dated as of this 16th day of April, 1998.
FOUNTAIN VIEW, INC.
By _______________________________
Name __________________________
Title _________________________
Accepted and agreed to as of the day and year last above written.
BANK OF MONTREAL, in its individual
capacity as a Bank and as Agent
Address and Amount of Commitments: By /s/ Mark F. Spencer
--------------------------------
Name MARK F. SPENCER
-------------------------
Address: Title MANAGING DIRECTOR
------------------------
601 South Figueroa Street, Suite 4900
Los Angeles, California 90017
Attention: Ronald Launsbach
Telecopy: (213) 239-0680
Telephone: (213) 239-0602
with notices of Borrowing requests to:
Attention: Jean Pazan
Telecopy: (312) 750-3456
Telephone: (312) 750-3450
Revolving Credit Commitment:
$30,000,000
Term Loan Commitment:
$85,000,000
Lending Offices:
115 South LaSalle Street
Chicago, Illinois 60603
-68-
<PAGE>
EXHIBIT A
NOTICE OF PAYMENT REQUEST
[Date]
[Name of Bank]
[Address]
Attention:
Reference is made to the Credit Agreement, dated as of April 16, 1998,
among Fountain View, Inc., the Banks party thereto, and Bank of Montreal, as
Agent (the "Credit Agreement"). Capitalized terms used herein and not defined
herein have the meanings assigned to them in the Credit Agreement. [The
Borrower has failed to pay its Reimbursement Obligation in the amount of
$_________. Your Bank's Percentage of the unpaid Reimbursement Obligation is
$_________] or [The undersigned has been required to return a payment by the
Borrower of a Reimbursement Obligation in the amount of $________. Your Bank's
Percentage of the returned Reimbursement Obligation is $_________.]
Very truly yours,
BANK OF MONTREAL, as Issuing Bank
By ________________________________
Its ____________________________
<PAGE>
EXHIBIT B
NOTICE OF BORROWING
Date: ______________, ____
To: Bank of Montreal, as Agent for the Banks parties to the Credit Agreement
dated as of April 16, 1998 (as extended, renewed, amended or restated from
time to time, the "Credit Agreement") among Fountain View, Inc., certain
Banks which are signatories thereto and Bank of Montreal, as Agent
Ladies and Gentlemen:
The undersigned, Fountain View, Inc. (the "Borrower"), refers to the Credit
Agreement, the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably, pursuant to Section 1.6 of the Credit
Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is ___________, ____.
2. The aggregate amount of the proposed Borrowing is $______________.
3. The Borrowing is being advanced under the [REVOLVING] [TERM]
Credit.
4. The Borrowing is to be comprised of $___________ of [BASE RATE]
[EURODOLLAR] Loans.
[5. THE DURATION OF THE INTEREST PERIOD FOR THE EURODOLLAR LOANS
INCLUDED IN THE BORROWING SHALL BE ____________ MONTHS.]
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Borrower contained in
Section 6 of the Credit Agreement are true and correct as though made on
and as of such date (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and
correct as of such date); and
(b) no Default or Event of Default has occurred and is continuing or
would result from such proposed Borrowing.
FOUNTAIN VIEW, INC.
By ________________________________
Name ___________________________
Title __________________________
<PAGE>
EXHIBIT C
NOTICE OF CONVERSION/CONTINUATION
Date: ____________, ____
To: Bank of Montreal, as Agent for the Banks parties to the Credit Agreement
dated as of April 16, 1998 (as extended, renewed, amended or restated from
time to time, the "Credit Agreement") among Fountain View, Inc., certain
Banks which are signatories thereto and Bank of Montreal, as Agent
Ladies and Gentlemen:
The undersigned, Fountain View, Inc. (the "Borrower"), refers to the Credit
Agreement, the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably, pursuant to Section 16 of the Credit
Agreement, of the [CONVERSION] [CONTINUATION] of the Loans specified herein,
that:
1. The conversion/continuation Date is __________, ____.
2. The aggregate amount of the [REVOLVING] [TERM] Loans to be [CONVERTED]
[CONTINUED] is $______________.
3. The Loans are to be [CONVERTED INTO] [CONTINUED AS] [EURODOLLAR] [BASE
RATE] Loans.
4. [IF APPLICABLE:] The duration of the Interest Period for the
[REVOLVING] [TERM] Loans included in the [CONVERSION] [CONTINUATION] shall be
_________ months.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the proposed conversion/continuation date,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Borrower contained in
Section 6 of the Credit Agreement are true and correct as though made on and as
of such date (except to the extent such representations and warranties relate to
an earlier date, in which case they are true and correct as of such date);
provided, however, that this condition shall not apply to the conversion of an
outstanding Eurodollar Loan to a Base Rate Loan; and
(b) no Default or Event of Default has occurred and is continuing, or
would result from such proposed [CONVERSION] [CONTINUATION].
Fountain View, Inc.
By:________________________________
Name_____________________________
Title____________________________
<PAGE>
EXHIBIT D
REVOLVING NOTE
U.S.$_______________ ________________, 19___
For Value Received, the undersigned, Fountain View, Inc., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
______________________ (the "Bank") on the Revolving Credit Termination Date of
the hereinafter defined Credit Agreement, at the principal office of Bank of
Montreal, as Agent, in Chicago, Illinois, in immediately available funds, the
principal sum of ___________________ Dollars ($__________) or, if less, the
aggregate unpaid principal amount of all Revolving Loans made by the Bank to the
Borrower pursuant to the Credit Agreement, together with interest on the
principal amount of each Revolving Loan from time to time outstanding hereunder
at the rates, and payable in the manner and on the dates, specified in the
Credit Agreement.
The Bank shall record on its books or records or on a schedule attached to
this Note, which is a part hereof, each Revolving Loan made by it pursuant to
the Credit Agreement, together with all payments of principal and interest and
the principal balances from time to time outstanding hereon, whether the
Revolving Loan is a Base Rate Loan or a Eurodollar Loan, the interest rate and
Interest Period applicable thereto, provided that prior to the transfer of this
Note all such amounts shall be recorded on a schedule attached to this Note.
The record thereof, whether shown on such books or records or on a schedule to
this Note, shall be prima facie evidence of the same, provided, however, that
the failure of the Bank to record any of the foregoing or any error in any such
record shall not limit or otherwise affect the obligation of the Borrower to
repay all Revolving Loans made to it pursuant to the Credit Agreement together
with accrued interest thereon.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of April 16, 1998, among the Borrower, Bank of Montreal, as Agent, and
the Banks party thereto (the "Credit Agreement"), and this Note and the holder
hereof are entitled to all the benefits and security provided for thereby or
referred to therein, to which Credit Agreement reference is hereby made for a
statement thereof. All defined terms used in this Note, except terms otherwise
defined herein, shall have the same meaning as in the Credit Agreement. This
Note shall be governed by and construed in accordance with the internal laws of
the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are required
to be made hereon, and this Note may be declared due prior to the expressed
maturity hereof (in each case without premium or penalty except as otherwise set
forth in the Credit Agreement), all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
<PAGE>
The Borrower hereby waives demand, presentment, protest or notice of any
kind hereunder.
Fountain View, Inc.
By______________________________
Name__________________________
Title_________________________
<PAGE>
EXHIBIT E
TERM NOTE
U.S.$_______________ ________________, 19___
For Value Received, the undersigned, Fountain View, Inc., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
______________________ (the "Bank") at the principal office of Bank of Montreal,
as Agent, in Chicago, Illinois, in immediately available funds, the principal
sum of ___________________ Dollars ($__________) or, if less, the aggregate
unpaid principal amount of the Term Loan made or maintained by the Bank to the
Borrower pursuant to the Credit Agreement, in consecutive quarter-annual
principal installments in the amounts called for by Section 1.8(b) of the Credit
Agreement, commencing on March 31, 1999, and continuing on the last day of each
June, September, December and March occurring thereafter, together with interest
on the principal amount of such Term Loan from time to time outstanding
hereunder at the rates, and payable in the manner and on the dates, specified in
the Credit Agreement, except that all principal and interest not sooner paid on
the Term Loan evidenced hereby shall be due and payable on December 31, 2003,
the final maturity date hereof.
The Bank shall record on its books or records or on a schedule attached to
this Note, which is a part hereof, the Term Loan made or maintained by it
pursuant to the Credit Agreement, together with all payments of principal and
interest and the principal balances from time to time outstanding hereon,
whether the Term Loan is a Base Rate Loan or a Eurodollar Loan, the interest
rate and Interest Period applicable thereto, provided that prior to the transfer
of this Note all such amounts shall be recorded on a schedule attached to this
Note. The record thereof, whether shown on such books or records or on a
schedule to this Note, shall be prima facie evidence of the same, provided,
however, that the failure of the Bank to record any of the foregoing or any
error in any such record shall not limit or otherwise affect the obligation of
the Borrower to repay the Term Loan made to it pursuant to the Credit Agreement
together with accrued interest thereon.
This Note is one of the Term Notes referred to in the Credit Agreement
dated as of April 16, 1998, among the Borrower, Bank of Montreal, as Agent, and
the Banks party thereto (the "Credit Agreement"), and this Note and the holder
hereof are entitled to all the benefits and security provided for thereby or
referred to therein, to which Credit Agreement reference is hereby made for a
statement thereof. All defined terms used in this Note, except terms otherwise
defined herein, shall have the same meaning as in the Credit Agreement. This
Note shall be governed by and construed in accordance with the internal laws of
the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are required
to be made hereon, and this Note may be declared due prior to the expressed
maturity hereof (in each case without premium or penalty except as otherwise set
forth in the Credit Agreement), all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
<PAGE>
The Borrower hereby waives demand, presentment, protest or notice of any
kind hereunder.
Fountain View, Inc.
By___________________________
Name_______________________
Title______________________
<PAGE>
EXHIBIT F
COMPLIANCE CERTIFICATE
FOR
FOUNTAIN VIEW, INC.
This Compliance Certificate is furnished to Bank of Montreal, as Agent (the
"Agent") pursuant to that certain Credit Agreement dated as of April 16, 1998,
among Fountain View, Inc. (the "Borrower"), Bank of Montreal, as Agent, and the
Banks party thereto (the "Credit Agreement"). Unless otherwise defined herein,
the terms used in this Compliance Certificate have the meanings ascribed thereto
in the Credit Agreement.
The Undersigned hereby certifies that:
1. I am the duly elected _____________________________________ of
the Borrower;
2. I have reviewed the terms of the Credit Agreement and I have
made, or have caused to be made under my supervision, a detailed review of
the transactions and conditions of the Borrower and its Subsidiaries during
the accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or the occurrence of
any event which constitutes a Default or Event of Default during or at the
end of the accounting period covered by the attached financial statements
or as of the date of this Certificate, except as set forth below; and
4. The Attachment hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my
knowledge, true, complete and correct and have been made in accordance with
the relevant Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
<PAGE>
The foregoing certifications, together with the computations set forth in
the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________ day of
__________________ 19___.
Fountain View, Inc.
By_______________________________
_________________, ____________
(Name) (Title)
<PAGE>
ATTACHMENT TO COMPLIANCE CERTIFICATE
FOR
FOUNTAIN VIEW, INC.
Compliance Calculations for Credit Agreement
Dated as of April 16, 1998
Calculations as of _____________, 19___
___________________________________________________________________________
A. Leverage Ratio (Section 8.23)
-----------------------------
1. Total Funded Debt $___________
2. Rental Expense for past 4 quarters $______
x 8
------- $___________
3. Sum of Lines A1 and A2 $___________
4. Net Income (adjusted, pro forma, for acquisition ___________
effect) for past 4 quarters
5. Interest Expense (adjusted, pro forma, for acquisition ___________
effect) for past 4 quarters
6. Taxes (adjusted, pro forma, for acquisition effect) ___________
for past 4 quarters
7. Depreciation, Amortization and Rental Expense
(adjusted, pro forma, for acquisition effect) for past 4 ___________
quarters
8. Sum of Lines A4, A5, A6 and A7 ("Adjusted EBITDAR") ___________
9. Ratio of Line A3 to A8 ____:1.0
10. Line A9 ratio must not be equal to or greater than ____:1.0
11. The Borrower is in compliance (circle yes or no) yes/no
B. Senior Leverage Ratio (Section 8.24)
------------------------------------
1. Total Senior Funded Debt $___________
<PAGE>
2. Rental Expense for past 4 quarters $______
x 8
------- $___________
3. Sum of Lines B1 and B2 $___________
4. Adjusted EBITDAR (Line A8 above) $___________
5. Ratio of Line B3 to B4 ____:1.0
6. Line B5 ratio must not be equal to or greater than ____:1.0
7. The Borrower is in compliance (circle yes or no) yes/no
C. Net Worth (Section 8.25)
------------------------
1. Net Worth $___________
2. Line C1 shall not be less than $___________
3. The Borrower is in compliance (circle yes or no) yes/no
D. Fixed Charge Coverage Ratio (Section 8.26)
------------------------------------------
1. Net Income for past 4 quarters $___________
2. Interest Expense for past 4 quarters $___________
3. Taxes for past 4 quarters $___________
4. Depreciation, Amortization and Rental Expense for past $___________
4 quarters
5. Sum of lines D1, D2, D3 and D4 ("EBITDAR") $___________
6. Fixed asset maintenance expenditures for past 4 $___________
quarters
7. Cash payments for income taxes for past 4 quarters $___________
8. Sum of Lines D6 and D7 $___________
9. Line D5 minus Line D8 $___________
10. Principal payments for past 4 quarters $___________
<PAGE>
11. Interest Expense for past 4 quarters $___________
12. Rental Expense for past 4 quarters $___________
13. Sum of Lines D10, D11 and D12 $___________
14. Ratio of Line D9 to Line D13 ____: 1.0
15. Line D14 ratio must not be less than 1.15: 1.0
16. The Borrower is in compliance (circle yes or no) yes/no
E. Capital Expenditures (Section 8.27)
-----------------------------------
1. Capital Expenditures (year-to-date) $___________
2. Line E1 not to exceed $___________
3. The Borrower is in compliance (circle yes or no) yes/no
<PAGE>
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19_____
Reference is made to the Credit Agreement dated as of April 16, 1998 (the
"CREDIT AGREEMENT") among Fountain View, Inc., a Delaware corporation, the Banks
(as defined in the Credit Agreement) and Bank of Montreal, as Agent for the
Banks (the "Agent"). Terms defined in the Credit Agreement are used herein with
the same meaning.
_____________________________________________________ (the "Assignor") and
_________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a _______%
interest in and to all of the Assignor's rights and obligations under the
Credit Agreement as of the Effective Date (as defined below), including,
without limitation, such percentage interest in the Assignor's Commitments
as in effect on the Effective Date and the Loans, if any, owing to the
Assignor on the Effective Date and the Assignor's Percentage of any
outstanding L/C Obligations.
2. The Assignor (i) represents and warrants that as of the date hereof
(A) its Revolving Credit Commitment is $_____________ and its Term Loan
Commitment is $______________, (B) the aggregate outstanding principal
amount of Loans made by it under the Credit Agreement that have not been
repaid is $____________ ($_____________ of Revolving Loans and
$_____________ of Term Loans ) and a description of the interest rates and
interest periods of such Loans is attached as Schedule 1 hereto, and (C)
the aggregate principal amount of Assignor's Percentage of outstanding L/C
Obligations is $____________; (ii) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim, lien, or
encumbrance of any kind; (iii) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; and (iv) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower
or any Subsidiary or performance or observance by the Borrower or any
Subsidiary of any of its obligations under the Credit Agreement or any
other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.5 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance;
<PAGE>
(ii) agrees that it will, independently and without reliance upon the
Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit
Agreement; (iii) appoints and authorizes the Agent to take such action as
Agent on its behalf and to exercise such powers under the Credit Agreement
and the other Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
(iv) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; and (v) specifies as its lending office (and
address for notices) the offices set forth beneath its name on the
signature pages hereof.
4. As consideration for the assignment and sale contemplated in
Section 1 hereof, the Assignee shall pay to the Assignor on the Effective
Date in Federal funds an amount equal to $________________*. It is
understood that commitment and/or facility fees accrued to the Effective
Date with respect to the interest assigned hereby are for the account of
the Assignor and such fees accruing from and including the date hereof are
for the account of the Assignee. Each of the Assignor and the Assignee
hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the
same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other
party.
5. The effective date for this Assignment and Acceptance shall be
_____________, 19___(the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance
and recording by the Agent and, if required, the Borrower.
6. Upon such acceptance and recording, as of the Effective Date, (i)
the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations
of a Bank thereunder and (ii) the Assignor shall, to the extent provided in
this Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Credit Agreement.
7. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments under the Credit Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect thereto)
to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Effective Date directly between themselves.
_________________
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula
rather than as a fixed sum.
<PAGE>
8. In accordance with Section 12.12 of the Credit Agreement, the
Assignor and the Assignee request and direct that the Agent prepare and
cause the Borrower to execute and deliver to the Assignee the relevant
Notes payable to the Assignee in the amount of its Commitments and new
Notes to the Assignor in the amount of its Commitments after giving effect
to this assignment.
9. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Illinois.
[Assignor Bank]
By__________________________________
Name______________________________
Title_____________________________
[Assignee Bank]
By__________________________________
Name______________________________
Title_____________________________
Lending office (and address for notices):
Accepted and consented this
____ day of ___________, 19__
Fountain View, Inc.
By________________________________
Name______________________________
Title_____________________________
Accepted and consented to by the Agent this
_______ day of ___________, 19__
Bank of Montreal, as Agent
By________________________________
Name______________________________
Title_____________________________
<PAGE>
SCHEDULE I
Principal Amount Type of Loan Interest Rate Maturity Date
<PAGE>
SCHEDULE 6.2
<TABLE>
<CAPTION>
NAME JURISDICTION OF PERCENTAGE OWNERSHIP
INCORPORATION
<S> <C> <C>
Fountain View Holdings, Inc. Delaware 100%
Locomotion Holdings, Inc. Delaware 100%
Locomotion Therapy, Inc. Delaware 100%
Fountain View Management, Inc. California 100%
Sycamore Park Convalescent California 100%
Hospital
AIB Corp. California 100%
Elmcrest Convalescent Hospital California 100%
Brier Oak Convalescent, Inc. California 100%
BIA Hotel Corp. California 100%
Rio Hondo Nursing Center California 100%
Fountainview Convalescent California 100%
Hospital
Alexandria Convalescent California 100%
Hospital, Inc.
I.'n O., Inc. California 100%
On-Track Therapy Center, Inc. California 100%
Summit Care Corporation California 100%
Summit Care-California, Inc. California 100%
Summit Care-Texas No. 2, Inc. Texas 100%
Summit Care-Texas No. 3, Inc. Texas 100%
Summit Care Pharmacy, Inc. California 100%
Summit Care Texas, L.P. Texas 100%
(Limited Partnership)
Summit Care Texas Equity, Inc. California 100%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Summit Care Management Texas, Texas 100%
Inc.
SNF Pharmacy, Inc. California 100%
Skilled Care Network California 100%
FV-SCC Acquisition Corp. Delaware 100%
</TABLE>
<PAGE>
SCHEDULE 6.9
GOVERNMENTAL AUTHORITY AND LICENSING
The Department of Health of California conducted a survey at the Alexandria
facility and reported certain deficiencies in such facility's dietary plan and
care planning. Fountain View, Inc. disagrees with such findings and has
appealed them.
<PAGE>
SCHEDULE 6.13
APPROVALS
The grant of a security interest in Summit Care Pharmacy, Inc.'s membership
interest in APS-Summit Care Pharmacy, L.L.C., requires the consent of American
Pharmaceutical Services, Inc. ("APS"). APS has indicated that it will give such
consent; however, APS has not yet provided such written consent to Summit Care
Pharmacy, Inc.
<PAGE>
SCHEDULE 8.4
INSURANCE MATTERS
Insurance carriers with a less than A rating in the most current available
Best's Insurance Report.
<TABLE>
<CAPTION>
CARRIER RATING COVERAGE LIMITS
<S> <C> <C> <C>
Frontier Pacific A-V Excess Employer's $1,000,000 per
Indemnity & occurrence (no
Employer's aggregate)
Occupational Disease subject to
on Texas employees $150,000 SIR
Meridian Non-rated Healthcare liability, Occurrence limit
1st excess layer is $400,000 in
above retention. excess of
Covers medical, $100,000
professional, general retention and
liability, products aggregate limit
liability and is $300,000 in
employment practices excess of
liability. $700,000
retention.
</TABLE>
<PAGE>
SCHEDULE 8.7
PERMITTED EXISTING INDEBTEDNESS
Deferred Compensation for Certain Individuals
<TABLE>
<CAPTION>
Lump Sum Value * Present Value
Discount Rate N/A 9.0%
<S> <C> <C>
Currently paying:
L. Wertheim $ 985 $ 960
F. Hoogstad $ 15,527 $ 13,714
J. Salkind $ 52,021 $ 37,512
-------- --------
Subtotal $ 68,533 $ 52,186
Future payments:
C. Fukushima $123,239 $ 9,961
P. Meza $ 43,062 $ 15,839
F. Meza $ 90,738 $ 38,807
L. Smith $ 63,631 $ 5,937
R. Gundling $112,496 $ 14,924
-------- --------
Subtotal $433,166 $ 85,468
Total present value of deferred $501,699 $137,654
compensation at 4/98
</TABLE>
__________
* Undiscounted amount of payment stream.
<PAGE>
SCHEDULE 8.8 - PERMITTED EXISTING LIENS
---------------------------------------
<TABLE>
<CAPTION>
REMAINING PRINCIPAL
DEBTOR SECURED PARTY AMOUNT OUTSTANDING FILE NUMBER FILING DATE COLLATERAL
------ ------------- ------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
1. Summit Care Corporation Union Bank $1,039,999 94067151 04/04/94 Personal property located
(Calif. S/S) on or otherwise relating
to the use or operation
of the Burbank, CA
facility described
therein, and rights to
certain payments with
respect to or on account
of such property.
2. Summit Care-Texas No. Secretary of Housing and $3,727,750 94023767 02/09/94 Personal property located
3, Inc. Urban Development (Calif. S/S) on or otherwise relating
to the use or operation
of the Heritage Manor
Nursing Center,
Woodlands, Texas,
described therein and
rights to certain
payments with respect to
or on account of such
property.
3. Summit Care-Texas No. Secretary of Housing and See no. 2 above 94-00014921 01/24/94 Personal property located
3, Inc. Urban Development (TX S/S) on or otherwise relating
to the use or operation of
the Heritage Manor Nursing
Center, Woodlands, Texas,
described therein and
rights to certain payments
with respect to or on
account of such property.
4. Summit Care-Texas No. Woodlands Place Nursing $1,590,226 94-00014922 01/24/94 All of Debtor's right,
3, Inc. Center, Inc. (TX S/S) title and interest in
inventory, equipment,
consumer goods and
fixtures located on
Montgomery County, Texas
real property described
therin.
5. Summit Care-Texas No. Woodlands Place Nursing See no. 4 above 94-0021276 02/07/94 All of Debtor's right,
3, Inc. Center, Inc. (TX S/S) title and interest in
inventory, equipment,
consumer goods and
fixtures located on
Montgomery County, Texas
real property described
therein.
</TABLE>
<PAGE>
SCHEDULE 8.9
EXISTING NOTE RECEIVABLES
<TABLE>
<CAPTION>
Maker Original Amount
<S> <C>
F&B Healthcare $ 300,000.00
Frank D. Johnson $ 400,000.00
DMN Enterprizes $ 500,000.00
Garden Park Care Center, Inc. $ 600,000.00
Courtyard Health Care Center, LLC $ 500,000.00
Anaheim Healthcare Center, LLC $ 1,746,574.00
Garden Park Care Center, LLC $ 350,000.00
Anaheim Healthcare Center, LLC $ 1,506,035.00
Villa Rancho Bernardo Health Care, LLC $ 300,000.00
Gardena Flores, Inc./Diana Fortune $ 821,126.00
D.K. Fortune & Assoc., Inc./Diana Fortune $ 1,003,717.00
Jurupa Hills Enterprises, Inc. $ 244,572.07
St. Erne Hospital, Inc./Charles Zilafro $ 193,208.55
Cal-Ohio Associates $ 2,117,000.00
--------------
$10,582,232.62
</TABLE>
<PAGE>
EXHIBIT 10.48
GUARANTY AGREEMENT
This Guaranty Agreement (the "Guaranty") dated as of this 16th day of
April, 1998, by the parties who have executed this Guaranty (such parties, along
with any other parties who execute and deliver to the Agent hereinafter
identified and defined an agreement in the form attached hereto as Exhibit A,
being herein referred to collectively as the "Guarantors" and individually as a
"Guarantor").
WITNESSETH:
Whereas, each of the Guarantors is a direct or indirect subsidiary of
Fountain View, Inc., a Delaware corporation (the "Borrower"); and
Whereas, the Borrower and Bank of Montreal ("BOM"), individually and as
agent (BOM acting as such agent and any successor or successors to BOM in such
capacity being hereinafter referred to as the "Agent") have entered into a
Credit Agreement dated as of April 16, 1998 (such Credit Agreement as the same
may from time to time hereafter be amended, modified, or restated being
hereinafter referred to as the "Credit Agreement") pursuant to which BOM and
other banks, financial institutions and letter of credit issuer(s) from time to
time parties thereto (BOM, in its individual capacity, and such other banks and
financial institutions being hereinafter referred to collectively as the
"Lenders" and individually as a "Lender" and such letter of credit issuer(s)
being hereinafter referred to collectively as the "Letter of Credit Issuers" and
individually as a "Letter of Credit Issuer") have extended various credit
facilities to the Borrower (the Agent, the Lenders and the Letter of Credit
Issuers being hereinafter referred to collectively as the "Guaranteed Creditors"
and individually as a "Guaranteed Creditor"); and
Whereas, the Borrower may from time to time enter into one or more interest
rate exchange, cap, collar, floor or other agreements with one or more of the
Lenders party to the Credit Agreement, or their affiliates, for the purpose of
hedging or otherwise protecting the Borrower against changes in interest rates
(the liability of the Borrower in respect of such agreements with such Lenders
and their affiliates being hereinafter referred to as the "Hedging Liability");
and
Whereas, the Borrower provides each of the Guarantors with substantial
financial, management, administrative, and technical support; and
Whereas, as a condition to extending the credit facilities to the Borrower
under the Credit Agreement, the Guaranteed Creditors have required, among other
things, that the Guarantors execute and deliver this Guaranty; and
Whereas, each Guarantor will directly and substantially benefit from credit
and other financial accommodations extended and to be extended by the Guaranteed
Creditors to the Borrower; and
<PAGE>
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Borrower by
the Guaranteed Creditors from time to time, each Guarantor hereby makes the
following representations and warranties to the Guaranteed Creditors and hereby
covenants and agrees with the Guaranteed Creditors as follows:
Section 1. All capitalized terms used herein without definition shall
have the same meanings herein as such terms have in the Credit Agreement.
Section 2. Each Guarantor hereby jointly and severally guarantees to
the Guaranteed Creditors, the due and punctual payment when due of (i) any and
all indebtedness, obligations and liabilities of the Borrower and the
Guarantors, and of any of them individually, to the Guaranteed Creditors, and to
any of them individually, under or in connection with or evidenced by the Credit
Agreement, the Notes of the Borrower heretofore or hereafter issued under the
Credit Agreement and the obligations of the Borrower to reimburse the Guaranteed
Creditors, or any of them individually, for the amount of all drawings on all
Letters of Credit issued pursuant to the Credit Agreement, and all other
obligations of the Borrower under any and all applications for Letters of
Credit, and any and all liability of the Borrower and the Guarantors, and of any
of them individually, arising under or in connection with or otherwise evidenced
by agreements with any one or more of the Guaranteed Creditors or their
affiliates with respect to any Hedging Liability, in each case whether now
existing or hereafter arising (and whether arising before or after the filing of
a petition in bankruptcy and including all interest accrued after the petition
date), due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired and (ii) any and all expenses and charges,
legal or otherwise (including, without limitation, court costs and reasonable
attorneys' fees), suffered or incurred by the Guaranteed Creditors, and any of
them individually, in collecting or enforcing any of such indebtedness,
obligations and liabilities or in realizing on or protecting or preserving any
security therefor. The indebtedness, obligations and liabilities described in
the immediately preceding clauses (i) and (ii) are hereinafter referred to as
the "indebtedness hereby guaranteed". In case of failure by the Borrower
punctually to pay any indebtedness hereby guaranteed, each Guarantor hereby
jointly and severally agrees to make such payment or to cause such payment to be
made punctually as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, and as if such payment were made
by the Borrower. All payments hereunder by any Guarantor shall be made in
immediately available funds in Dollars without set-off, counterclaim or other
defense or withholding or deduction of any nature. Notwithstanding anything in
this Guaranty to the contrary, the right of recovery against a Guarantor under
this Guaranty shall not exceed $1.00 less than the amount which would render
such Guarantor's obligations under this Guaranty void or voidable under
applicable law, including fraudulent conveyance law.
Section 3. Each Guarantor further jointly and severally agrees to pay
on demand all expenses, legal and/or otherwise (including court costs and
reasonable attorneys' fees), paid or incurred by any Guaranteed Creditor in
endeavoring to collect the indebtedness hereby guaranteed, or any part thereof,
or in enforcing or endeavoring to enforce any
-2-
<PAGE>
Guarantor's obligations hereunder, or any part thereof, or in protecting,
defending or enforcing this Guaranty in any litigation, bankruptcy or insolvency
proceedings or otherwise.
Section 4. Each Guarantor agrees that, upon demand, such Guarantor
shall pay to the Agent for the benefit of the Guaranteed Creditors the full
amount of the indebtedness hereby guaranteed then due (subject to the right of
recovery from such Guarantor pursuant to the last sentence of Section 2 above)
whether or not any one or more of the other Guarantors shall then or thereafter
pay any amount whatsoever in respect to their obligations hereunder.
Section 5. Each Guarantor agrees that such Guarantor will not
exercise or enforce any right of exoneration, contribution, reimbursement,
recourse or subrogation available to such Guarantor against any person liable
for payment of the indebtedness hereby guaranteed, or as to any security
therefor, unless and until the full amount owing to the Guaranteed Creditors of
the indebtedness hereby guaranteed has been fully paid and satisfied and each of
the commitments by the Guaranteed Creditors to extend any indebtedness hereby
guaranteed shall have expired or otherwise terminated. The payment by any
Guarantor of any amount or amounts to the Guaranteed Creditors pursuant hereto
shall not in any way entitle any such Guarantor, either at law, in equity or
otherwise, to any right, title or interest (whether by way of subrogation or
otherwise) in and to the indebtedness hereby guaranteed or any part thereof or
any collateral security therefor or any other rights or remedies in any way
relating thereto or in and to any amounts theretofor, then or thereafter paid or
applicable to the payment thereof howsoever such payment may be made and from
whatsoever source such payment may be derived unless and until all of the
indebtedness hereby guaranteed and all costs and expenses suffered or incurred
by the Guaranteed Creditors in enforcing this Guaranty have been paid and
satisfied in full and each of the commitments by the Guaranteed Creditors to
extend any indebtedness hereby guaranteed shall have expired or otherwise
terminated and unless and until such payment in full and termination, any
payments made by any Guarantor hereunder and any other payments from whatsoever
source derived on account of or applicable to the indebtedness hereby guaranteed
or any part thereof shall be held and taken to be merely payments in gross to
the Guaranteed Creditors reducing pro tanto the indebtedness hereby guaranteed.
Section 6. To the extent permitted by the Credit Agreement, each
Guaranteed Creditor may, without any notice whatsoever to any of the Guarantors,
sell, assign, or transfer all of the indebtedness hereby guaranteed, or any part
thereof, or grant participations therein, and in that event each and every
immediate and successive assignee, transferee, or holder of all or any part of
the indebtedness hereby guaranteed, shall have the right through the Agent
pursuant to Section 18 hereof to enforce this Guaranty, by suit or otherwise,
for the benefit of such assignee, transferee, or holder as fully as if such
assignee, transferee, or holder were herein by name specifically given such
rights, powers and benefits; but each Guaranteed Creditor through the Agent
pursuant to Section 18 hereof shall have an unimpaired right to enforce this
Guaranty for its own benefit, as to so much of the indebtedness hereby
guaranteed that it has not sold, assigned or transferred.
-3-
<PAGE>
Section 7. This Guaranty is a continuing, absolute and unconditional
Guaranty, and shall remain in full force and effect until all indebtedness
hereby guaranteed shall be fully paid and satisfied and each of the commitments
by the Guaranteed Creditors to extend any indebtedness hereby guaranteed shall
have expired or otherwise terminated. The Guaranteed Creditors may at any time
or from time to time release any Guarantor from its obligations hereunder or
effect any compromise with any Guarantor and no such release or compromise shall
in any manner impair or otherwise affect the obligations hereunder of the other
Guarantors. No release, compromise, or discharge of any one or more of the
Guarantors shall release, compromise or discharge the obligations of the other
Guarantors hereunder.
Section 8. In case of the dissolution, liquidation or insolvency
(howsoever evidenced) of, or the institution of bankruptcy or receivership
proceedings against the Borrower or any Guarantor, all of the indebtedness
hereby guaranteed which is then existing shall in accordance with the terms of
the Credit Agreement immediately become due or accrued and payable from the
Guarantors. All payments received from the Borrower or on account of the
indebtedness hereby guaranteed from whatsoever source, shall be taken and
applied as payment in gross, and this Guaranty shall apply to and secure any
ultimate balance that shall remain owing to the Guaranteed Creditors.
Section 9. The liability hereunder shall in no way be affected or
impaired by (and the Guaranteed Creditors are hereby expressly authorized to
make from time to time, without notice to any of the Guarantors), any sale,
pledge, surrender, compromise, settlement, release, renewal, extension,
impairment, indulgence, alteration, substitution, exchange, change in,
modification or other disposition of any of the indebtedness hereby guaranteed,
either express or implied, or of any Loan Document or any other contract or
contracts evidencing any thereof, or of any security or collateral therefor or
any guaranty thereof. The liability hereunder shall in no way be affected or
impaired by any acceptance by the Guaranteed Creditors of any security for or
other guarantors upon any of the indebtedness hereby guaranteed, or by any
failure, neglect or omission on the part of the Guaranteed Creditors to realize
upon or protect any of the indebtedness hereby guaranteed, or any collateral or
security therefor (including, without limitation, impairment of collateral and
failure to perfect security interest in any collateral), or to exercise any lien
upon or right of appropriation of any moneys, credits or property of the
Borrower or any Guarantor, possessed by any of the Guaranteed Creditors, toward
the liquidation of the indebtedness hereby guaranteed, or by any application of
payments or credits thereon. The Guaranteed Creditors shall have the exclusive
right to determine how, when and what application of payments and credits, if
any, shall be made on said indebtedness hereby guaranteed, or any part of same.
In order to hold any Guarantor liable hereunder, there shall be no obligation on
the part of the Guaranteed Creditors, at any time, to resort for payment to the
Borrower or to any other Guarantor, or to any other person, its property or
estate, or resort to any collateral, security, property, liens or other rights
or remedies whatsoever, and the Guaranteed Creditors shall have the right to
enforce this Guaranty against any Guarantor irrespective of whether or not other
proceedings or steps are pending seeking resort to or realization upon or from
any of the foregoing are pending.
-4-
<PAGE>
Section 10. In the event the Guaranteed Creditors shall at any time
in their discretion permit a substitution of Guarantors hereunder or a party
shall wish to become Guarantor hereunder, such substituted or additional
Guarantor shall, upon executing an agreement in the form attached hereto as
Exhibit A, become a party hereto and be bound by all the terms and conditions
hereof to the same extent as though such Guarantor had originally executed this
Guaranty and in the case of a substitution, in lieu of the Guarantor being
replaced. No such substitution shall be effective absent the written consent of
the Guaranteed Creditors delivered in accordance with the terms of the Credit
Agreement, nor shall it in any manner affect the obligations of the other
Guarantors hereunder.
Section 11. All diligence in collection or protection, and all
presentment, demand, protest and/or notice, as to any and everyone, whether or
not the Borrower or the Guarantors or others, of dishonor and of default and of
non-payment and of the creation and existence of any and all of said
indebtedness hereby guaranteed, and of any security and collateral therefor, and
of the acceptance of this Guaranty, and of any and all extensions of credit and
indulgence hereunder, are expressly waived.
Section 12. No act of commission or omission of any kind, or at any
time, upon the part of the Guaranteed Creditors in respect to any matter
whatsoever, shall in any way affect or impair this Guaranty.
Section 13. The Guarantors waive any and all defenses, claims and
discharges of the Borrower, or any other obligor or guarantor, pertaining to the
indebtedness hereby guaranteed, except the defense of discharge by payment in
full. Without limiting the generality of the foregoing, the Guarantors will not
assert, plead or enforce against the Guaranteed Creditors any defense of waiver,
release, discharge in bankruptcy, statute of limitations, res judicata, statue
of frauds, anti-deficiency statute, fraud, incapacity, minority, usury,
illegality or unenforceability which may be available to the Borrower or any
other person liable in respect of any of the indebtedness hereby guaranteed, or
any set-off available against the Guaranteed Creditors to the Borrower or any
such other person, whether or not on account of a related transaction. The
Guarantors agree that the Guarantors shall be and remain jointly and severally
liable for any deficiency remaining after foreclosure or other realization on
any lien or security interest securing the indebtedness hereby guaranteed,
whether or not the liability of the Borrower or any other obligor for such
deficiency is discharged pursuant to statute or judicial decision.
Section 14. If any payment applied by the Guaranteed Creditors to the
indebtedness hereby guaranteed is thereafter set aside, recovered, rescinded or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Borrower or any other obligor),
the indebtedness hereby guaranteed to which such payment was applied shall for
the purposes of this Guaranty be deemed to have continued in existence,
notwithstanding such application, and this Guaranty shall be enforceable as to
such of the indebtedness hereby guaranteed as fully as if such application had
never been made.
Section 15. The liability of the Guarantors under this Guaranty is in
addition to and shall be cumulative with all other liabilities of the Guarantors
after the date hereof to the
-5-
<PAGE>
Guaranteed Creditors as a guarantor of the indebtedness hereby guaranteed,
without any limitation as to amount, unless the instrument or agreement
evidencing or creating such other liability specifically provides to the
contrary.
Section 16. Any invalidity or unenforceability of any provision or
application of this Guaranty shall not affect other lawful provisions and
applications hereof, and to this end the provisions of this Guaranty are
declared to be severable. Without limiting the generality of the foregoing, any
invalidity or unenforceability against any Guarantor of any provision or
application of the Guaranty shall not affect the validity or enforceability of
the provisions or application of this Guaranty as against the other Guarantors.
Section 17. Any demand for payment on this Guaranty or any other
notice required or desired to be given hereunder to any Guarantor shall be in
writing (including, without limitation, notice by telecopy) and shall be given
to the relevant party at its address or telecopier number set forth on the
appropriate signature page hereof, or such other address or telecopier number as
such party may hereafter specify by notice to the Agent given by United States
certified or registered mail, by telecopy or by other telecommunication device
capable of creating a written record of such notice and its receipt. Each such
notice, request or other communication shall be effective (i) if given by
telecopier, when such telecopy is transmitted to the telecopier number specified
in this Section and a confirmation of such telecopy has been received by the
sender, (ii) if given by mail, 5 days after such communication is deposited in
the mail, certified or registered with return receipt requested, addressed as
aforesaid or (iii) if given by any other means, when delivered at the addresses
specified in this Section.
Section 18. No Lender or Letter of Credit Issuer shall have the right
to institute any suit, action or proceeding in equity or at law in connection
with this Guaranty for the enforcement of any remedy under or upon this
Guaranty; it being understood and intended that no one or more of the Lenders or
Letter of Credit Issuers shall have any right in any manner whatsoever to
enforce any right hereunder, and that all proceedings at law or in equity shall
be instituted, had and maintained by the Agent in the manner herein provided for
the benefit of the Guaranteed Creditors.
Section 19. The Guarantors are concurrently herewith granting Liens
on substantially all of their assets as security for the indebtedness hereby
guaranteed, including certain real property. In consideration of advances made
or to be made, or credit accommodations given or to be given, to the Borrower by
the Guaranteed Creditors from time to time, the Guarantors hereby
unconditionally agree to forever indemnify, defend and hold harmless, and
covenant not to sue for any claim for contribution against, the Guaranteed
Creditors for any damages, costs, loss or expense, including without limitation,
response, remedial or removal costs, arising out of any of the following: (i)
any presence, release, threatened release or disposal of any hazardous or toxic
substance or petroleum by the Borrower or any Guarantor or otherwise occurring
on or with respect to their property, (ii) the operation or violation of any
environmental law, whether federal, state, or local, and any regulations
promulgated thereunder, by the Borrower or any Guarantor or otherwise occurring
on or with respect to their property, (iii) any claim for personal injury or
-6-
<PAGE>
property damage in connection with the Borrower or any Guarantor or otherwise
occurring on or with respect to their property, and (iv) the inaccuracy or
breach of any environmental representation, warranty or covenant by the Borrower
or any Guarantor made in any loan agreement, promissory note, mortgage, deed of
trust, security agreement or any other instrument or document evidencing or
securing any indebtedness, obligations or liabilities of the Borrower or any
Guarantor owing to the Guaranteed Creditors or setting forth terms and
conditions applicable thereto or otherwise relating thereto, except for damages
arising from the Guaranteed Creditors' willful misconduct or gross negligence.
This indemnification shall survive the payment and satisfaction of all
indebtedness, obligations and liabilities of the Borrower and the Guarantors
owing to the Guaranteed Creditors and the termination of this Guaranty, and
shall remain in force beyond the expiration of any applicable statute of
limitations and payment or satisfaction in full of any single claim under this
indemnification. This indemnification shall be binding upon the successors and
assigns of the Guarantors and shall inure to the benefit of Guaranteed Creditors
and their directors, officers, employees, agents, and collateral trustees, and
their successors and assigns.
Section 20. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE OF ILLINOIS (without regard to principles of
conflicts of laws) in which state it shall be performed by the Guarantors and
may not be waived, amended, released or otherwise changed except by a writing
signed by the Agent. This Guaranty and every part thereof shall be effective
upon delivery to the Agent, without further act, condition or acceptance by the
Guaranteed Creditors, shall be binding upon the Guarantors and upon the legal
representatives, successors and assigns of the Guarantors, and shall inure to
the benefit of the Guaranteed Creditors, their successors, legal representatives
and assigns. The Guarantors waive notice of the Guaranteed Creditors'
acceptance hereof. This Guaranty may be executed in counterparts and by
different parties hereto on separate counterparts each of which shall be an
original, but all together to be one and the same instrument.
Section 21. Each Guarantor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Northern District of
Illinois and of any Illinois State court sitting in Cook County, Illinois, for
purposes of all legal proceedings arising out of or relating to this Guaranty or
the transactions contemplated hereby. Each Guarantor irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such court has been brought in
an inconvenient forum. EACH GUARANTOR AND, BY ACCEPTING THE BENEFITS OF THIS
AGREEMENT, EACH GUARANTEED CREDITOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signature Pages to follow]
-7-
<PAGE>
In Witness Whereof, the Guarantors have caused this Guaranty to be executed
and delivered as of the date first above written.
"GUARANTORS"
FOUNTAIN VIEW HOLDINGS, INC.
LOCOMOTION HOLDINGS, INC.
FOUNTAIN VIEW MANAGEMENT, INC.
SYCAMORE PARK CONVALESCENT HOSPITAL
AIB CORP.
ELMCREST CONVALESCENT HOSPITAL
BRIER OAK CONVALESCENT, INC.
BIA HOTEL CORP.
RIO HONDO NURSING CENTER
FOUNTAINVIEW CONVALESCENT HOSPITAL
ALEXANDRIA CONVALESCENT HOSPITAL, INC.
I.'N O., INC.
SUMMIT CARE CORPORATION
SUMMIT CARE-CALIFORNIA, INC.
SUMMIT CARE-TEXAS NO. 2, INC.
SUMMIT CARE-TEXAS NO. 3, INC.
SUMMIT CARE PHARMACY, INC.
SKILLED CARE NETWORK
SUMMIT CARE TEXAS EQUITY, INC.
SUMMIT CARE MANAGEMENT TEXAS, INC.
SNF PHARMACY, INC.
FV-SCC ACQUISITION CORP.
By /s/ Robert M. Snukal
--------------------------------------
Name: Robert M. Snukal
Title: President
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
-8-
<PAGE>
Locomotion Therapy, Inc.
On-Track Therapy Center, Inc.
By /s/ Robert M. Snukal
--------------------------------------
Name: Robert M. Snukal
Title: Chief Executive Officer
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
SUMMIT CARE TEXAS, L.P.
By: Summit Care Management Texas, Inc.,
in its capacity as general partner
By:/s/ Robert M. Snukal
--------------------------------------
Robert M. Snukal, President
By: Summit Care Texas Equity, Inc.,
in its capacity as limited partner
By: /s/ Robert M. Snukal
--------------------------------------
Robert M. Snukal, President
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
-9-
<PAGE>
Accepted and agreed to in Chicago, Illinois as of the date first above
written.
BANK OF MONTREAL, AS AGENT
By /s/ Mark F. Spencer
--------------------------------------
Name Mark F. Spencer
-----------------------------------
Title Managing Director
----------------------------------
Address:
601 South Figueroa Street, Suite 4900
Los Angeles, CA 90017
Attention: Ronald Launsbach
Telephone: (213) 239-0602
Telecopy: (213) 239-0680
-10-
<PAGE>
EXHIBIT A
TO
GUARANTY AGREEMENT
ASSUMPTION AND SUPPLEMENT TO GUARANTY AGREEMENT
This Assumption and Supplement to Guaranty Agreement (the "Agreement") is
dated as of this _____ day of ____________, _____, made by [NEW GUARANTOR], a
___________ corporation (the "New Guarantor");
WITNESSETH THAT:
Whereas, certain parties have executed and delivered to the Guaranteed
Creditors that certain Guaranty Agreement dated as of April 16, 1998 (such
Guaranty Agreement, as the same may from time to time be amended, modified, or
restated, including supplements thereto which add or substitute parties as
Guarantors thereunder, being hereinafter referred to as the "Guaranty") pursuant
to which such parties (the "Existing Guarantors") have guaranteed to the
Guaranteed Creditors the full and prompt payment of, among other things, any and
all indebtedness, obligations and liabilities of Fountain View, Inc. (the
"Borrower") arising under or relating to the Credit Agreement and the Loan
Documents as defined therein; and
Whereas, the Borrower provides the New Guarantor with substantial
financial, managerial, administrative and technical support and the New
Guarantor will directly and substantially benefit from credit and other
financial accommodations extended and to be extended by the Guaranteed Creditors
to the Borrower;
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Borrower by
the Guaranteed Creditors from time to time, the New Guarantor hereby agrees as
follows:
1. The New Guarantor acknowledges and agrees that it shall become a
"Guarantor" party to the Guaranty effective upon the date of the New Guarantor's
execution of this Agreement and the delivery of this Agreement to the Agent on
behalf of the Guaranteed Creditors, and that upon such execution and delivery,
all references in the Guaranty to the terms "Guarantor" or "Guarantors" shall be
deemed to include the New Guarantor.
2. The New Guarantor hereby assumes and becomes liable (jointly and
severally with all the other Guarantors) for the indebtedness hereby guaranteed
(as defined in the Guaranty) and agrees to pay and perform all of the
obligations of a Guarantor under the Guaranty according to, and otherwise on and
subject to, the terms and conditions of the Guaranty to the same extent and with
the same force and effect as if the New Guarantor had originally been one of the
Existing Guarantors under the Guaranty and had originally executed the same as
such an Existing Guarantor.
<PAGE>
3. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Guaranty, except that any
reference to the term "Guarantor" or "Guarantors" and any provision of the
Guaranty providing meaning to such term shall be deemed a reference to the
Existing Guarantors and the New Guarantor. Except as specifically modified
hereby, all of the terms and conditions of the Guaranty shall stand and remain
unchanged and in full force and effect.
4. The New Guarantor agrees to execute and deliver such further
instruments and documents and do such further acts and things as the Agent or
the Guaranteed Creditors may deem necessary or proper to carry out more
effectively the purposes of this Agreement.
5. No reference to this Agreement need be made in the Guaranty or in any
other document or instrument making reference to the Guaranty, any reference to
the Guaranty in any of such to be deemed a reference to the Guaranty as modified
hereby.
6. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law) in
which state it shall be performed by the New Guarantor.
[NEW GUARANTOR]
By_______________________
Name___________________
Title__________________
Acknowledged and agreed to as of the date first above written.
Bank of Montreal, as Agent
By_______________________
Name___________________
Title__________________
-2-
<PAGE>
EXHIBIT 10.49
PLEDGE AGREEMENT
This Pledge Agreement (the "Agreement") is dated as of April 16, 1998, by
and among Fountain View, Inc., a Delaware corporation (the "Borrower"), and the
other parties executing this Agreement under the heading "Pledgors" (the
Borrower and such other parties, along with any parties who execute and deliver
to the Agent an agreement in the form attached hereto as Schedule C being
hereinafter referred to collectively as the "Pledgors" and individually as a
"Pledgor"), each with its mailing address as set forth on its signature page
hereto and Bank of Montreal, a chartered bank of Canada acting through its
Chicago branch ("BOM"), with its mailing address at 115 South LaSalle Street,
Chicago, Illinois 60603, acting as agent hereunder for the Lenders and Letter of
Credit Issuers hereinafter identified and defined (BOM acting as such agent and
any successor or successors to BOM acting in such capacity being hereinafter
referred to as the "Agent");
PRELIMINARY STATEMENTS
A. The Borrower and BOM, individually and as agent, have entered into a
Credit Agreement dated as of April 16, 1998 (such Agreement as the same may be
amended, modified or restated from time to time being hereinafter referred to as
the "Credit Agreement"), pursuant to which BOM and other banks, financial
institutions and letter of credit issuers from time to time party to the Credit
Agreement (BOM, in its individual capacity, and such other banks and financial
institutions being hereinafter referred to collectively as the "Lenders" and
individually as a "Lender" and such letter of credit issuers being hereinafter
referred to collectively as the "Letter of Credit Issuers" and individually as a
"Letter of Credit Issuer") have agreed, subject to certain terms and conditions,
to extend credit and make certain other financial accommodations available to
the Borrower (the Agent, the Lenders and the Letter of Credit Issuers being
hereinafter referred to collectively as the "Secured Creditors" and individually
as a "Secured Creditor").
B. The Borrower may from time to time enter into one or more interest
rate exchange, cap, collar, floor or other agreements with one or more of the
Lenders party to the Credit Agreement, or their affiliates, for the purpose of
hedging or otherwise protecting the Borrower against changes in interest rates
(the liability of the Borrower in respect of such agreements with such Lenders
and their affiliates being hereinafter referred to as the "Hedging Liability").
C. As a condition to extending credit to the Borrower under the Credit
Agreement, the Secured Creditors have required, among other things, that each
Pledgor grant to the Agent for the benefit of the Secured Creditors a lien on
and security interest in certain personal property of such Pledgor described
herein subject to the terms and conditions hereof.
D. The Borrower owns, directly or indirectly, equity interests in each
other Pledgor and the Borrower provides each other Pledgor with financial,
management,
<PAGE>
administrative, and technical support which enables such Pledgor to
conduct its business in an orderly and efficient manner in the ordinary course.
E. Each Pledgor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Secured Creditors to the
Borrower.
Now, Therefore, for and in consideration of the execution and
delivery by the Secured Creditors of the Credit Agreement, and other good and
valuable consideration, receipt whereof is hereby acknowledged, the parties
hereto hereby agree as follows :
Section 1. Terms Defined in Credit Agreement. All capitalized terms
used herein without definition shall have the same meanings herein as such terms
have in the Credit Agreement. The term "Pledgor" and "Pledgors" as used herein
shall mean and include the Pledgors collectively and also each individually,
with all grants, representations, warranties and covenants of and by the
Pledgors, or any of them, herein contained to constitute joint and several
grants, representations, warranties and covenants of and by the Pledgors;
provided, however, that unless the context in which the same is used shall
otherwise require, any grant, representation, warranty or covenant contained
herein related to the Collateral shall be made by each Pledgor only with respect
to the Collateral owned by it or represented by such Pledgor as owned by it.
Section 2. Grant of Security Interest in the Collateral. Each
Pledgor hereby grants to the Agent for the benefit of the Secured Creditors a
lien on and security interest in, and acknowledges and agrees that the Agent has
and shall continue to have for the benefit of the Secured Creditors a continuing
lien on and security interest in, any and all right, title and interest of each
Pledgor in all equity interests of each of its Subsidiaries, whether now owned
or existing or hereafter created, acquired or arising, and in whatever form,
including, without limitation, any and all right, title, and interest in and to
the following:
(a) Stock Collateral. (i) All shares of the capital stock of each
Subsidiary which is a corporation owned or held by such Pledgor, whether now
owned or hereafter formed or acquired (those shares delivered to and deposited
with the Agent on or prior to the date hereof being listed and described on
Schedule A attached hereto), and all substitutions and additions to such shares
(herein, the "Pledged Securities"), (ii) all dividends, distributions and sums
distributable or payable from, upon or in respect of the Pledged Securities and
(iii) all other rights and privileges incident to the Pledged Securities (all of
the foregoing being hereinafter referred to collectively as the "Stock
Collateral");
(b) Partnership Interest Collateral. (i) All partnership or other equity
interests in each Subsidiary which is a partnership (whether general or limited)
owned or held by such Pledgor, whether now owned or hereafter formed or acquired
(each of such equity interests existing on the date hereof being listed and
identified on Schedule B attached hereto) (such partnerships being hereinafter
referred to collectively as the "Partnerships" and individually as a
"Partnership"), (ii) any and all payments and distributions of whatever kind or
character, whether in cash or other
-2-
<PAGE>
property, at any time made, owing or payable to such Pledgor in respect of
or on account of its present or hereafter acquired interests in each
Partnership, whether due or to become due and whether representing profits,
distributions pursuant to complete or partial liquidation or dissolution of
any such Partnership, distributions representing the complete or partial
redemption of such Pledgor's interest in any such Partnership or the
complete or partial withdrawal of such Pledgor from any such Partnership,
repayment of capital contributions, payment of management fees or
commissions, or otherwise, and the right to receive, receipt for, use and
enjoy all such payments and distributions, and (iii) all other rights and
privileges incident to such Pledgor's interest in each Partnership (all of
the foregoing being hereinafter collectively called the "Partnership
Interest Collateral");
(c) LLC Collateral. (i) All membership or other equity interests in each
Subsidiary which is a limited liability company owned or held by such
Pledgor, whether now owned or hereafter formed or acquired (each of such
equity interests existing on the date hereof being listed and identified on
Schedule C attached hereto (such limited liability companies being
hereinafter referred to collectively as the "LLCs" and individually as a
"LLC"), (ii) any and all payments and distributions of whatever kind or
character, whether in cash or other property, at any time made, owing or
payable to such Pledgor in respect of or on account of its present or
hereafter acquired interests in each LLC, whether due or to become due and
whether representing profits, distributions pursuant to complete or partial
liquidation or dissolution of any such LLC, distributions representing the
complete or partial redemption of such Pledgor's interest in such LLC or
the complete or partial withdrawal of such Pledgor from any such LLC,
repayment of capital contributions, payment of management fees or
commissions, or otherwise, and the right to receive, receipt for, use and
enjoy all such payments and distributions, and (iii) all other rights and
privileges incident to such Pledgor's interest in each LLC (all of the
foregoing being hereinafter referred to as the "LLC Collateral"); and
(d) Proceeds. All proceeds of the foregoing;
all of the foregoing being herein sometimes referred to as the "Collateral";
provided that, so long as the Borrower is in compliance with Section 4.1 of the
Credit Agreement, the Collateral shall not include any capital stock issued by
Alexandria Convalescent Hospital, Inc. All terms which are used in this
Agreement which are defined in the Uniform Commercial Code of the State of
Illinois ("UCC") shall have the same meanings herein as such terms are defined
in the UCC, unless this Agreement shall otherwise specifically provide.
Section 3. Obligations Hereby Secured. This Agreement is made and given
to secure, and shall secure, the prompt payment and performance when due of (i)
any and all indebtedness, obligations and liabilities of the Pledgors, and of
any of them individually, to the Secured Creditors, and to any of them
individually, under or in connection with or evidenced by the Credit Agreement,
the Notes of the Borrower heretofore or hereafter issued under the Credit
Agreement and the obligations of the Borrower to reimburse the Secured Creditors
for the amount of all drawings on all Letters of Credit issued pursuant to
-3-
<PAGE>
the Credit Agreement, and all other obligations of the Borrower under any and
all applications for Letters of Credit, and any and all liability of the
Pledgors, and of any of them individually, arising under or in connection with
or otherwise evidenced by agreements with any one or more of the Secured
Creditors or their affiliates with respect to any Hedging Liability, and any and
all liability of the Pledgors, and of any of them individually, arising under
any guaranty issued by it relating to the foregoing or any part thereof, in each
case whether now existing or hereafter arising (and whether arising before or
after the filing of a petition in bankruptcy and including all interest accrued
after the petition date), due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired and (ii) any and all
expenses and charges, legal or otherwise, suffered or incurred by the Secured
Creditors, and any of them individually, in collecting or enforcing any of such
indebtedness, obligations and liabilities or in realizing on or protecting or
preserving any security therefor, including, without limitation, the lien and
security interest granted hereby (all of the indebtedness, obligations,
liabilities, expenses and charges described above being hereinafter referred to
as the "Obligations"). Notwithstanding anything in this Agreement to the
contrary, the right of recovery against any Pledgor (other than the Borrower to
which this limitation shall not apply) under this Agreement shall not exceed
$1.00 less than the amount which would render such Pledgor's obligations under
this Agreement void or voidable under applicable law, including fraudulent
conveyance law.
Section 4. Covenants, Agreements, Representations and Warranties.
Each Pledgor hereby covenants and agrees with, and represents and warrants to,
the Secured Creditors that:
(a) Each Pledgor is and shall be the sole and lawful legal, record and
beneficial owner of its Collateral. Each Pledgor's chief executive office
is at the address listed under such Pledgor's name on Schedule A, Schedule
B and Schedule C hereto, as applicable. Each Pledgor agrees that it will
not change any location set forth on the applicable Schedule hereto without
30 days prior written notice to the Agent (provided in all cases such
locations shall be within the United States of America). No Pledgor shall,
without the Agent's prior written consent, sell, assign, or otherwise
dispose of the Collateral or any interest therein, except to the extent
permitted by Section 8.10 of the Credit Agreement. The Collateral, and
every part thereof, is and shall be free and clear of all security
interests, liens, rights, claims, attachments, levies and encumbrances of
every kind, nature and description and whether voluntary or involuntary,
except for the security interest of the Agent hereunder and for other Liens
permitted by Section 8.8 of the Credit Agreement. Each Pledgor shall
warrant and defend the Collateral against any claims and demands of all
persons at any time claiming the same or any interest in the Collateral
adverse to any Secured Creditor.
(b) Each Pledgor agrees to execute and deliver to the Agent such further
agreements, assignments, instruments and documents and to do all such other
things as the Agent may deem necessary or appropriate to assure the Agent
its lien and security interest hereunder, including such assignments,
acknowledgments (including acknowledgments of collateral assignment in the
form attached hereto as Schedule D),
-4-
<PAGE>
stock powers, financing statements, instruments and documents as the Agent
may from time to time require in order to comply with the UCC. Each Pledgor
hereby agrees that a carbon, photographic or other reproduction of this
Agreement or any such financing statement is sufficient for filing as a
financing statement by the Agent without prior notice thereof to such
Pledgor wherever the Agent in its discretion desires to file the same. In
the event for any reason the law of any jurisdiction other than Illinois
becomes or is applicable to the Collateral or any part thereof, or to any
of the Obligations, each Pledgor agrees to execute and deliver all such
agreements, assignments, instruments and documents and to do all such other
things as the Agent in its discretion deems necessary or appropriate to
preserve, protect and enforce the lien and security interest of the Agent
under the law of such other jurisdiction.
(c) If, as and when any Pledgor (x) delivers any securities for pledge
hereunder in addition to those listed on Schedule A hereto or (y) pledges
interests in any partnership in addition to those listed on Schedule B
hereto or (z) pledges interests in any limited liability company in
addition to those listed on Schedule C hereto, the Pledgors shall furnish
to the Agent a duly completed and executed amendment to such Schedule in
substantially the form (with appropriate insertions) of Schedule E hereto
reflecting the additional securities, partnership interests or limited
liability company interests pledged hereunder after giving effect to such
addition.
(d) None of the Collateral constitutes margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System).
(e) On failure of any Pledgor to perform when due any of the agreements
and covenants herein contained, the Agent may, at its option, perform the
same and in so doing may expend such sums as the Agent reasonably deems
advisable in the performance thereof, including, without limitation, the
payment of any taxes, liens and encumbrances, expenditures made in
defending against any adverse claim, and all other expenditures which the
Agent may be compelled to make by operation of law or which Agent may make
by agreement or otherwise for the protection of the security hereof. All
such sums and amounts so expended shall be repayable by the Pledgors upon
demand, shall constitute additional Obligations secured hereunder and shall
bear interest from the date said amounts are expended at the rate per annum
(computed on the basis of a year of 360 days, for the actual number of days
elapsed) determined by adding 2% to the Base Rate from time to time in
effect plus the Applicable Margin for Base Rate Loans (such rate per annum
as so determined being hereinafter referred to as the "Default Rate"). No
such performance of any covenant or agreement by the Agent on behalf of
such Pledgor, and no such advancement or expenditure therefor, shall
relieve such Pledgor of any default under the terms of this Agreement or in
any way obligate any Secured Creditor to take any further or future action
with respect thereto. The Agent, in making any payment hereby authorized,
may do so according to any bill, statement or estimate procured from the
appropriate public office or holder of the claim to be discharged without
inquiry into the accuracy of such bill, statement or estimate, or into the
validity of any tax assessment, sale, forfeiture, tax lien or title or
claim. The Agent, in performing any act hereunder, shall be the sole
-5-
<PAGE>
judge of whether the relevant Pledgor is required to perform the same under
the terms of this Agreement. The Agent is hereby authorized to charge any
depository or other account of any Pledgor maintained with any Secured
Creditor for the amount of such sums and amounts so expended.
Section 5. Special Provisions Re: Stock Collateral.
(a) Each Pledgor has the right to vote the Pledged Securities and there
are no restrictions upon the voting rights associated with, or the transfer
of, any of the Pledged Securities, except as provided by federal and state
laws applicable to the sale of securities generally and the terms of this
Agreement.
(b) The certificates for all shares of the Pledged Securities shall be
delivered by the relevant Pledgor to the Agent duly endorsed in blank for
transfer or accompanied by an appropriate assignment or assignments or an
appropriate undated stock power or powers, in every case sufficient to
transfer title thereto. The Agent may, at any time after the occurrence of
an Event of Default at any time when the Obligations are, or have been
declared to be, due and payable in full, cause to be transferred into its
name or into the name of its nominee or nominees any and all of the Pledged
Securities. The Agent shall at all times have the right to exchange the
certificates representing the Pledged Securities for certificates of
smaller or larger denominations.
(c) The Pledged Securities have been validly issued and, except as
described on Schedule A, are fully paid and non-assessable. Except as set
forth on Schedule A, there are no outstanding commitments or other
obligations of the issuers of any of the Pledged Securities to issue, and
no options, warrants or other rights of any individual or entity to
acquire, any share of any class or series of capital stock of such issuers.
The Pledged Securities listed and described on Schedule A attached hereto
constitute the percentage of the issued and outstanding capital stock of
each series and class of the issuers thereof as set forth thereon owned by
the relevant Pledgor. Each Pledgor further agrees that in the event any
such issuer shall issue any additional capital stock of any series or class
(whether or not entitled to vote) to such Pledgor or otherwise on account
of its ownership interest therein, each Pledgor will forthwith pledge and
deposit hereunder, or cause to be pledged and deposited hereunder, all such
additional shares of such capital stock.
Section 6. Special Provisions Re: Partnership Interest Collateral and LLC
Collateral.
(a) Each Pledgor further represents and warrants to, and agrees with, the
Secured Creditors as follows:
(i) each Partnership is a valid and existing entity of the type
listed on Schedule B and is duly organized and existing under applicable
law; and each LLC is duly organized and existing under applicable law;
-6-
<PAGE>
(ii) the Partnership Interest Collateral listed and described on
Schedule B attached hereto constitutes the percentage of the equity
interest in each Partnership set forth thereon owned by the relevant
Pledgor; and the LLC Collateral listed and described on Schedule C
attached hereto constitutes the percentage of the equity interest in
each LLC set forth thereon owned by the relevant Pledgor; and
(iii) the copies of the partnership agreements of each Partnership
and the articles of association and operating agreements of each LLC (each
such agreement being hereinafter referred to as "Organizational Agreement")
heretofore delivered to the Agent are true and correct copies thereof and
have not been amended or modified in any respect.
(b) Each Pledgor agrees that it shall not, without the prior written
consent of the Agent, agree to any amendment or modification to any of the
Organizational Agreements which would in any manner adversely affect or impair
the Partnership Interest Collateral or LLC Collateral or reduce or dilute the
rights of such Pledgor with respect to any Partnership or LLC, any of such done
without such prior written consent to be null and void. The Pledgors shall
promptly send to the Agent copies of all notices and communications with respect
to each Partnership and each LLC alleging the existence of a default by any
Pledgor in the performance of any of its obligations under any Organizational
Agreement. Each Pledgor agrees that it will promptly notify the Agent of any
litigation which is reasonably likely to have a Material Adverse Effect or is
reasonably likely to materially and adversely affect a Partnership or a LLC or
any of their respective properties and of any material adverse change in the
operations, business properties, assets or conditions, financial or otherwise,
of any Pledgor or any Partnership or any LLC. Each Pledgor shall perform when
due all of its obligations under each Organizational Agreement. In the event
any Pledgor fails to pay or perform any obligation arising under any
Organizational Agreement or otherwise related to any Partnership or any LLC, the
Agent may, but need not, pay or perform such obligation at the expense and for
the account of the Pledgors and all funds expended for such purposes shall
constitute Obligations secured hereby which the Pledgors promise to pay to the
Agent together with interest thereon at the Default Rate.
(c) The certificates, if any, at any time evidencing any Pledgor's
interest in any Partnership or LLC shall be delivered to the Agent duly endorsed
in blank for transfer or accompanied by an appropriate assignment or assignments
or an appropriate undated stock power or powers, in every case sufficient to
transfer title thereto. The Agent may, at any time after the occurrence of an
Event of Default at any time when the Obligations are, or have been declared to
be, due and payable in full, cause to be transferred into its name or the name
of its nominee or nominees, any and all of such Collateral. The Agent shall at
all times have the right to exchange the certificates representing such
Collateral for certificates of smaller or larger denominations.
-7-
<PAGE>
(d) Each Pledgor has the right to vote its interest in each
Partnership and LLC (except as set forth herein) and there are no
restrictions upon the voting rights associated with, or the transfer of,
any of the Partnership Interest Collateral or LLC Collateral, except as
provided by federal and state laws applicable to the sale of securities
generally, the terms of any Organizational Agreement under which such
person is organized and the terms of this Agreement.
(e) Except as set forth on Schedule C, there are no outstanding
commitments or other obligations of any LLC to issue, and no options,
warrants or other rights of any individual or entity to acquire, any
interest in such LLC.
(f) Each Pledgor further agrees that in the event it shall acquire
any additional interests in any Partnership or LLC, such Pledgor will
forthwith pledge and deposit hereunder or cause to be pledged and deposited
hereunder, all such additional interests.
Section 7. Voting Rights and Dividends. Unless and until an Event of
Default hereunder has occurred and is continuing and thereafter until notified
by the Agent pursuant to Section 9(b) hereof:
(a) Each Pledgor shall be entitled to exercise all voting and/or
consensual powers pertaining to the Collateral of such Pledgor, or any part
thereof, for all purposes not inconsistent with the terms of this Agreement
or any other document evidencing or otherwise relating to any of the
Obligations.
(b) Each Pledgor shall be entitled to receive and retain all
dividends and distributions in respect of the Collateral which are paid in
cash of whatsoever nature; provided, however, that such dividends and
distributions representing:
(i) stock or liquidating dividends or a distribution or return
of capital upon or in respect of the Pledged Securities or any part
thereof or resulting from a split-up, revision or reclassification of
the Pledged Securities or any part thereof or received in addition to,
in substitution of or in exchange for the Pledged Securities or any
part thereof as a result of a merger, consolidation or otherwise; or
(ii) distributions in complete or partial liquidation of any
Partnership or LLC or the interest of such Pledgor therein;
in each case, shall be paid, delivered or transferred, as appropriate,
directly to the Agent immediately upon the receipt thereof by such Pledgor
and may, in the case of cash, be applied by the Agent to the Obligations in
accordance with the terms of the Credit Agreement, whether or not the same
may then be due or otherwise adequately secured and shall, in the case of
all other property, together with any cash received by the Agent and not
applied as aforesaid, be held by the Agent pursuant hereto as part of the
Collateral pledged under and subject to the terms of this Agreement.
-8-
<PAGE>
(c) In order to permit each Pledgor to exercise such voting and/or
consensual powers which it is entitled to exercise under subsection (a)
above and to receive such distributions which such Pledgor is entitled to
receive and retain under subsection (b) above, the Agent will, if
necessary, upon the written request of such Pledgor, from time to time
execute and deliver to such Pledgor appropriate proxies and dividend
orders.
Section 8. Power of Attorney. Each Pledgor hereby appoints the Agent, its
nominee, or any other person whom the Agent may designate as such Pledgor's
attorney-in-fact, with full power and authority upon the occurrence and during
the continuation of any Event of Default to ask, demand, collect, receive,
receipt for, sue for, compound and give acquittance for any and all sums or
properties which may be or become due, payable or distributable in respect of
the Collateral or any part thereof, with full power to settle, adjust or
compromise any claim thereunder or therefor as fully as such Pledgor could
itself do, to endorse or sign the Pledgor's name on any assignments, stock
powers, or other instruments of transfer and on any checks, notes, acceptances,
money orders, drafts, and any other forms of payment or security that may come
into the Agent's possession and on all documents of satisfaction, discharge or
receipt required or requested in connection therewith, and, in its discretion,
to file any claim or take any other action or proceeding, either in its own name
or in the name of such Pledgor, or otherwise, which the Agent deems necessary or
appropriate to collect or otherwise realize upon all or any part of the
Collateral, or effect a transfer thereof, or which may be necessary or
appropriate to protect and preserve the right, title and interest of the Agent
in and to such Collateral and the security intended to be afforded hereby. Each
Pledgor hereby ratifies and approves all acts of any such attorney and agrees
that neither the Agent nor any such attorney will be liable for any such acts or
omissions nor for any error of judgment or mistake of fact or law other than
such person's gross negligence or willful misconduct. The Agent may file one or
more financing statements disclosing its security interest in all or any part of
the Collateral without any Pledgor's signature appearing thereon, and each
Pledgor also hereby grants the Agent a power of attorney to execute any such
financing statements, and any amendments or supplements thereto, on behalf of
such Pledgor without notice thereof to such Pledgor. The foregoing powers of
attorney, being coupled with an interest, are irrevocable until the Obligations
have been fully satisfied and all commitments of the Lenders to extend credit to
or for the account of the Borrower under the Credit Agreement have expired or
otherwise terminated.
Section 9. Defaults and Remedies. (a) The occurrence of any event or the
existence of any condition which is specified as an "Event of Default" under the
Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default at any time when the Obligations are, or have been declared to be, due
and payable in full, all rights of the Pledgors to receive and retain the
distributions which they are entitled to receive and retain pursuant to Section
7(b) hereof shall, at the option of the Agent cease and thereupon become vested
in the Agent which, in addition to all other rights provided herein or by law,
shall then be entitled solely and exclusively to receive and retain the
distributions
-9-
<PAGE>
which the Pledgors would otherwise have been authorized to retain pursuant to
Section 7(b) hereof and all rights of the Pledgors to exercise the voting and/or
consensual powers which they are entitled to exercise pursuant to Section 7(a)
hereof shall, at the option of the Agent, cease and thereupon become vested in
the Agent which, in addition to all other rights provided herein or by law,
shall then be entitled solely and exclusively to exercise all voting and other
consensual powers pertaining to the Collateral and to exercise any and all
rights of conversion, exchange or subscription and any other rights, privileges
or options pertaining thereto as if the Agent were the absolute owner thereof
including, without limitation, the right to exchange, at its discretion, the
Collateral or any part thereof upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the respective issuer thereof or upon
the exercise by or on behalf of any such issuer or the Agent of any right,
privilege or option pertaining to the Collateral or any part thereof and, in
connection therewith, to deposit and deliver the Collateral or any part thereof
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Agent may determine. In the event
the Agent in good faith believes any of the Collateral constitutes restricted
securities within the meaning of any applicable securities law, any disposition
thereof in compliance with such laws shall not render the disposition
commercially unreasonable.
(c) Upon the occurrence and during the continuation of any Event of
Default, the Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the UCC (regardless
of whether the UCC is the law of the jurisdiction where the rights or remedies
are asserted and regardless of whether the UCC applies to the affected
Collateral), and further the Agent may, without demand and without
advertisement, notice, hearing or process of law to the extent permitted by
applicable law, all of which each Pledgor hereby waives to the extent permitted
by applicable law, at any time or times, sell and deliver any or all of the
Collateral held by or for it at public or private sale, at any securities
exchange or broker's board or at any of the Agent's offices or elsewhere, for
cash, upon credit or otherwise, at such prices and upon such terms as the Agent
deems advisable, in its sole discretion. In the exercise of any such remedies,
the Agent may sell the Collateral as a unit even though the sales price thereof
may be in excess of the amount remaining unpaid on the Obligations. Also, if
less than all the Collateral is sold, the Agent shall have no duty to marshal or
apportion the part of the Collateral so sold as between the Pledgors, or any of
them, but may sell and deliver any or all of the Collateral without regard to
which of the Pledgors are the owners thereof. In addition to all other sums due
any Secured Creditor hereunder, each Pledgor shall pay the Secured Creditors all
costs and expenses incurred by the Secured Creditors, including reasonable
attorneys' fees and court costs, in obtaining, liquidating or enforcing payment
of Collateral or the Obligations or in the prosecution or defense of any action
or proceeding by or against any Secured Creditor or any Pledgor concerning any
matter arising out of or connected with this Agreement or the Collateral or the
Obligations including, without limitation, any of the foregoing arising in,
arising under or related to a case under the United States Bankruptcy Code (or
any successor statute). Any requirement of reasonable notice shall be met if
such notice is personally served on or mailed, postage prepaid, to the Pledgors
in accordance with Section 14(b) hereof at least 10 days before the time of sale
or other event giving rise to the requirement of such notice; provided, however,
no notification need be given to a Pledgor if
-10-
<PAGE>
such Pledgor has signed, after an Event of Default has occurred, a statement
renouncing any right to notification of sale or other intended disposition. The
Agent shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given. Any Secured Creditor may be
the purchaser at any such sale. Each Pledgor hereby waives all of its rights of
redemption from any such sale. The Agent may postpone or cause the postponement
of the sale of all or any portion of the Collateral by announcement at the time
and place of such sale, and such sale may, without further notice, be made at
the time and place to which the sale was postponed or the Agent may further
postpone such sale by announcement made at such time and place.
EACH PLEDGOR AGREES THAT IF ANY PART OF THE COLLATERAL IS SOLD AT ANY
PUBLIC OR PRIVATE SALE, THE AGENT MAY ELECT TO SELL ONLY TO A BUYER WHO WILL
GIVE FURTHER ASSURANCES, SATISFACTORY IN FORM AND SUBSTANCE TO THE AGENT,
RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE FEDERAL SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, AND A SALE SUBJECT TO
SUCH CONDITION SHALL BE DEEMED COMMERCIALLY REASONABLE.
EACH PLEDGOR FURTHER AGREES THAT IN ANY SALE OF ANY PART OF THE COLLATERAL,
THE AGENT IS HEREBY AUTHORIZED TO COMPLY WITH ANY LIMITATION OR RESTRICTION IN
CONNECTION WITH SUCH SALE AS IT MAY BE ADVISED BY COUNSEL IS NECESSARY IN ORDER
TO AVOID ANY VIOLATION OF APPLICABLE LAW (INCLUDING, WITHOUT LIMITATION,
COMPLIANCE WITH SUCH PROCEDURES AS MAY RESTRICT THE NUMBER OF PROSPECTIVE
BIDDERS AND PURCHASERS AND/OR FURTHER RESTRICT SUCH PROSPECTIVE BIDDERS OR
PURCHASERS TO PERSONS WHO WILL REPRESENT AND AGREE THAT THEY ARE PURCHASING FOR
THEIR OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR
RESALE OF SUCH COLLATERAL ), OR IN ORDER TO OBTAIN ANY REQUIRED APPROVAL OF THE
SALE OR OF THE PURCHASER BY ANY GOVERNMENTAL REGULATORY AUTHORITY OR OFFICIAL,
AND EACH PLEDGOR FURTHER AGREES THAT SUCH COMPLIANCE SHALL NOT RESULT IN SUCH
SALE BEING CONSIDERED OR DEEMED NOT TO HAVE BEEN MADE IN A COMMERCIALLY
REASONABLE MANNER, NOR SHALL THE AGENT BE LIABLE OR ACCOUNTABLE TO ANY PLEDGOR
FOR ANY DISCOUNT ALLOWED BY REASON OF THE FACT THAT SUCH COLLATERAL IS SOLD IN
COMPLIANCE WITH ANY SUCH LIMITATION OR RESTRICTION.
(d) In the event the Agent shall sell or otherwise dispose of all or any
part of the Partnership Interest Collateral or LLC Collateral, each Pledgor
hereby grants the purchaser of such portion of the Partnership Interest
Collateral or LLC Collateral to the fullest extent of its capacity, the ability
(but not the obligation) to become a partner or member in the relevant
Partnership or LLC, as the case may be (subject to the approval of the relevant
Partnership or LLC, as the case may be, in the exercise of its discretion in
accordance with its Organizational Agreement and subject to any requirements of
applicable law), in the place and stead of such Pledgor. To exercise such
right, the purchaser shall give written notice to the relevant Partnership or
LLC, as the case may be, of its election to become a partner or member in such
Partnership or LLC. Following such election and giving of consent by all
necessary partners or members of the relevant Partnership or LLC as to the
purchaser becoming a partner or member, the purchaser shall have the right and
powers and be subject
-11-
<PAGE>
to the liabilities of a partner or member under the relevant Organizational
Agreement and the partnership or limited liability company act governing the
Partnership or LLC.
(e) Upon the occurrence and during the continuation of any Event of
Default, in addition to all other rights provided herein or by law, the Agent
shall have the right to cause all or any part of the Partnership Interest
Collateral or LLC Collateral of any of the Pledgors in any one or more of the
Partnerships or LLCs to be redeemed and to cause a withdrawal, in whole or in
part, of any Pledgor from any Partnership or LLC or any of its interest therein.
(f) The powers conferred upon the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose on it any duties to exercise
such powers. The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equivalent to that which the Agent accords
its own property, consisting of similar types securities, it being understood,
however, that the Agent shall have no responsibility for (i) ascertaining or
taking any action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relating to any Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters, (ii) taking any necessary
steps to preserve rights against any parties with respect to any Collateral, or
(iii) initiating any action to protect the Collateral or any part thereof
against the possibility of a decline in market value. This Agreement constitutes
an assignment of rights only and not an assignment of any duties or obligations
of the Pledgors in any way related to the Collateral, and the Agent shall have
no duty or obligation to discharge any such duty or obligation. By its
acceptance hereof, the Agent does not undertake to perform or discharge and
shall not be responsible or liable for the performance or discharge of any such
duties or responsibilities and shall not in any event become a "Substituted
Limited Partner" or words of like import (as defined in the relevant
Organizational Agreement) in the relevant Partnership. Neither any Secured
Creditor, nor any party acting as attorney for any Secured Creditor, shall be
liable hereunder for any acts or omissions or for any error of judgment or
mistake of fact or law other than such person's gross negligence or willful
misconduct.
(g) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Pledgor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. The rights and remedies of the Secured Creditors
under this Agreement shall be cumulative and not exclusive of any other right or
remedy which the any Secured Creditor may have.
Section 10. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of, or held as
collateral security for, the Obligations in accordance with the terms of the
Credit Agreement. The Pledgors shall remain liable to the Secured Creditors for
any deficiency. Any surplus remaining after the full payment and satisfaction
-12-
<PAGE>
of the Obligations shall be returned to the Borrower, as agent for Pledgors, or
to whomsoever the Agent reasonably determines is lawfully entitled thereto.
Section 11. Continuing Agreement. This Agreement shall be a
continuing agreement in every respect and shall remain in full force and effect
until all of the Obligations, both for principal and interest, have been fully
paid and satisfied and the commitments of the Secured Creditors to extend credit
to or for the account of the Borrower under the Credit Agreement shall have
expired or otherwise terminated. Upon such termination of this Agreement, the
Agent shall, upon the request and at the expense of the Pledgors, forthwith
release all its liens and security interests hereunder.
Section 12. Primary Security; Obligations Absolute. The lien and
security herein created and provided for stand as direct and primary security
for the Obligations. No application of any sums received by the Agent in
respect of the Collateral or any disposition thereof to the reduction of the
Obligations or any portion thereof shall in any manner entitle any Pledgor to
any right, title or interest in or to the Obligations or any collateral security
therefor, whether by subrogation or otherwise, unless and until all Obligations
have been fully paid and satisfied and all commitments to extend credit
constituting Obligations to the Borrower shall have expired or otherwise
terminated. Each Pledgor acknowledges and agrees that the lien and security
hereby created and provided for are absolute and unconditional and shall not in
any manner be affected or impaired by any acts or omissions whatsoever of any
Secured Creditor or any other holder of any of the Obligations, and without
limiting the generality of the foregoing, the lien and security hereof shall not
be impaired by any acceptance by any Secured Creditor or any other holder of any
of the Obligations of any other security for or guarantors upon any Obligations
or by any failure, neglect or omission on the part of any Secured Creditor or
any other holder of any of the Obligations to realize upon or protect any of the
Obligations or any collateral security therefor. The lien and security hereof
shall not in any manner be impaired or affected by (and the Secured Creditors,
without notice to anyone, are hereby authorized to make from time to time) any
sale, pledge, surrender, compromise, settlement, release, renewal, extension,
indulgence, alteration, substitution, exchange, change in, modification or
disposition of any of the Obligations, or of any collateral security therefor,
or of any guaranty thereof, or of any instrument or agreement setting forth the
terms and conditions pertaining to any of the foregoing. The Secured Creditors
may at their discretion at any time grant credit to the Borrower without notice
to the other Pledgors in such amounts and on such terms as the Secured Creditors
may elect without in any manner impairing the lien and security hereby created
and provided for. In order to realize hereon and to exercise the rights granted
the Secured Creditors hereunder and under applicable law, there shall be no
obligation on the part of any Secured Creditor or any other holder of any of the
Obligations at any time to first resort for payment to the Borrower or any other
Pledgor or to any guaranty of the Obligations or any portion thereof or to
resort to any other collateral security, property, liens or any other rights or
remedies whatsoever, and the Secured Creditors shall have the right to enforce
this Agreement as against any Pledgor or any of its Collateral irrespective of
whether or not other proceedings or steps seeking resort to or realization upon
or from any of the foregoing are pending.
-13-
<PAGE>
Section 13. The Agent. In acting under or by virtue of this
Agreement, Agent shall be entitled to all the rights, authority, privileges and
immunities provided in Section 11 of the Credit Agreement, all of which
provisions of said Section 11 are incorporated by reference herein with the same
force and effect as if set forth herein in their entirety. The Agent hereby
disclaims any representation or warranty to the other Secured Creditors or any
other holders of the Obligations concerning the perfection of the liens and
security interests granted hereunder or in the value of the Collateral.
Section 14. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and
security interest in the Collateral and shall be binding upon each Pledgor, its
successors and permitted assigns, and shall inure, together with the rights and
remedies of the Secured Creditors hereunder, to the benefit of the Secured
Creditors, and their successors and assigns; provided, however, that no Pledgor
may assign its rights or delegate its duties hereunder without the Agent's prior
written consent. Without limiting the generality of the foregoing, and subject
to the provisions of the Credit Agreement, any Lender may assign or otherwise
transfer any indebtedness held by it secured by this Agreement to any other
person, and such other person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise.
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Pledgor when given to the Borrower in accordance
with Section 12.8 of the Credit Agreement, or if to any Secured Creditor, when
given to such party in accordance with Section 12.8 of the Credit Agreement.
(c) No Lender or Letter of Credit Issuer shall have the right to
institute any suit, action or proceeding in equity or at law for the foreclosure
or other realization upon any Collateral subject to this Agreement or for the
execution of any trust or power hereof or for the appointment of a receiver, or
for the enforcement of any other remedy under or upon this Agreement; it being
understood and intended that no one or more of the Lenders or Letter of Credit
Issuers shall have any right in any manner whatsoever to affect, disturb or
prejudice the lien and security interest of this Agreement by its or their
action or to enforce any right hereunder, and that all proceedings at law or in
equity shall be instituted, had and maintained by the Agent in the manner herein
provided for the benefit of the Secured Creditors.
(d) In the event that any provision hereof shall be deemed to be invalid
or unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed as
not containing such provision, but only as to such jurisdictions where such law
or interpretation is operative, and the invalidity or unenforceability of such
provision shall not affect the validity of any remaining provision hereof, and
any and all other provisions hereof which are otherwise lawful and valid shall
remain in full force and effect. Without limiting the generality of the
foregoing, in the event that this Agreement shall be deemed to be invalid or
otherwise
-14-
<PAGE>
unenforceable with respect to any Pledgor, such invalidity or
unenforceability shall not affect the validity of this Agreement with respect to
the other Pledgors.
(e) In the event the Secured Creditors shall at any time in their
discretion permit a substitution of Pledgors hereunder or a party shall wish to
become a Pledgor hereunder, such substituted or additional Pledgor shall, upon
executing an agreement in the form attached hereto as Schedule F, become a party
hereto and be bound by all the terms and conditions hereof to the same extent as
though such Pledgor had originally executed this Agreement and, in the case of a
substitution, in lieu of the Pledgor being replaced. Any such agreement shall
contain information as to such Pledgor necessary to update Schedules A, B and C
with respect to it. No such substitution shall be effective absent the written
consent of Agent nor shall it in any manner affect the obligations of the other
Pledgors hereunder.
(f) Each Pledgor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in Cook County, Illinois for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Pledgor irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
form. Each Pledgor and, by accepting the benefits of this Agreement, each
Secured Creditor hereby irrevocably waives any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
(g) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(h) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same instrument.
[Signature Pages to Follow]
-15-
<PAGE>
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly
executed and delivered as of the date first above written.
"PLEDGORS"
FOUNTAIN VIEW, INC.
FOUNTAIN VIEW HOLDINGS, INC.
LOCOMOTION HOLDINGS, INC.
FOUNTAIN VIEW MANAGEMENT, INC.
SYCAMORE PARK CONVALESCENT HOSPITAL
AIB CORP.
ELMCREST CONVALESCENT HOSPITAL
BRIER OAK CONVALESCENT, INC.
BIA HOTEL CORP.
RIO HONDO NURSING CENTER
FOUNTAINVIEW CONVALESCENT HOSPITAL
ALEXANDRIA CONVALESCENT HOSPITAL, INC.
I.'N O., INC.
SUMMIT CARE CORPORATION
SUMMIT CARE-CALIFORNIA, INC.
SUMMIT CARE-TEXAS NO. 2, INC.
SUMMIT CARE-TEXAS NO. 3, INC.
SUMMIT CARE PHARMACY, INC.
SKILLED CARE NETWORK
SUMMIT CARE TEXAS EQUITY, INC.
SUMMIT CARE MANAGEMENT TEXAS, INC.
SNF PHARMACY, INC.
FV-SCC ACQUISITION CORP.
By /s/ Robert M. Snukal
----------------------------
Name: Robert M. Snukal
Title: President
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
-16-
<PAGE>
LOCOMOTION THERAPY, INC.
ON-TRACK THERAPY CENTER, INC.
By /s/ Robert M. Snukal
-------------------------------
Name: Robert M. Snukal
Title: Chief Executive Officer
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
SUMMIT CARE TEXAS, L.P.
By: Summit Care Management Texas, Inc.,
in its capacity as general partner
By /s/ Robert Snukal
---------------------------
Robert Snukal, President
By: Summit Care Texas Equity, Inc.,
in its capacity as limited partner
By /s/ Robert Snukal
---------------------------
Robert Snukal, President
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
-17-
<PAGE>
Acknowledged and agreed to in Chicago, Illinois as of the date first above
written.
BANK OF MONTREAL, AS AGENT
By /s/ Mark F. Spencer
-----------------------------
Name MARK F. SPENCER
----------------------
Title MANAGING DIRECTOR
----------------------
Address:
601 South Figueroa Street, Suite 4900
Los Angeles, CA 90017
Attention: Ronald Launsbach
Telephone: (213) 239-0602
Telecopy: (213) 239-0680
-18-
<PAGE>
SCHEDULE A TO PLEDGE AGREEMENT
THE PLEDGED SECURITIES
<TABLE>
<CAPTION>
Percentage
Jurisdiction of No. of Certificate of Issuer's
Name of Pledgor Name of Issuer Incorporation Shares No. Stock
<S> <C> <C> <C> <C> <C>
Fountain View, Inc. FV-SCC Acquisition Delaware 100 #1 100%
Corp. (Pre-Merger)
Fountain View, Inc. Summit Care California 100 ____ 100%
Corporation (Post-Merger)
Fountain View, Inc. Locomotion Delaware 1,000 #1 100%
Holdings, Inc.
Fountain View, Inc. Fountain View Delaware 1,000 #1 100%
Holdings, Inc.
Fountain View, Inc. I.'n O., Inc. California 5,000 #2 100%
Fountain View, Inc. On-Track Therapy California 5,000 #2 100%
Center, Inc.
Fountain View, Inc. Sycamore Park California 625 #9 100%
Convalescent Hospital
Fountain View Rio Hondo California 10,000 #4 100%
Holdings, Inc. Nursing Center
Fountain View Fountainview California 30 #3 100%
Holdings, Inc. Convalescent Hospital
Fountain View Fountain View California 2,000 #4 100%
Holdings, Inc. Management, Inc.
Fountain View AIB Corp. California 1,000 #22 100%
Holdings, Inc.
Fountain View Brier Oak California 10,000 #4 100%
Holdings, Inc. Convalescent, Inc.
Fountain View Elmcrest Convalescent California 10,000 #4 100%
Holdings, Inc. Hospital
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Fountain View BIA Hotel Corp. California 1,000 #22 100%
Holdings, Inc.
Locomotion Locomotion Delaware 1,000 #1 100%
Holdings, Inc. Therapy, Inc.
FV-SCC Acquisition Summit Care California 6,751,038 #L 0288 99%
Corp. Corporation
(Pre-Merger)
Summit Care Summit Care- California 2,011.53 #19 100%
Corporation California, Inc.
Summit Care Summit Care- Texas 1,000 #2 100%
Corporation Texas No. 2, Inc.
Summit Care Summit Care- Texas 1,000 #1 100%
Corporation Texas No. 3, Inc.
Summit Care Summit Care California 1,000 #3 100%
Corporation Pharmacy, Inc.
Summit Care Summit Care California 1,000 #1 100%
Corporation Texas Equity, Inc.
Summit Care Summit Care Texas 1,000 #1 100%
Corporation Management Texas,
Inc.
</TABLE>
<PAGE>
SCHEDULE B TO PLEDGE AGREEMENT
PARTNERSHIP INTEREST COLLATERAL
<TABLE>
<CAPTION>
Name of Type of Jurisdiction Percent of
Name of Pledgor Partnership Organization of Organization Ownership
<S> <C> <C> <C> <C>
Summit Care Summit Care Texas, L.P. Limited Partnership Texas 1%
Management Texas,
Inc.
Summit Care Texas Summit Care Texas, L.P. Limited Partnership California 99%
Equity, Inc.
</TABLE>
<PAGE>
SCHEDULE C TO PLEDGE AGREEMENT
LLC COLLATERAL
Percentage of
Equity
Jurisdiction of Interest Owned
Name of Pledgor Name of LLC Organization by Pledgor
<PAGE>
SCHEDULE D TO PLEDGE AGREEMENT
ACKNOWLEDGMENT TO COLLATERAL ASSIGNMENT
____________, 199__
_________________________________
_________________________________
_________________________________
_________________________________
Attention:_______________________
Ladies and Gentlemen:
_________________________ ("Pledgor") is a party to that certain Pledge
Agreement dated as of April 16, 1998 (the "Pledge Agreement") in favor of Bank
of Montreal (the "Agent"), a copy of which you have received. Pursuant to the
Pledge Agreement, Pledgor assigned its equity interests in ___________________
(the "Partnership/LLC") as collateral security for, among other things,
indebtedness and obligations of Fountain View, Inc. (the "Borrower") now or from
time to time owing pursuant to that certain Credit Agreement dated as of April
16, 1998 (such Credit Agreement as the same may be amended, modified or restated
from time to time being hereinafter referred to as the "Credit Agreement") among
the Borrower, the Agent, and various other lenders party thereto.
We ask you, by accepting this letter below on behalf of the Partnership/LLC
and as its general partner/manager, to confirm the following:
1. Pledgor is a partner/member in the Partnership/LLC.
2. You consent to the collateral assignment of Pledgor's interest in
the Partnership/LLC to the Agent, notwithstanding anything to the contrary
contained in the Partnership Agreement/Limited Liability Company Articles
of Association and Operating Agreement. This letter will serve to evidence
the consent to this collateral assignment from the Partnership/LLC and its
general partner/manager.
3. All parties required by the terms of the Partnership
Agreement/Limited Liability Company Articles of Association and Operating
Agreement to approve the collateral assignment made by the Pledge Agreement
have done so, and the interest of the Agent by virtue of that assignment
has been reflected on the books and records of the Partnership/LLC.
4. The Partnership/LLC has been formed under the Partnership
Agreement dated as of ______________, 19__/the Articles of Association
dated ______________,
<PAGE>
19__, and the Operating Agreement dated as of ________________, 19___ (the
"Organizational Documents"), and the Organizational Documents have not
subsequently been modified or amended and continue in full force and
effect. The Organizational Documents shall not be amended without the
consent of the Agent. The Agent agrees with the Partnership/LLC that the
Agent will not unreasonably withhold its consent to modifications or
amendments to the Organizational Documents which do not adversely affect
the interests of the Secured Creditors identified and defined in the Pledge
Agreement.
5. All payments and distributions due and to become due to Pledgor
pursuant to the Organizational Documents shall continue to be paid directly
to such Pledgor, unless and until the Agent notifies the Partnership/LLC in
writing to do otherwise. If the Agent so notifies the Partnership/LLC, the
Partnership/LLC will immediately cease making such payments and
distributions to the Pledgor and will as soon as possible, but in any event
within 5 days after receiving such notice, remit all such payments and
distributions directly to the Agent at 115 South LaSalle Street, Chicago,
Illinois 60603.
6. By virtue of the Pledge Agreement, the Agent has the right, upon
the occurrence and during the continuation of any Event of Default under
the Credit Agreement, at its option to exercise Pledgor's right (if any) to
withdraw all or any part of such Pledgor's interest in the Partnership/LLC
by so notifying the Partnership/LLC in writing no less than 10 days prior
to the proposed withdrawal date. All payments and distributions due or to
become due under the Organizational Documents to the Pledgor as a result of
such withdrawal shall be remitted directly to the Agent as stated above. If
given at all, the notice provided pursuant to this paragraph may (but need
not) be given concurrently with any notice provided pursuant to the
immediately preceding paragraph.
7. The Pledgor agrees that any such payment to the Agent shall be a
good receipt and acquittance as against it -- that is to say, the
Partnership/LLC should make the payment directly to the Agent and in so
doing, the Partnership/LLC discharges any liability to such Pledgor for
that payment.
8. The terms of the Pledge Agreement prohibit Pledgor from making
any transfer of its interest in the Partnership/LLC without the Agent's
prior written consent. You agree not to honor any such transfer of
Pledgor's interest without the Agent's prior written consent.
<PAGE>
The agreements in this letter shall be modified only in a writing signed by
the Agent, the Pledgor and the Partnership/LLC. We acknowledge that the
Partnership/LLC shall be entitled to assume that the Pledge Agreement continues
in full force and effect unless and until the Partnership/LLC receives actual
written notice of a termination of same from the Agent.
Very truly yours,
[Pledgor]
By_________________________________
Its______________________________
Bank of Montreal, as Agent
By_________________________________
Its______________________________
The undersigned, both as the general partner/manager of the Partnership/LLC
and on behalf of the Partnership/LLC, join in this letter to evidence their
acknowledgment and agreement to the same.
[Partnership/LLC]
By_________________________________
Its______________________________
[General Partner/Manager of Partnership]
By_________________________________
Its______________________________
<PAGE>
SCHEDULE E TO PLEDGE AGREEMENT
AMENDMENT TO PLEDGE AGREEMENT
Reference is hereby made to that certain Pledge Agreement dated as of April
16, 1998 (as the same may be amended, the "Pledge Agreement"), from Fountain
View, Inc. and the other Pledgors which are signatories thereto to and Bank of
Montreal, as Agent. Capitalized terms not otherwise defined herein shall have
the meaning set forth in the Pledge Agreement.
Subsequent to the Pledgors' delivery of the Pledge Agreement, certain
shares of stock, partnership interests or limited liability company interests
have been added as Collateral under the Pledge Agreement. As a result of such
addition, Schedule A of the Pledge Agreement does not accurately describe the
shares of capital stock and/or Schedule B does not accurately describe the
partnership interests and/or Schedule C does not accurately describe the limited
liability company interests, currently held by the Agent as collateral under the
Pledge Agreement.
The Pledgors now desire to amend Schedule A and/or Schedule B and/or
Schedule C to the Pledge Agreement to reflect such addition, and this instrument
shall constitute an agreement between the Pledgors and the Agent amending the
Pledge Agreement in the respects, but only in the respects, hereinafter set
forth:
1. If an Annex A is attached hereto, Schedule A of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex A attached hereto.
2. If an Annex B is attached hereto, Schedule B of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex B attached hereto.
3. If an Annex C is attached hereto, Schedule C of the Pledge
Agreement shall be and hereby is amended and as so amended shall be
restated in its entirety to read as Annex C attached hereto.
4. As collateral security for the Obligations, each Pledgor hereby
grants to the Agent a continuing lien on and security interest in, and
acknowledges and agrees that the Agent has and shall continue to have a
continuing lien on and security interest in, all the shares of capital
stock of each issuer listed and described on Annex A attached hereto (if
attached), all of the partnership interests listed and described on Annex B
attached hereto (if attached), all of the limited liability company
interests listed and described on Annex C attached hereto (if attached) and
all the other properties, rights, interests and privileges comprising the
Collateral (as such term is defined in the Pledge Agreement after giving
effect to this Amendment), to the same extent and with the same force and
effect as if (i) the shares of stock described on
<PAGE>
Annex A had originally been included on Schedule A to the Pledge Agreement,
(ii) the partnership interests described on Annex B had been originally
included on Schedule B to the Pledge Agreement and (iii) the limited
liability company interests described on Annex C had been originally
included on Schedule C to the Pledge Agreement. The foregoing granting
clause is in addition to and supplemental of and not in substitution for
the granting clause contained in the Pledge Agreement. Neither the Pledgors
nor the Agent intends by this Amendment to in any way impair or otherwise
affect the lien of the Pledge Agreement on such of the Collateral which was
subject to the Pledge Agreement prior to giving effect to this Amendment.
5. Each Pledgor hereby repeats and reaffirms all of its covenants,
agreements, representations and warranties contained in the Pledge
Agreement, each and all of which shall be applicable to all of the
properties, rights, interests and privileges subject to the lien of the
Pledge Agreement after giving effect to this Amendment. Each Pledgor hereby
certifies that no Event of Default or event which, with notice or lapse of
time or both, would constitute an Event of Default exists under the Pledge
Agreement after giving effect to this Amendment.
6. No reference to this Amendment need be made in any note,
instrument or other document at any time referring to the Pledge Agreement,
any reference in any of such to the Pledge Agreement to be deemed to
reference to the Pledge Agreement as modified hereby.
7. Except as specifically modified hereby, all the terms and
conditions of the Pledge Agreement shall stand and remain unchanged and in
full force and effect.
Pledgor(s):
[NAME OF PLEDGORS]
By_________________________________
Its______________________________
Acknowledged and agreed to as of the date first above written.
Bank of Montreal, as Agent
By_________________________________
Its______________________________
<PAGE>
ANNEX A
TO AMENDMENT TO PLEDGE AGREEMENT
THE PLEDGED SECURITIES
<TABLE>
<CAPTION>
Percentage
Jurisdiction of No. of Certificate of Issuer's
Name of Pledgor Name of Issuer Incorporation Shares No. Stock
<S> <C> <C> <C> <C> <C>
Fountain View, Inc. FV-SCC Acquisition Delaware 100 #1 100%
Corp. (Pre-Merger)
Fountain View, Inc. Summit Care California 100 ____ 100%
Corporation (Post-
Merger)
Fountain View, Inc. Locomotion Delaware 1,000 #1 100%
Holdings, Inc.
Fountain View, Inc. Fountain View Delaware 1,000 #1 100%
Holdings, Inc.
Fountain View, Inc. I.'n O., Inc. California 5,000 #2 100%
Fountain View, Inc. On-Track Therapy California 5,000 #2 100%
Center, Inc.
Fountain View, Inc. Sycamore Park California 625 #9 100%
Convalescent Hospital
Fountain View Rio Hondo California 10,000 #4 100%
Holdings, Inc. Nursing Center
Fountain View Fountainview California 30 #3 100%
Holdings, Inc. Convalescent Hospital
Fountain View Fountain View California 2,000 #4 100%
Holdings, Inc. Management, Inc.
Fountain View AIB Corp. California 1,000 #22 100%
Holdings, Inc.
Fountain View Brier Oak California 10,000 #4 100%
Holdings, Inc. Convalescent, Inc.
Fountain View Elmcrest Convalescent California 10,000 #4 100%
Holdings, Inc. Hospital
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Fountain View BIA Hotel Corp. California 1,000 #22 100%
Holdings, Inc.
Locomotion Holdings, Locomotion Therapy, Delaware 1,000 #1 100%
Inc. Inc.
FV-SCC Acquisition Summit Care California 6,751,038 #L 0288 99%
Corp. Corporation (Pre-
Merger)
Summit Care Summit Care- California 2,011.53 #19 100%
Corporation California, Inc.
Summit Care Summit Care-Texas Texas 1,000 #2 100%
Corporation No. 2, Inc.
Summit Care Summit Care-Texas Texas 1,000 #1 100%
Corporation No. 3, Inc.
Summit Care Summit Care California 1,000 #3 100%
Corporation Pharmacy, Inc.
Summit Care Summit Care Texas California 1,000 #1 100%
Corporation Equity, Inc.
Summit Care Summit Care Texas 1,000 #1 100%
Corporation Management Texas,
Inc.
_______________ ________________ __________ ______ _______ ________
_______________ ________________ __________ ______ _______ ________
</TABLE>
<PAGE>
ANNEX B
TO AMENDMENT TO PLEDGE AGREEMENT
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Jurisdiction
Name of Type of of Percent of
Name of Pledgor Partnership Organization Organization Ownership
<S> <C> <C> <C> <C>
Summit Care Summit Care Texas, L.P. Limited Partnership Texas 1%
Management Texas,
Inc.
Summit Care Texas Summit Care Texas, L.P. Limited Partnership California 99%
Equity, Inc.
_________________ ______________________ _________________ ___________ ________
_________________ ______________________ _________________ ___________ ________
</TABLE>
<PAGE>
ANNEX C
TO AMENDMENT TO PLEDGE AGREEMENT
<TABLE>
<CAPTION>
Jurisdiction of Percentage of Equity
Name of Pledgor Name of LLC Organization Interest Owned by Pledgor
<S> <C> <C> <C>
</TABLE>
<PAGE>
SCHEDULE F TO PLEDGE AGREEMENT
ASSUMPTION AND SUPPLEMENTAL PLEDGE AGREEMENT
This Agreement dated as of this _____ day of ______________, 199___ from
[NEW PLEDGOR], a __________ corporation/partnership/limited liability company
(the "New Pledgor"), to Bank of Montreal ("BOM") as agent for the Secured
Creditors (defined in the Pledge Agreement hereinafter identified and defined)
(BOM acting as such agent and any successor or successors to BOM in such
capacity being hereinafter referred to as the "Agent");
PRELIMINARY STATEMENTS
A. Fountain View, Inc. (the "Borrower") and certain other Pledgors have
executed and delivered to the Agent that certain Pledge Agreement dated as of
April 16, 1998 (such Pledge Agreement, as the same may from time to time be
modified or amended, including supplements thereto which add additional parties
as Pledgors thereunder, being hereinafter referred to as the "Pledge Agreement")
pursuant to which such parties (the "Existing Pledgors") have granted to the
Agent for the benefit of the Secured Creditors a lien on and security interest
in such Existing Pledgors' Collateral (as such term is defined in the Pledge
Agreement) to secure the Obligations (as such term is defined in the Pledge
Agreement);
B. Each Pledgor will benefit, directly and indirectly, from credit and
other financial accommodations extended by the Secured Creditors to the
Borrower.
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Borrower by
the Secured Creditors from time to time, the New Pledgor hereby agrees as
follows:
1. The New Pledgor acknowledges and agrees that it shall become a
"Pledgor" party to the Pledge Agreement effective upon the date the New
Pledgor's execution of this Agreement and the delivery of this Agreement to the
Agent, and that upon such execution and delivery, all references in the Pledge
Agreement to the terms "Pledgor" or "Pledgors" shall be deemed to include the
New Pledgor. Without limiting the generality of the foregoing, the New Pledgor
hereby repeats and reaffirms all grants (including the grant of a lien and
security interest), covenants, agreements, representations and warranties
contained in the Pledge Agreement as amended hereby, each and all of which are
and shall remain applicable to the Collateral from time to time owned by the New
Pledgor or in which the New Pledgor from time to time has any rights. Without
limiting the foregoing, in order to secure payment of the Obligations, whether
now existing or hereafter arising, the New Pledgor does hereby grant to the
Agent for the benefit of the Secured Creditors, and hereby agrees that the Agent
has and shall continue to have for the benefit of the Secured Creditors a
continuing security interest in, among other things, all of the New Pledgor's
Collateral (as such term is defined in the Pledge Agreement) described in
Section 2 of the Pledge Agreement, each and all of such granting clauses being
incorporated herein by reference
<PAGE>
with the same force and effect as if set forth in their entirety except that all
references in such clauses to the Existing Pledgor or any of them shall be
deemed to include references to the New Pledgor. Nothing contained herein shall
in any manner impair the priority of the liens and security interests heretofore
granted in favor of the Agent under the Pledge Agreement.
2. The following information shall be added to Schedules A, B and/or
C to the Pledge Agreement, as applicable:
SCHEDULE A
THE PLEDGED SECURITIES
<TABLE>
<CAPTION>
Percentage
Name and Name of Jurisdiction of No. of Certificate of Issuer's
Location of Issuer Incorporation Shares Class No. Stock
Pledgor
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
OR
SCHEDULE B
PARTNERSHIP INTEREST COLLATERAL
<TABLE>
<CAPTION>
Name and Location of Name of Type of Jurisdiction Percent of
Pledgor Partnership Organization of Organization Ownership
<S> <C> <C> <C> <C>
</TABLE>
OR
SCHEDULE C
LLC COLLATERAL
<TABLE>
<CAPTION>
Percentage of Equity
Name and Location of Jurisdiction of Interest Owned by
Pledgor Name of LLC Organization Pledgor
<S> <C> <C> <C>
</TABLE>
3. The New Pledgor hereby acknowledges and agrees that the Obligations
are secured by all of the Collateral according to, and otherwise on and subject
to, the terms and conditions of the Pledge Agreement to the same extent and with
the same force and effect as if the New Pledgor had originally been one of the
Existing Pledgors under the Pledge Agreement and had originally executed the
same as such an Existing Pledgor.
<PAGE>
4. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Pledge Agreement, except
that any reference to the term "Pledgor" or "Pledgors" and any provision of the
Pledge Agreement providing meaning to such term shall be deemed a reference to
the Existing Pledgors and the New Pledgor. Except as specifically modified
hereby, all of the terms and conditions of the Pledge Agreement shall stand and
remain unchanged and in full force and effect.
5. The New Pledgor agrees to execute and deliver such further instruments
and documents and do such further acts and things as the Agent may deem
necessary or proper to carry out more effectively the purposes of this
Agreement.
6. No reference to this Agreement need be made in the Pledge Agreement or
in any other document or instrument making reference to the Pledge Agreement,
any reference to the Pledge Agreement in any of such to be deemed a reference to
the Pledge Agreement as modified hereby.
7. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law).
[NEW PLEDGOR]
By______________________________
Its___________________________
Acknowledged and agreed to as of the date first above written.
Bank of Montreal, as Agent
By______________________________
Its___________________________
<PAGE>
EXHIBIT 10.50
SECURITY AGREEMENT
This Security Agreement (the "Agreement") is dated as of April 16, 1998, by
and among Fountain View, Inc., a Delaware corporation (the "Borrower"), and the
other parties executing this Agreement under the heading "Debtors" (the Borrower
and such other parties, along with any parties who execute and deliver to the
Agent an agreement attached hereto as Schedule D, being hereinafter referred to
collectively as the "Debtors" and individually as a "Debtor"), each with its
mailing address as set forth on its signature page hereto, and Bank of Montreal,
a chartered bank of Canada acting through its Chicago branch ("BOM"), with its
mailing address at 115 South LaSalle Street, Chicago, Illinois 60603, acting as
agent hereunder for the Lenders and Letter of Credit Issuers hereinafter
identified and defined (BOM acting as such agent and any successor or successors
to BOM acting in such capacity being hereinafter referred to as the "Agent");
PRELIMINARY STATEMENTS
A. The Borrower and BOM, individually and as agent, have entered into a
Credit Agreement dated as of April 16, 1998 (such Credit Agreement as the same
may be amended, modified or restated from time to time being hereinafter
referred to as the "Credit Agreement"), pursuant to which BOM and such other
banks, financial institutions and letter of credit issuers from time to time
party to the Credit Agreement (BOM, in its individual capacity, and such other
banks and financial institutions being hereinafter referred to collectively as
the "Lenders" and individually as a "Lender" and such letter of credit issuers
being hereinafter referred to collectively as the "Letter of Credit Issuers" and
individually as a "Letter of Credit Issuer") have agreed, subject to certain
terms and conditions, to extend credit and make certain other financial
accommodations available to the Borrower (the Agent, the Lenders and the Letter
of Credit Issuers being hereinafter referred to collectively as the "Secured
Creditors" and individually as a "Secured Creditor").
B. The Borrower may from time to time enter into one or more interest
rate exchange, cap, collar, floor or other agreements with one or more of the
Lenders party to the Credit Agreement, or their affiliates, for the purpose of
hedging or otherwise protecting the Borrower against changes in interest rates
(the liability of the Borrower in respect of such agreements with such Lenders
and their affiliates being hereinafter referred to as the "Hedging Liability").
C. As a condition to extending credit to the Borrower under the Credit
Agreement, the Secured Creditors have required, among other things, that each
Debtor grant to the Agent for the benefit of the Secured Creditors a lien on and
security interest in the personal property of such Debtor described herein
subject to the terms and conditions hereof.
D. The Borrower owns, directly or indirectly, equity interests in each
other Debtor and the Borrower provides each other Debtor with financial,
management, administrative, and technical support which enables such Debtor to
conduct its business in an orderly and efficient manner in the ordinary course.
<PAGE>
E. Each Debtor will benefit, directly or indirectly, from credit and
other financial accommodations extended by the Secured Creditors to the
Borrower.
NOW, THEREFORE, for and in consideration of the execution and delivery by
the Secured Creditors of the Credit Agreement, and other good and valuable
consideration, receipt whereof is hereby acknowledged, the parties hereto hereby
agree as follows:
Section 1. Terms defined in Credit Agreement. All capitalized terms used
herein without definition shall have the same meanings herein as such terms have
in the Credit Agreement. The term "Debtor" and "Debtors" as used herein shall
mean and include the Debtors collectively and also each individually, with all
grants, representations, warranties and covenants of and by the Debtors, or any
of them, herein contained to constitute joint and several grants,
representations, warranties and covenants of and by the Debtors; provided,
however, that unless the context in which the same is used shall otherwise
require, any grant, representation, warranty or covenant contained herein
related to the Collateral shall be made by each Debtor only with respect to the
Collateral owned by it or represented by such Debtor as owned by it.
Section 2. Grant of Security Interest in the Collateral; Obligations
Secured. (a) Each Debtor hereby grants to the Agent for the benefit of the
Secured Creditors a lien on and security interest in, and right of set-off
against, and acknowledges and agrees that the Agent has and shall continue to
have for the benefit of the Secured Creditors a continuing lien on and security
interest in, and right of set-off against, any and all right, title and interest
of each Debtor, whether now owned or existing or hereafter created, acquired or
arising, in and to the following:
(i) Receivables. All Receivables, whether now owned or existing or
hereafter created, acquired or arising, and however evidenced or acquired,
or in which such Debtor now has or hereafter acquires any rights (the term
"Receivables" means and includes all accounts, accounts receivable,
contract rights, instruments, notes, drafts, acceptances, documents,
chattel paper, any right of such Debtor to payment for goods sold or leased
or for services rendered, whether or not earned by performance, and all
other forms of obligations owing to such Debtor, and all of such Debtor's
rights to any merchandise or other goods (including without limitation any
returned or repossessed goods and the right of stoppage in transit) which
is represented by, arises from or is related to any of the foregoing);
(ii) General Intangibles. All General Intangibles, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "General
Intangibles" means and includes all general intangibles, all patents,
patent applications, patent licenses, trademarks, trademark registrations,
trademark licenses, trade styles, trade names, copyrights, copyright
registrations, copyright licenses and other licenses and similar
intangibles, all customer, client and supplier lists (in whatever form
maintained), all rights in leases and other agreements relating to real or
personal property, all causes of action and tax refunds of every kind and
nature, all privileges, franchises, immunities,
-2-
<PAGE>
licenses, permits and similar intangibles, and all other personal property
(including things in action) not otherwise covered by this Agreement);
(iii) Inventory. All Inventory, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights and all documents of title at any time
evidencing or representing any part thereof (the term "Inventory" means and
includes all inventory and other goods which are held for sale or lease or
are to be furnished under contracts of service or consumed in such Debtor's
business, all goods which are raw materials, work-in-process, finished
goods, materials or supplies of every kind and nature, in each case used or
usable in connection with the acquisition, manufacture, processing, supply,
servicing, storing, packing, shipping, advertising, selling, leasing or
furnishing of such goods, and any constituents or ingredients thereof, and
all goods which are returned or repossessed goods);
(iv) Equipment. All Equipment, whether now owned or existing or
hereafter created, acquired or arising, or in which such Debtor now has or
hereafter acquires any rights (the term "Equipment" means and includes all
equipment and other machinery, tools, fixtures, trade fixtures, furniture,
furnishings, office equipment, vehicles (including vehicles subject to a
certificate of title law) and all other goods now or hereafter used or
usable in connection with such Debtor's business, together with all parts,
accessories and attachments relating to any of the foregoing);
(v) Investment Property. All Investment Property, whether now owned
or existing or hereafter created, acquired or arising, or in which such
Debtor now has or hereafter acquires any rights (the term "Investment
Property" means and includes all investment property and all other
securities (whether certificated or uncertificated), security entitlements,
securities accounts, commodity contracts, and commodity accounts, including
all substitutions and additions thereto, all dividends, distributions and
sums distributable or payable from, upon, or in respect of such property,
and all rights and privileges incident to such property);
(vi) Deposits and Property in Possession. All deposit accounts
(whether general, specific, matured or unmatured and in whatever currency
denominated) of such Debtor maintained with any of the Secured Creditors
and all sums now or hereafter on deposit therein or payable thereon, and
any and all other property and interests in property which now is or may
from time to time hereafter come into the possession, custody or control of
any of the Secured Creditors, or any agent of any of them, in any way and
for any purpose (whether for safekeeping, custody, pledge, transmission,
collection or otherwise);
(vii) Records. All supporting evidence and documents relating to any of
the above-described property, including, without limitation, computer
programs, disks, tapes and related electronic data processing media, and
all rights of such Debtor to retrieve the same from third parties, written
applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice
-3-
<PAGE>
copies, delivery receipts, notes and other evidences of indebtedness,
insurance certificates and the like, together with all books of account,
ledgers and cabinets in which the same are reflected or maintained, all
whether now existing or hereafter arising;
(viii) Accessions and Additions. All accessions and additions to and
substitutions and replacements of any and all of the foregoing, whether now
existing or hereafter arising; and
(ix) Proceeds and Products. All proceeds and products of the foregoing
and all insurance of the foregoing and proceeds thereof, whether now
existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "Collateral";
provided, however, that in no event will any of the Collateral described above
be deemed to include any interests in any leases or licenses to use real or
personal property under which a Debtor is lessee or licensee and a Person other
than a Debtor or an Affiliate of a Debtor is lessor or licensor, to the extent
the granting of a security interest or lien therein is prohibited by the
agreement(s) pursuant to which such property is leased or licensed and such
prohibition has not been or is not waived or the consent of the applicable party
has not been or is not obtained; provided further, that if and when the
prohibition which prevents the granting of a security interest in any such
Property is removed, terminated or otherwise becomes unenforceable as a matter
of law, the Agent will be deemed to have, and at all times to have had, a
security interest in such Property, and the Collateral will be deemed to
include, and at all times to have included, such Property. All terms which are
used herein which are defined in the Uniform Commercial Code of the State of
Illinois ("UCC") shall have the same meanings herein as such terms are defined
in the UCC, unless this Agreement shall otherwise specifically provide.
(b) This Agreement is made and given to secure, and shall secure, the
prompt payment and performance when due of (i) any and all indebtedness,
obligations and liabilities of the Debtors, and of any of them individually, to
the Secured Creditors, and to any of them individually, under or in connection
with or evidenced by the Credit Agreement, the Notes of the Borrower heretofore
or hereafter issued under the Credit Agreement and the obligations of the
Borrower to reimburse the Secured Creditors for the amount of all drawings on
all Letters of Credit issued pursuant to the Credit Agreement, and all other
obligations of the Borrower under any and all applications for Letters of
Credit, and any and all liability of the Debtors, and of any of them
individually, arising under or in connection with or otherwise evidenced by
agreements with any one or more of the Secured Creditors or their affiliates
with respect to any Hedging Liability, and any and all liability of the Debtors,
and of any of them individually, arising under any guaranty issued by it
relating to the foregoing or any part thereof, in each case whether now existing
or hereafter arising (and whether arising before or after the filing of a
petition in bankruptcy and including all interest accrued after the petition
date), due or to become due, direct or indirect, absolute or contingent, and
howsoever evidenced, held or acquired and (ii) any and all expenses and charges,
legal or otherwise, suffered or incurred by the Secured Creditors, and any of
them
-4-
<PAGE>
individually, in collecting or enforcing any of such indebtedness,
obligations and liabilities or in realizing on or protecting or preserving any
security therefor, including, without limitation, the lien and security interest
granted hereby (all of the indebtedness, obligations, liabilities, expenses and
charges described above being hereinafter referred to as the "Obligations").
Notwithstanding anything in this Agreement to the contrary, the right of
recovery against any Debtor (other than the Borrower to which this limitation
shall not apply) under this Agreement shall not exceed $1.00 less than the
amount which would render such Debtor's obligations under this Agreement void or
voidable under applicable law, including fraudulent conveyance law.
Section 3. Covenants, Agreements, Representations and Warranties. The
Debtors hereby covenant and agree with, and represent and warrant to, the
Secured Creditors that:
(a) Each Debtor is duly organized, validly existing and in good standing
under the laws of the state of its incorporation or organization, is the
sole and lawful owner of the Collateral granted by it hereunder and has the
power and authority to enter into this Agreement and to perform each and
all of the matters and things herein provided for. Each Debtor's Federal
tax identification number is set forth under its name under Column 1 on
Schedule A.
(b) Each Debtor's respective chief executive office is at the location
listed under Column 2 on Schedule A attached hereto opposite such Debtor's
name; and such Debtor has no other executive offices or places of business
other than those listed under Column 3 on Schedule A attached hereto
opposite such Debtor's name. The Collateral owned or leased by each Debtor
is and shall remain in such Debtor's possession or control at the locations
listed under Columns 2 and 3 on Schedule A attached hereto opposite such
Debtor's name (collectively for each Debtor, the "Permitted Collateral
Locations"), except as to any Collateral sold or otherwise disposed of in
accordance with this Agreement and Section 8.10 of the Credit Agreement. If
for any reason any Collateral is at any time kept or located at a location
other than a Permitted Collateral Location, the Agent shall nevertheless
have and retain a lien on and security interest therein. No Debtor shall
move its chief executive office or maintain a place of business at a
location other than those specified under Columns 2 or 3 on Schedule A or
permit any Collateral to be located at a location other than a Permitted
Collateral Location, in each case without first providing the Agent at
least 30 days prior written notice of the Debtor's intent to do so;
provided that each Debtor shall at all times maintain its chief executive
office, places of business, and Permitted Collateral Locations in the
United States of America and, with respect to any new chief executive
office or place of business or location of Collateral, such Debtor shall
have taken all action reasonably requested by the Agent to maintain the
lien and security interest of the Agent in the Collateral at all times
fully perfected and in full force and effect.
(c) The Collateral and every part thereof is and shall be free and clear
of all security interests, liens (including, without limitation,
mechanics', laborers' and statutory liens), attachments, levies and
encumbrances of every kind, nature and
-5-
<PAGE>
description and whether voluntary or involuntary, except for the lien and
security interest of the Agent therein and other Liens permitted by Section
8.8 of the Credit Agreement (herein, the "Permitted Liens"). Each Debtor
shall warrant and defend the Collateral against any claims and demands of
all persons at any time claiming the same or any interest in the Collateral
adverse to any of the Secured Creditors.
(d) Each Debtor will promptly pay when due all taxes, assessments and
governmental charges and levies upon or against it or its Collateral, in
each case before the same become delinquent and before penalties accrue
thereon, unless and to the extent that the same are being contested in good
faith by appropriate proceedings which prevent attachment of any Lien
resulting therefrom to, foreclosure on or other realization upon any
Collateral and preclude interference with the operation of its business in
the ordinary course and such Debtor shall have established adequate
reserves therefor.
(e) Each Debtor agrees it will not waste or destroy the Collateral or any
part thereof and will not be negligent in the care or use of any
Collateral. Each Debtor agrees it will not use, manufacture, sell or
distribute any Collateral in violation of any statute, ordinance or other
governmental requirement. Each Debtor will perform in all material respects
its obligations under any contract or other agreement constituting part of
the Collateral, it being understood and agreed that the Secured Creditors
have no responsibility to perform such obligations.
(f) Subject to Sections 4(d), 5(a), 6(b), 6(c), and 7(c) hereof and the
terms of the Credit Agreement (including, without limitation, Section 8.10
thereof), each Debtor agrees it will not, without the Agent's prior written
consent, sell, assign, mortgage, lease or otherwise dispose of the
Collateral or any interest therein.
(g) Each Debtor will insure its Collateral which is insurable against
such risks and hazards as other companies similarly situated insure
against, and including in any event loss or damage by fire, theft,
burglary, pilferage, and loss in transit, in amounts and under policies
containing loss payable clauses to the Agent as its interest may appear
(and, if the Agent requests, naming the Agent as additional insureds
therein) by insurers reasonably acceptable to the Agent. All premiums on
such insurance shall be paid by the Debtors and the policies of such
insurance (or certificates therefor) delivered to the Agent. All insurance
required hereby shall provide that any loss shall be payable
notwithstanding any act or negligence of the relevant Debtor, shall provide
that no cancellation thereof shall be effective until at least 30 days
after receipt by the relevant Debtor and the Agent of written notice
thereof, and shall be reasonably satisfactory to the Agent in all other
respects. In case of any material loss, damage to or destruction of the
Collateral or any part thereof, the relevant Debtor shall promptly give
written notice thereof to the Secured Creditors generally describing the
nature and extent of such damage or destruction. In case of any loss,
damage to or destruction of the Collateral or any part thereof, the
relevant Debtor, whether or not the insurance proceeds, if any, received on
account of such damage or destruction shall be sufficient for that purpose,
at such Debtor's cost and expense, will promptly
-6-
<PAGE>
repair or replace the Collateral so lost, damaged or destroyed, except to
the extent such Collateral is not necessary to the conduct of such Debtor's
business in the ordinary course. In the event any Debtor shall receive any
proceeds of such insurance, such Debtor will immediately pay over such
proceeds to the Agent; provided that, in the absence of any Default or
Event of Default such Debtors shall be entitled to retain such insurance
proceeds to the extent such proceeds are used for such repair or
replacement in accordance with Section 1.9(b) of the Credit Agreement. Each
Debtor hereby authorizes the Agent, at the Agent's option, to adjust,
compromise and settle any losses under any insurance afforded at any time
after the occurrence and during the continuation of any Event of Default,
and such Debtor does hereby irrevocably constitute the Agent, its officers,
agents and attorneys, as such Debtor's attorneys-in-fact, with full power
and authority after the occurrence and during the continuation of any Event
of Default to effect such adjustment, compromise and/or settlement and to
endorse any drafts drawn by an insurer of the Collateral or any part
thereof and to do everything necessary to carry out such purposes and to
receive and receipt for any unearned premiums due under policies of such
insurance. Unless the Agent elects to adjust, compromise or settle losses
as aforesaid, any adjustment, compromise and/or settlement of any losses
under any insurance shall be made by the relevant Debtor subject to final
approval of the Agent (regardless of whether or not an Event of Default
shall have occurred) in the case of losses exceeding $500,000. Net
insurance proceeds received by the Agent under the provisions hereof or
under any policy or policies of insurance covering the Collateral or any
part thereof pursuant to the terms hereof shall be applied to the reduction
of, or otherwise held as security for, the Obligations (whether or not then
due); provided, however, that the Agent agrees to release such insurance
proceeds to the relevant Debtor for replacement or restoration of the
portion of the Collateral lost, damaged or destroyed if, but only if, (i)
at the time of release no Default or Event of Default exists hereunder,
(ii) written application for such release is received from such Debtor
within 30 days of receipt of, or in the event received by the Agent notice
of Agent's receipt of, such proceeds and (iii) the Agent has received
evidence reasonably satisfactory to it that the Collateral lost, damaged or
destroyed has been or will be replaced or restored in accordance with
Section 1.9(b) of the Credit Agreement. All insurance proceeds shall be
subject to the lien and security interest of the Agent hereunder.
(h) Each Debtor will at all times allow the Secured Creditors and their
respective representatives free access to and right of inspection of the
Collateral at such reasonable times and intervals as the Agent or any other
Secured Creditor may designate.
(i) If any Collateral is in the possession or control of any agents or
processors of a Debtor and the Agent so requests, such Debtor agrees to
notify such agents or processors in writing of the Agent's security
interest therein and instruct them to hold all such Collateral for the
Agent's account and subject to the Agent's instructions. Each Debtor will,
upon the request of the Agent, authorize and instruct all bailees and any
other parties, if any, at any time processing, labeling, packaging,
holding, storing, shipping or transferring all or any part of the
Collateral to permit
-7-
<PAGE>
the Secured Creditors and their respective representatives to examine and
inspect any of the Collateral then in such party's possession and to verify
from such party's own books and records any information concerning the
Collateral or any part thereof which the Secured Creditors or their
respective representatives may seek to verify. As to any premises not owned
by a Debtor wherein any of the Collateral is located, if any, such Debtor
shall, upon the Agent's request, cause each party having any right, title
or interest in, or lien on, any of such premises to enter into an agreement
(any such agreement to contain a legal description of such premises)
whereby such party disclaims any right, title and interest in, and lien on,
the Collateral, allowing the removal of such Collateral by the Agent or its
agents or representatives and otherwise in form and substance reasonably
acceptable to the Agent.
(j) Upon the Agent's request, each Debtor agrees from time to time to
deliver to the any Secured Creditor such evidence of the existence,
identity and location of its Collateral and of its availability as
collateral security pursuant hereto (including, without limitation,
schedules describing all Receivables created or acquired by such Debtor,
copies of customer invoices or the equivalent and original shipping or
delivery receipts for all merchandise and other goods sold or leased or
services rendered by it, together with such Debtor's warranty of the
genuineness thereof, and reports stating the book value of its Inventory
and Equipment by major category and location), in each case as such Secured
Creditor may reasonably request. The Agent shall have the right to verify
all or any part of the Collateral in any manner, and through any medium,
which the Agent considers appropriate and reasonable, and each Debtor
agrees to furnish all assistance and information, and perform any acts,
which the Agent may require in connection therewith.
(k) Each Debtor will comply in all material respects with the terms and
conditions of any and all leases, easements, right-of-way agreements and
other agreements binding upon such Debtor or affecting the Collateral, in
each case which cover the premises wherein the Collateral is located, and
any orders, ordinances, laws or statutes of any city, state or other
governmental entity, department or agency having jurisdiction with respect
to such premises or the conduct of business thereon.
(l) No Debtor has invoiced Receivables or otherwise transacted business,
and does not invoice Receivables or otherwise transact business, under any
trade names other than its name set forth on its signature page to this
Agreement or as otherwise set forth on Schedule B hereto. Each Debtor
agrees it will not change its name or transact business under any other
trade name, in each case without first giving the Agent at least 30 days
prior written notice of its intent to do so.
(m) Each Debtor agrees to execute and deliver to the Agent such further
agreements, assignments, instruments and documents, and to do all such
other things, as the Agent may reasonably deem necessary or appropriate to
assure the Agent its lien and security interest hereunder, including
without limitation, (i) executing such financing statement or other
instruments and documents as the Agent may from time to time reasonably
require to comply with the UCC, and (ii) executing such patent,
-8-
<PAGE>
trademark, and copyright agreements as the Agent may from time to time
reasonably require to comply with the filing requirements of the United
States Patent and Trademark Office and the United States Copyright Office.
Each Debtor hereby agrees that a carbon, photographic or other reproduction
of this Agreement or any such financing statement is sufficient for filing
as a financing statement by the Agent without prior notice thereof to such
Debtor wherever the Agent deems necessary or desirable to perfect or
protect the security interest granted hereby. In the event for any reason
the law of any jurisdiction other than Illinois becomes or is applicable to
the Collateral or any part thereof, or to any of the Obligations, each
Debtor agrees to execute and deliver all such instruments and documents and
to do all such other things as the Agent deems necessary or appropriate to
preserve, protect and enforce the security interest of the Agent under the
law of such other jurisdiction.
(n) On failure of a Debtor to perform any of the covenants and agreements
herein contained, the Agent may, at its option, perform the same and in so
doing may expend such sums as the Agent deems advisable in the performance
thereof, including, without limitation, the payment of any insurance
premiums, the payment of any taxes, liens and encumbrances, expenditures
made in defending against any adverse claims, and all other expenditures
which the Agent may be compelled to make by operation of law or which the
Agent may make by agreement or otherwise for the protection of the security
hereof. All such sums and amounts so expended shall be repayable by such
Debtor immediately upon demand, shall constitute additional Obligations
secured hereunder, and shall bear interest from the date said amounts are
expended at the rate per annum (computed on the basis of a year of 360
days, for the actual number of days elapsed) determined by adding 2% to the
Base Rate from time to time in effect plus the Applicable Margin for
Revolving Loans, with any change in such rate per annum as so determined by
reason of a change in such Base Rate to be effective on the date of such
change in said Base Rate (such rate per annum as so determined being
hereinafter referred to as the "Default Rate"). No such performance of any
covenant or agreement by the Agent on behalf of a Debtor, and no such
advancement or expenditure therefor, shall relieve any Debtor of any
default under the terms of this Agreement or in any way obligate any
Secured Creditor to take any further or future action with respect thereto.
The Agent in making any payment hereby authorized may do so according to
any bill, statement or estimate procured from the appropriate public office
or holder of the claim to be discharged without inquiry into the accuracy
of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien or title or claim. The Agent in
performing any act hereunder shall be the sole judge of whether the
relevant Debtor is required to perform the same under the terms of this
Agreement. The Agent is hereby authorized to charge any depository or other
account of any Debtor maintained with any Secured Creditor for the amount
of such sums and amounts so expended.
Section 4. Special Provisions Re: Receivables. (a) As of the time any
Receivable becomes subject to the security interest provided for hereby and at
all times thereafter, each Debtor shall be deemed to have warranted as to each
and all of its Receivables that all warranties of such Debtor set forth in this
Agreement are true and correct with respect to
-9-
<PAGE>
each such Receivable; that each of its Receivable and all papers and documents
relating thereto are genuine and in all respects what they purport to be; that
each of its Receivable is valid and existing and, if such Receivable is an
account, arises out of a bona fide sale of goods sold and delivered by such
Debtor to, or in the process of being delivered to, or out of and for services
theretofore actually rendered by such Debtor to, the account debtor named
therein; and that no surety bond was required or given in connection with such
Receivable or the contracts or purchase orders out of which the same arose.
(b) To the extent any Receivables or other item of Collateral is
evidenced by an instrument, each Debtor shall cause such instrument to be
pledged and delivered to the Agent; provided, however, that, prior to the
existence of a Default or Event of Default and thereafter until otherwise
required by the Agent or the Secured Creditors, a Debtor shall not be required
to deliver any such instrument if and only so long as the aggregate unpaid
principal balance of all such instruments held by the Debtors and not delivered
to the Agent under the Collateral Documents is less than $500,000 at any one
time outstanding.
(c) If any Receivable arises out of a contract with the United States of
America or any of its departments, agencies or instrumentalities, the relevant
Debtor agrees to, at the request of the Agent or the Secured Creditors, execute
whatever instruments and documents are required by the Agent in order that such
Receivable shall be assigned to the Agent and that proper notice of such
assignment shall be given under the federal Assignment of Claims Act (or any
successor statute) or any similar statute relating to the assignment of such
Receivables.
(d) Unless and until an Event of Default hereunder occurs and is
continuing, any merchandise or other goods which are returned by a customer or
account debtor or otherwise recovered may be resold by the relevant Debtor in
the ordinary course of its business as presently conducted in accordance with
Section 6(b) hereof; upon the occurrence and during the continuation of any
Event of Default hereunder, such merchandise and other goods shall be set aside
at the request of the Agent and held by such Debtor as trustee for the Secured
Creditors and shall remain part of the Collateral. Unless and until an Event of
Default hereunder occurs and is continuing, the relevant Debtor may settle and
adjust disputes and claims with its customers and account debtors, handle
returns and recoveries and grant discounts, credits and allowances in the
ordinary course of its business as presently conducted for amounts and on terms
which such Debtor in good faith considers advisable. Upon the occurrence and
during the continuation of any Event of Default hereunder, unless the Agent
requests otherwise, each Debtor shall notify the Agent promptly of all returns
and recoveries and, on the Agent's request, deliver any such merchandise or
other goods to the Agent. Upon the occurrence and during the continuation of
any Event of Default hereunder, at the Agent's request, each Debtor shall also
notify the Agent promptly of all disputes and claims and settle or adjust them
at no expense to the Secured Creditors hereunder, but no discount, credit or
allowance other than on normal trade terms in the ordinary course of business as
presently conducted shall be granted to any customer or account debtor and no
returns of merchandise or other goods shall be accepted by any Debtor without
the Agent's consent. The Agent may, at all times upon the occurrence and during
the continuation of
-10-
<PAGE>
any Event of Default hereunder, settle or adjust disputes and claims directly
with customers or account debtors for amounts and upon terms which the Agent
considers advisable.
Section 5. Collection of Receivables. (a) Except as otherwise
provided in this Agreement, each Debtor shall make collection of all of its
Receivables and may use the same to carry on its business in accordance with
sound business practice and otherwise subject to the terms hereof.
(b) Upon the occurrence and during the continuation of any Default or
Event of Default hereunder, whether or not the Agent has exercised any or all of
its rights under other provisions of this Section 5, in the event the Agent
requests any Debtor to do so:
(i) all instruments and chattel paper at any time constituting
part of the Receivables (including any postdated checks) shall, upon
receipt by such Debtor, be immediately endorsed to and deposited with
Agent; and/or
(ii) such Debtor shall instruct all of its customers and account
debtors to remit all payments in respect of its Receivables to a lockbox or
lockboxes under the sole custody and control of Agent and which are
maintained at post offices selected by the Agent.
(c) Upon the occurrence and during the continuation of any Default or
Event of Default hereunder, whether or not the Agent has exercised any or all of
its rights under other provisions of this Section 5, the Agent or its designee
may notify the relevant Debtor's customers and account debtors at any time that
Receivables have been assigned to the Agent or of the Agent's security interest
therein, and either in its own name, or such Debtor's name, or both, demand,
collect (including, without limitation, through a lockbox analogous to that
described in Section 5(b)(ii) hereof), receive, receipt for, sue for, compound
and give acquittance for any or all amounts due or to become due on Receivables,
and in the Agent's discretion file any claim or take any other action or
proceeding which the Agent may deem necessary or appropriate to protect and
realize upon the security interest of the Agent in the Receivables.
(d) Any proceeds of Receivables or other Collateral transmitted to or
otherwise received by the Agent pursuant to any of the provisions of Sections
5(b) or 5(c) hereof during the existence of any Default or Event of Default may
be handled and administered by the Agent in and through a remittance account or
accounts maintained at the Agent or by the Agent at a commercial bank or banks
selected by the Agent (collectively the "Depositary Banks" and individually a
"Depositary Bank"), and each Debtor acknowledges that the maintenance of such
remittance accounts by the Agent is solely for the Agent's convenience and that
the Debtors do not have any right, title or interest in such remittance accounts
or any amounts at any time standing to the credit thereof. The Agent may apply
all or any part of any proceeds of Receivables or other Collateral received by
it during the existence of any Default or Event of Default from any source to
the payment of the Obligations (whether or not then due and payable), such
applications to be made in such amounts, in such manner and order and at such
intervals as the Agent may from time to time in its discretion determine.
-11-
<PAGE>
The Agent need not apply or give credit for any item included in proceeds of
Receivables or other Collateral until the Depositary Bank has received final
payment therefor at its office in cash or final solvent credits current at the
site of deposit acceptable to the Agent and the Depositary Bank as such.
However, if the Agent does permit credit to be given for any item prior to a
Depositary Bank receiving final payment therefor and such Depositary Bank fails
to receive such final payment or an item is charged back to the Agent or any
Depositary Bank for any reason, the Agent may at its election in either instance
charge the amount of such item back against any such remittance accounts or any
depository account of any Debtor maintained with any Secured Creditor, together
with interest thereon at the Default Rate. Concurrently with each transmission
of any proceeds of Receivables or other Collateral to any such remittance
account, upon the Agent's request, the relevant Debtor shall furnish the Agent
with a report in such form as Agent shall reasonably require identifying the
particular Receivable or such other Collateral from which the same arises or
relates. Each Debtor hereby indemnifies the Secured Creditors from and against
all liabilities, damages, losses, actions, claims, judgments, and all reasonable
costs, expenses, charges and attorneys' fees suffered or incurred by any Secured
Creditor because of the maintenance of the foregoing arrangements; provided,
however, that no Debtor shall be required to indemnify any Secured Creditor for
any of the foregoing to the extent they arise solely from the gross negligence
or willful misconduct of the person seeking to be indemnified. The Secured
Creditors shall have no liability or responsibility to any Debtor for the Agent
or any other Depositary Bank accepting any check, draft or other order for
payment of money bearing the legend "payment in full" or words of similar import
or any other restrictive legend or endorsement whatsoever or be responsible for
determining the correctness of any remittance.
Section 6. Special Provisions Re: Inventory and Equipment. (a) Each
Debtor shall at its own cost and expense maintain, keep and preserve its
Inventory in good and merchantable condition and keep and preserve its Equipment
in good repair, working order and condition, ordinary wear and tear excepted,
and, without limiting the foregoing, make all necessary and proper repairs,
replacements and additions to its Equipment so that the efficiency thereof shall
be fully preserved and maintained.
(b) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, use, consume
and sell the Inventory in the ordinary course of its business, but a sale in the
ordinary course of business shall not under any circumstance include any
transfer or sale in satisfaction, partial or complete, of a debt owing by such
Debtor.
(c) Each Debtor may, until an Event of Default has occurred and is
continuing and thereafter until otherwise notified by the Agent, sell (x)
obsolete, worn out or unusable Equipment which is concurrently replaced with
similar Equipment at least equal in quality and condition to that sold and owned
by such Debtor free of any lien, charge or encumbrance other than the security
interest granted hereby and (y) Equipment to the extent permitted by Section
8.10 of the Credit Agreement.
-12-
<PAGE>
(d) As of the time any Inventory or Equipment of a Debtor becomes subject
to the security interest provided for hereby and at all times thereafter, such
Debtor shall be deemed to have warranted as to any and all of such Inventory and
Equipment that all warranties of such Debtor set forth in this Agreement are
true and correct with respect to such Inventory and Equipment; that all of such
Inventory and Equipment is located at a location set forth pursuant to Section
3(b) hereof. Each Debtor warrants and agrees that none of its Inventory is or
will be consigned to any other person or entity without the Agent's prior
written consent.
(e) Upon the Agent's or the Secured Creditors' request, each Debtor shall
at its own cost and expense cause the lien of the Agent in and to any portion of
its Collateral subject to a certificate of title law to be duly noted on such
certificate of title or to be otherwise filed in such manner as is prescribed by
law in order to perfect such lien and will cause all such certificates of title
and evidences of lien to be deposited with the Agent.
(f) Except for Equipment from time to time located on the real estate
described on Schedule C attached hereto or as otherwise hereafter disclosed to
the Secured Creditors in writing, none of the Equipment is or will be attached
to real estate in such a manner that the same may become a fixture.
(g) If any of the Inventory is at any time evidenced by a document of
title, such document shall be promptly delivered by the relevant Debtor to the
Agent.
Section 7. Special Provisions Re: Investment Property. (a) Unless and
until an Event of Default has occurred and is continuing and thereafter until
notified to the contrary by the Agent pursuant to Section 9(d) hereof:
(i) Each Debtor shall be entitled to exercise all voting and/or
consensual powers pertaining to its Investment Property or any part
thereof, for all purposes not inconsistent with the terms of this
Agreement, the Credit Agreement or any other document evidencing or
otherwise relating to any Obligations; and
(ii) Each Debtor shall be entitled to receive and retain all cash
dividends paid upon or in respect of its Investment Property.
(b) Certificates for all securities now or at any time constituting
Investment Property and part of the Collateral hereunder shall be promptly
delivered by the relevant Debtor to the Agent duly endorsed in blank for
transfer or accompanied by an appropriate assignment or assignments or an
appropriate undated stock power or powers, in every case sufficient to transfer
title thereto, including, without limitation, all stock received in respect of a
stock dividend or resulting from a split-up, revision or reclassification of the
Investment Property or any part thereof or received in addition to, in
substitution of or in exchange for the Investment Property or any part thereof
as a result of a merger, consolidation or otherwise. With respect to any
Investment Property held by a securities intermediary, commodity intermediary,
or other financial intermediary of any kind, the relevant Debtor shall execute
and deliver, and shall cause any such intermediary to execute and deliver, an
-13-
<PAGE>
agreement among such Debtor, the Agent, and such intermediary in form and
substance satisfactory to the Agent which provides, among other things, for the
intermediary's agreement that it will comply with such entitlement orders, and
apply any value distributed on account of any Investment Property maintained in
an account with such intermediary, as directed by the Agent without further
consent by such Debtor. The Agent may, at any time after the occurrence and
during the continuation of an Event of Default at any time when the Obligations
are, or have been declared to be, due and payable in full, cause to be
transferred into its name or the name of its nominee or nominees any and all of
the Investment Property hereunder.
(c) Unless and until an Event of Default has occurred and is continuing,
each Debtor may sell or otherwise dispose of any of its Investment Property to
the extent permitted by the Credit Agreement, provided that except to the extent
permitted by Section 8.11 of the Credit Agreement, no Debtor shall sell or
otherwise dispose of any capital stock or other equity interest in any direct or
indirect Subsidiary without the prior written consent of the Agent. During the
existence of any Event of Default, no Debtor shall sell all or any part of the
Investment Property without the prior written consent of the Agent.
(d) Each Debtor represents that on the date of this Agreement, none of
its Investment Property consists of margin stock (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System) except to
the extent such Debtor has delivered to the Agent a duly executed and completed
Form U-1 with respect to such stock. If at any time the Investment Property or
any part thereof consists of margin stock, the relevant Debtor shall promptly so
notify the Agent and deliver to the Agent a duly executed and completed Form U-1
and such other instruments and documents reasonably requested by the Agent in
form and substance satisfactory to the Agent.
Section 8. Power of Attorney. In addition to any other powers of
attorney contained herein, each Debtor hereby appoints the Agent, its nominee,
or any other person whom the Agent may designate as such Debtor's attorney-in-
fact, with full power during the existence of any Default or Event of Default to
sign such Debtor's name on verifications of accounts and other Collateral; to
send requests for verification of Collateral to such Debtor's customers, account
debtors and other obligors; to endorse such Debtor's name on any checks, notes,
acceptances, money orders, drafts and any other forms of payment or security
that may come into the Agent's possession; to endorse the Collateral in blank or
to the order of the Agent or its nominee; to sign such Debtor's name on any
invoice or bill of lading relating to any Collateral, on claims to enforce
collection of any Collateral, on notices to and drafts against customers and
account debtors and other obligors, on schedules and assignments of Collateral,
on notices of assignment and on public records; to notify the post office
authorities to change the address for delivery of such Debtor's mail to an
address designated by the Agent; to receive, open and dispose of all mail
addressed to such Debtor; and to do all things necessary to carry out this
Agreement. Each Debtor hereby ratifies and approves all acts of any such
attorney and agrees that neither the Agent nor any such attorney will be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law other than such person's gross negligence or willful misconduct. The Agent
may
-14-
<PAGE>
file one or more financing statements disclosing its security interest in
any or all of the Collateral without any Debtor's signature appearing thereon,
and each Debtor also hereby grants the Agent a power of attorney to execute any
such financing statements, or amendments and supplements to financing
statements, on behalf of such Debtor without notice thereof to any Debtor. The
foregoing powers of attorney, being coupled with an interest, are irrevocable
until the Obligations have been fully paid and satisfied and the commitments of
the Lenders to extend credit to or for the account of the Borrower under the
Credit Agreement have expired or otherwise terminated.
Section 9. Defaults and Remedies. (a) The occurrence of any event or
the existence of any condition which is specified as an "Event of Default" under
the Credit Agreement shall constitute an "Event of Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default, the Agent shall have, in addition to all other rights provided herein
or by law, the rights and remedies of a secured party under the UCC (regardless
of whether the UCC is the law of the jurisdiction where the rights or remedies
are asserted and regardless of whether the UCC applies to the affected
Collateral), and further the Agent may, without demand and without
advertisement, notice, hearing or process of law, all of which each Debtor
hereby waives to the extent permitted by applicable law, at any time or times,
sell and deliver any or all Collateral held by or for it at public or private
sale, at any securities exchange or broker's board or at any Secured Creditor's
office or elsewhere, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion. Upon the
occurrence and during the continuation of any Event of Default, in addition to
any other right or remedies set forth herein or by applicable law, the Agent may
by written demand direct any securities intermediary, commodities intermediary,
or other financial intermediary at any time holding any Investment Property, or
any issuer thereof, to deliver such Collateral, or any part thereof, to the
Agent and/or liquidate such Collateral, or any part thereof, and deliver the
proceeds thereof to the Agent. In the exercise of any such remedies, the Agent
may sell the Collateral as a unit even though the sales price thereof may be in
excess of the amount remaining unpaid on the Obligations. Also, if less than
all the Collateral is sold, the Agent shall have no duty to marshal or apportion
the part of the Collateral so sold as between the Debtors, or any of them, but
may sell and deliver any or all of the Collateral without regard to which of the
Debtors are the owners thereof. In addition to all other sums due any Secured
Creditor hereunder, each Debtor shall pay the Secured Creditors all costs and
expenses incurred by the Secured Creditors, including reasonable attorneys' fees
and court costs, in obtaining, liquidating or enforcing payment of Collateral or
the Obligations or in the prosecution or defense of any action or proceeding by
or against any Secured Creditor or any Debtor concerning any matter arising out
of or connected with this Agreement or the Collateral or the Obligations,
including, without limitation, any of the foregoing arising in, arising under or
related to a case under the United States Bankruptcy Code (or any successor
statute). Any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Debtors in accordance
with Section 13(b) hereof at least 10 days before the time of sale or other
event giving rise to the requirement of such notice; provided, however, no
notification need be given to a Debtor if such Debtor has signed, after an Event
of Default hereunder has occurred, a statement
-15-
<PAGE>
renouncing any right to notification of sale or other intended disposition. The
Agent shall not be obligated to make any sale or other disposition of the
Collateral regardless of notice having been given. Any Secured Creditor may be
the purchaser at any such sale. Each Debtor hereby waives all of its rights of
redemption from any such sale. The Agent may postpone or cause the postponement
of the sale of all or any portion of the Collateral by announcement at the time
and place of such sale, and such sale may, without further notice, be made at
the time and place to which the sale was postponed or the Agent may further
postpone such sale by announcement made at such time and place. In the event any
of the Collateral shall constitute restricted securities within the meaning of
any applicable securities laws, any disposition thereof in compliance with such
laws shall not render the disposition commercially unreasonable.
(c) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default hereunder, the Agent shall have
the right, in addition to all other rights provided herein or by law, to take
physical possession of any and all of the Collateral and anything found therein,
the right for that purpose to enter without legal process any premises where the
Collateral may be found (provided such entry be done lawfully), and the right to
maintain such possession on the relevant Debtor's premises (each Debtor hereby
agreeing, to the extent it may lawfully do so, to lease such premises without
cost or expense to the Agent or its designee if the Agent so requests) or to
remove the Collateral or any part thereof to such other places as the Agent may
desire. Upon the occurrence and during the continuation of any Event of Default
hereunder, the Agent shall have the right to exercise any and all rights with
respect to deposit accounts of each Debtor maintained with any Secured Creditor,
including, without limitation, the right to collect, withdraw and receive all
amounts due or to become due or payable under each such deposit account. Upon
the occurrence and during the continuation of any Event of Default hereunder,
each Debtor shall, upon the Agent's demand, assemble the Collateral and make it
available to the Agent at a place designated by the Agent. If the Agent
exercises its right to take possession of the Collateral, each Debtor shall also
at its expense perform any and all other steps requested by the Agent to
preserve and protect the security interest hereby granted in the Collateral,
such as placing and maintaining signs indicating the security interest of the
Agent, appointing overseers for the Collateral and maintaining Collateral
records.
(d) Without in any way limiting the foregoing, upon the occurrence and
during the continuation of any Event of Default at any time when the Obligations
are, or have been declared to be, due and payable in full, all rights of a
Debtor to exercise the voting and/or consensual powers which it is entitled to
exercise pursuant to Section 7(a)(i) hereof and/or to receive and retain the
distributions which it is entitled to receive and retain pursuant to Section
7(a)(ii) hereof, shall, at the option of the Agent, cease and thereupon become
vested in the Agent, which, in addition to all other rights provided herein or
by law, shall then be entitled solely and exclusively to exercise all voting and
other consensual powers pertaining to the Investment Property and/or to receive
and retain the distributions which such Debtor would otherwise have been
authorized to retain pursuant to Section 7(a)(ii) hereof and shall then be
entitled solely and exclusively to exercise any and all rights of conversion,
exchange or subscription or any other rights, privileges or options pertaining
to any Investment
-16-
<PAGE>
Property as if the Agent were the absolute owner thereof including, without
limitation, the rights to exchange, at its discretion, any and all of the
Investment Property upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the respective issuer thereof or upon
the exercise by or on behalf of any such issuer or the Agent of any right,
privilege or option pertaining to any Investment Property and, in connection
therewith, to deposit and deliver any and all of the Investment Property with
any committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Agent may determine.
(e) Without in any way limiting the foregoing, each Debtor hereby grants
to the Secured Creditors a royalty-free irrevocable license and right to use all
of such Debtor's patents, patent applications, patent licenses, trademarks,
trademark registrations, trademark licenses, trade names, trade styles, and
similar intangibles in connection with any foreclosure or other realization by
the Agent or the Secured Creditors on all or any part of the Collateral to the
extent permitted by law. The license and right granted the Secured Creditors
hereby shall be without any royalty or fee or charge whatsoever.
(f) Failure by the Agent to exercise any right, remedy or option under
this Agreement or any other agreement between any Debtor and the Agent or
provided by law, or delay by the Agent in exercising the same, shall not operate
as a waiver; and no waiver shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the
extent specifically stated. Neither any Secured Creditor, nor any party acting
as attorney for any Secured Creditor, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or law other than
their gross negligence or willful misconduct. The rights and remedies of the
Secured Creditors under this Agreement shall be cumulative and not exclusive of
any other right or remedy which any Secured Creditor may have.
Section 10. Application of Proceeds. The proceeds and avails of the
Collateral at any time received by the Agent upon the occurrence and during the
continuation of any Event of Default shall, when received by the Agent in cash
or its equivalent, be applied by the Agent in reduction of, or held as
collateral security for, the Obligations in accordance with the terms of the
Credit Agreement. The Debtors shall remain liable to the Secured Creditors for
any deficiency. Any surplus remaining after the full payment and satisfaction
of the Obligations shall be returned to the Borrower, as agent for the Debtors,
or to whomsoever the Agent reasonably determines is lawfully entitled thereto.
Section 11. Continuing Agreement. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until all
of the Obligations, both for principal and interest, have been fully paid and
satisfied and the commitments of the Lenders to extend credit to or for the
account of the Borrower under the Credit Agreement have expired or otherwise
terminated. Upon such termination of this Agreement, the Agent shall, upon the
request and at the expense of the Debtors, forthwith release its security
interest hereunder.
-17-
<PAGE>
Section 12. The Agent. In acting under or by virtue of this Agreement,
the Agent shall be entitled to all the rights, authority, privileges and
immunities provided in Section 11 of the Credit Agreement, all of which
provisions of said Section 11 are incorporated by reference herein with the same
force and effect as if set forth herein in their entirety. The Agent hereby
disclaims any representation or warranty to the other Secured Creditors or any
other holders of the Obligations concerning the perfection of the liens and
security interests granted hereunder or in the value of any of the Collateral.
Section 13. Miscellaneous. (a) This Agreement cannot be changed or
terminated orally. This Agreement shall create a continuing lien on and
security interest in the Collateral and shall be binding upon each Debtor, its
successors and assigns and shall inure, together with the rights and remedies of
the Secured Creditors hereunder, to the benefit of the Secured Creditors and
their successors and permitted assigns; provided, however, that no Debtor may
assign its rights or delegate its duties hereunder without the Agent's prior
written consent. Without limiting the generality of the foregoing, and subject
to the provisions of the Credit Agreement, any Lender may assign or otherwise
transfer any indebtedness held by it secured by this Agreement to any other
person, and such other person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise.
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be deemed to have
been given or made, if to any Debtor when given to the Borrower in accordance
with Section 12.8 of the Credit Agreement, or if to any Secured Creditor, when
given to such party in accordance with Section 12.8 of the Credit Agreement.
(c) No Lender or Letter of Credit Issuer shall have the right to
institute any suit, action or proceeding in equity or at law for the foreclosure
or other realization upon any Collateral subject to this Agreement or for the
execution of any trust or power hereof or for the appointment of a receiver, or
for the enforcement of any other remedy under or upon this Agreement; it being
understood and intended that no one or more of the Lenders or Letter of Credit
Issuers shall have any right in any manner whatsoever to affect, disturb or
prejudice the lien and security interest of this Agreement by its or their
action or to enforce any right hereunder, and that all proceedings at law or in
equity shall be instituted, had and maintained by the Agent in the manner herein
provided for the benefit of the Secured Creditors.
(d) In the event that any provision hereof shall be deemed to be invalid
or unenforceable by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Agreement shall be construed as
not containing such provision, but only as to such jurisdictions where such law
or interpretation is operative, and the invalidity or unenforceability of such
provision shall not affect the validity of any remaining provisions hereof, and
any and all other provisions hereof which are otherwise lawful and valid shall
remain in full force and effect. Without limiting the generality of the
foregoing, in the event that this Agreement shall be deemed to be invalid or
otherwise
-18-
<PAGE>
unenforceable with respect to any Debtor, such invalidity or unenforceability
shall not affect the validity of this Agreement with respect to the other
Debtors.
(e) The lien and security interest herein created and provided for stand
as direct and primary security for the Obligations of the Borrower arising under
or otherwise relating to the Credit Agreement as well as for any of the other
Obligations secured hereby. No application of any sums received by the Secured
Creditors in respect of the Collateral or any disposition thereof to the
reduction of the Obligations or any part thereof shall in any manner entitle any
Debtor to any right, title or interest in or to the Obligations or any
collateral or security therefor, whether by subrogation or otherwise, unless and
until all Obligations have been fully paid and satisfied and all agreements of
the Secured Creditors to extend credit to or for the account of the Borrower
under the Credit Agreement have expired or otherwise terminated. Each Debtor
acknowledges that the lien and security interest hereby created and provided are
absolute and unconditional and shall not in any manner be affected or impaired
by any acts of omissions whatsoever of any Secured Creditor or any other holder
of any Obligations, and without limiting the generality of the foregoing, the
lien and security interest hereof shall not be impaired by any acceptance by the
Secured Creditors or any other holder of any Obligations of any other security
for or guarantors upon any of the Obligations or by any failure, neglect or
omission on the part of any Secured Creditor or any other holder of any
Obligations to realize upon or protect any of the Obligations or any collateral
or security therefor (including, without limitation, impairment of collateral or
failure to perfect security interest in collateral). The lien and security
interest hereof shall not in any manner be impaired or affected by (and the
Secured Creditors, without notice to anyone, are hereby authorized to make from
time to time) any sale, pledge, surrender, compromise, settlement, release,
renewal, extension, indulgence, alteration, substitution, exchange, change in,
modification or disposition of any of the Obligations or of any collateral or
security therefor, or of any guaranty thereof, or of any instrument or agreement
setting forth the terms and conditions pertaining to any of the foregoing. The
Secured Creditors may at their discretion at any time grant credit to the
Borrower without notice to the other Debtors in such amounts and on such terms
as the Secured Creditors may elect (all of such to constitute additional
Obligations hereby secured) without in any manner impairing the lien and
security interest created and provided for herein. In order to realize hereon
and to exercise the rights granted the Secured Creditors hereunder and under
applicable law, there shall be no obligation on the part of any Secured Creditor
or any other holder of any Obligations at any time to first resort for payment
to the Borrower or to any other Debtor or to any guaranty of the Obligations or
any portion thereof or to resort to any other collateral, security, property,
liens or any other rights or remedies whatsoever, and the Secured Creditors
shall have the right to enforce this Agreement against any Debtor or any of its
Collateral irrespective of whether or not other proceedings or steps seeking
resort to or realization upon or from any of the foregoing are pending.
(f) In the event the Secured Creditors shall at any time in their
discretion permit a substitution of Debtors hereunder or a party shall wish to
become a Debtor hereunder, such substituted or additional Debtor shall, upon
executing an agreement in the form attached hereto as Schedule D, become a party
hereto and be bound by all the terms and conditions
-19-
<PAGE>
hereof to the same extent as though such Debtor had originally executed this
Agreement and, in the case of a substitution, in lieu of the Debtor being
replaced. Any such agreement shall contain information as to such Debtor
necessary to update Schedules A, B and C hereto with respect to it. No such
substitution shall be effective absent the written consent of Agent nor shall it
in any manner affect the obligations of the other Debtors hereunder.
(g) This Agreement shall be deemed to have been made in the State of
Illinois and shall be governed by, and construed in accordance with, the laws of
the State of Illinois. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
(h) Each Debtor hereby submits to the non-exclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois state court sitting in Cook County, Illinois for purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Debtor irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
form. Each Debtor and, by accepting the benefits of this Agreement, each
Secured Creditor hereby irrevocably waives any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
(i) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each
constituting an original, but all together one and the same agreement.
[Signature Pages to Follow]
-20-
<PAGE>
In Witness Whereof, each Debtor has caused this Agreement to be duly
executed and delivered as of the date first above written.
"Debtors"
Fountain View, Inc.
Fountain View Holdings, Inc.
Locomotion Holdings, Inc.
Fountain View Management, Inc.
Sycamore Park Convalescent Hospital
AIB Corp.
Elmcrest Convalescent Hospital
Brier Oak Convalescent, Inc.
BIA Hotel Corp.
Rio Hondo Nursing Center
Fountainview Convalescent Hospital
Alexandria Convalescent Hospital, Inc.
I.'N O., Inc.
Summit Care Corporation
Summit Care-California, Inc.
Summit Care-Texas No. 2, Inc.
Summit Care-Texas No. 3, Inc.
Summit Care Pharmacy, Inc.
Skilled Care Network
Summit Care Texas Equity, Inc.
Summit Care Management Texas, Inc.
SNF Pharmacy, Inc.
FV-SCC Acquisition4 Corp.
By /s/ Robert M. Snukal
--------------------------------
Name: Robert M. Snukal
Title: President
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
-21-
<PAGE>
Locomotion Therapy, Inc.
On-Track Therapy Center, Inc.
By /s/ Robert M. Snukal
-------------------------------------
Name: Robert M. Snukal
Title: Chief Executive Officer
Address:
11900 West Olympic Blvd., Suite 680
Los Angeles, CA 90064
Attention: Robert M. Snukal
Telephone: (310) 571-0351
Telecopy: (310) 571-0365
Summit Care Texas, L.P.
By: Summit Care Management Texas, Inc.,
in its capacity as general partner
By: /s/ Robert M. Snukal
------------------------------------
Robert M. Snukal, President
By: Summit Care Texas Equity, Inc.,
in its capacity as limited partner
By: /s/ Robert M. Snukal
------------------------------------
Robert M. Snukal, President
-22-
<PAGE>
Accepted and agreed to in Chicago, Illinois as of the date first above
written.
Bank of Montreal, as Agent
By /s/ Mark F. Spencer
--------------------------------
Name Mark F. Spencer
--------------------------
Title Managing Director
--------------------------
Address:
601 South Figueroa Street, Suite 4900
Los Angeles, CA 90017
Attention: Ronald Launsbach
Telephone: (213) 239-0602
Telecopy: (213) 239-0680
-23-
<PAGE>
SCHEDULE A
LOCATIONS
Column 1 Column 2 Column 3
Name of Debtor Chief
(and Federal Tax Executive Additional Places
I.D. Number) Office of Business
Fountain View, Inc. 11900 W. Olympic Blvd., None
Tax ID #95-4644784 #680
Los Angeles, California
90064
Fountain View Holdings, Inc. 11900 W. Olympic Blvd., None
Tax ID #95-4644785 #680
Los Angeles, California
90064
Locomotion Holdings, Inc. 11900 W. Olympic Blvd., None
Tax ID #95-4644786 #680
Los Angeles, California
90064
Locomotion Therapy, Inc. 861 Village Oaks Dr., #100 None
Tax ID #95-4644790 Covina, California 91724
Fountain View Management, 11900 W. Olympic Blvd., None
Inc. #680
Tax ID #95-4199013 Los Angeles, California
90064
Sycamore Park Convalescent 4585 N. Figueroa St. None
Hospital Los Angeles, California
Tax ID #95-2260970 90865
AIB Corp. 505 N. LaBrea None
Tax ID #95-3918421 Los Angeles, California
90036
Elmcrest Convalescent 3111 Santa Anita 1035 W. Beverly Blvd.
Hospital El Monte, California 91733 Montebello, California
Tax ID #95-4274740 90640
Brier Oak Convalescent, Inc. 5154 Sunset Blvd. None
Tax ID #95-4212165 Los Angeles, California
90027
BIA Hotel Corp. 515 N. LaBrea None
Tax ID #95-3918420 Los Angeles, California
90036
Rio Hondo Nursing Center 273 E. Beverly Blvd. None
Tax ID #95-4272737 Montebello, California
90640
Fountainview Convalescent 5310 Fountain Ave. None
Hospital Los Angeles, California
Tax ID #95-2506832 90029
Alexandria Convalescent 1515 N. Alexandria Ave. None
Hospital, Inc. Los Angeles, California
Tax ID #95-4395382 90027
I.'n O., Inc. 861 Village Oaks Dr., #200 None
Tax ID #95-4560821 Covina, California 91724
On-Track Therapy Center, 5690 N. Fresno St., #110 None
Inc. Fresno, California 93710
Tax ID #770447168
Summit Care Corporation 2600 W. Magnolia Blvd. 22613 Old Canal Rd.
Tax ID #95-3656297 Burbank, California 91505 Yorba Linda,
California 92887
13300 Old Blanco Rd.,
#150
San Antonio, Texas
78216
<PAGE>
Column 1 Column 2 Column 3
Name of Debtor Chief
(and Federal Tax Executive Additional Places
I.D. Number) Office of Business
Summit Care-California, Inc. 2600 W. Magnolia Blvd. None
Tax ID #95-2269142 Burbank, California 91505
Summit Care-Texas No. 2, 2600 W. Magnolia Blvd. None
Inc. Burbank, California 91505
Tax ID #95-4060847
Summit Care-Texas No. 3, 2600 W. Magnolia Blvd. None
Inc. Burbank, California 91505
Tax ID #74-2582813
Summit Care Pharmacy, Inc. 22607 Old Canal Rd. 222 E. Huntington
Tax ID #95-3747839 Yorba Linda, California Dr., #111
92887 Monrovia, California
91016
Summit Care Texas Equity, 2600 W. Magnolia Blvd. None
Inc. Burbank, California 91505
Tax ID #95-4604050
Summit Care Management 13300 Old Blanco Rd., #150 None
Texas, Inc. San Antonio, Texas 78216
Tax ID #74-2850517
Summit Care Texas, L.P. 13300 Old Blanco Rd., #150 None
Tax ID #95-4642711 San Antonio, Texas 78216
FV-SCC Acquisition Corp. 11900 W. Olympic Blvd., None
Tax ID #52-2088786 #680
Los Angeles, California
90064
Skilled Care Network 11900 W. Olympic Blvd., None
(to be dissolved) #680
Los Angeles, California
90064
SNF Pharmacy, Inc. 11900 W. Olympic Blvd., None
(to be dissolved) #680
Los Angeles, California
90064
-2-
<PAGE>
SCHEDULE B
TRADE NAMES
Trade Names of
Name of Debtor Such Debtor
Fountain View, Inc. None
Fountain View Holdings, Inc. None
Locomotion Holdings, Inc. None
Locomotion Therapy, Inc. None
Fountain View Management, Inc. None
Sycamore Park Convalescent Hospital None
AIB Corp. d/b/a Hancock Park Convalescent
Hospital
Elmcrest Convalescent Hospital d/b/a Montebello Convalescent
Hospital
Brier Oak Convalescent, Inc. d/b/a Brier Oak Terrace Care Center
BIA Hotel Corp. d/b/a Hancock Park Retirement Hotel
Rio Hondo Nursing Center d/b/a Rio Hondo Convalescent
Hospital
Fountainview Convalescent Hospital None
Alexandria Convalescent Hospital, Inc. None
I.'n O., Inc. None
On-Track Therapy Center, Inc. None
Summit Care Corporation Carson Retirement Center
Earlwood Care Center
Fountain Care Center
Fountain Assisted Living
/Retirement Center
<PAGE>
Trade Names of
Name of Debtor Such Debtor
Devonshire Care Center
Spring Assisted Living/Retirement
Center
Valley Health Care Center
Villa Maria Care Center
Phoenix Living Center
Summit Care-California, Inc. Anaheim Terrace Care Center
Ashton Court Care Center
Bay Crest Care Center
Carehouse Convalescent Center
Hemet Assisted Living/Retirement Center
Palm Grove Care Center
Royalwood Care Center
Sharon Care Center
Woodland Care Center
Willow Creek Care Center
Summit Care-Texas No. 2, Inc. None
Summit Care-Texas No. 3, Inc. The Woodlands Health Care Center
Summit Care Pharmacy, Inc. Skilled Care Pharmacy, Yorba Linda &
Skilled Care Pharmacy, Monrovia, CA
Skilled Care Network Skilled Care Network
Summit Care Texas Equity, Inc. Summit Care Texas, L.P. (99% Partner)
Summit Care Management Texas, Inc. Summit Care Texas, L.P. (1% Partner)
Summit Care Texas, L.P. Briarcliff Nursing & Rehabilitation
Center
-2-
<PAGE>
Trade Names of
Name of Debtor Such Debtor
Cityview Care Center
Colonial Manor Care Center
Colonial Manor - Tyler
Comanche Trail Nursing Center
Coronado Care Center
Guadalupe Valley Nursing Center
Heritage Oaks Nursing & Rehabilitation
Center
Live Oak Nursing Center
Lubbock Hospitality House
Monument Hill Nursing Center
Oak Crest Nursing Center
Oak Manor Nursing Center
Oakland Manor Nursing Center
Southern Manor Nursing Center
Southwood Care Center
The Clairmont-Beaumont
The Clairmont-Longview
The Clairmont-Tyler
Town & Country Manor
West Side Care Center
SNF Pharmacy, Inc. None
FV-SCC Acquisition Corp. None
-3-
<PAGE>
SCHEDULE C
REAL ESTATE LEGAL DESCRIPTIONS
The Debtors' only fixtures rest upon property subject to the Lien of the
Mortgages granted, or to be granted, to the Agent pursuant to Section 4.4 of the
Credit Agreement.
<PAGE>
SCHEDULE D
ASSUMPTION AND SUPPLEMENTAL SECURITY AGREEMENT
This Agreement dated as of this _____ day of ______________, ____ from [NEW
DEBTOR], a __________ corporation (the "New Debtor"), to Bank of Montreal
("BOM"), as agent for the Secured Creditors (defined in the Security Agreement
hereinafter identified and defined) (BOM acting as such agent and any successor
or successors to BOM in such capacity being hereinafter referred to as the
"Agent");
WITNESSETH THAT:
Whereas, Fountain View, Inc. (the "Borrower") and certain other parties
have executed and delivered to the Agent that certain Security Agreement dated
as of April 16, 1998 (such Security Agreement, as the same may from time to time
be amended, modified, or restated, including supplements thereto which add
additional parties as Debtors thereunder, being hereinafter referred to as the
"Security Agreement") pursuant to which such parties (the "Existing Debtors")
have granted to the Agent for the benefit of the Secured Creditors a lien on and
security interest in each such Existing Debtor's Collateral (as such term is
defined in the Security Agreement) to secure the Obligations (as such term is
defined in the Security Agreement); and
Whereas, the Borrower provides the New Debtor with substantial financial,
managerial, administrative, and technical support and the New Debtor will
directly and substantially benefit from credit and other financial
accommodations extended and to be extended by the Secured Creditors to the
Borrower;
Now, therefore, for value received, and in consideration of advances made
or to be made, or credit accommodations given or to be given, to the Borrower by
the Secured Creditors from time to time, the New Debtor hereby agrees as
follows:
1. The New Debtor acknowledges and agrees that it shall become a "Debtor"
party to the Security Agreement effective upon the date the New Debtor's
execution of this Agreement and the delivery of this Agreement to the Agent, and
that upon such execution and delivery, all references in the Security Agreement
to the terms "Debtor" or "Debtors" shall be deemed to include the New Debtor.
Without limiting the generality of the foregoing, the New Debtor hereby repeats
and reaffirms all grants (including the grant of a lien and security interest),
covenants, agreements, representations and contained in the Security Agreement
as amended hereby, each and all of which are and shall remain applicable to the
Collateral from time to time owned by the New Debtor or in which the New Debtor
from time to time has any rights. Without limiting the foregoing, in order to
secure payment of the Obligations, whether now existing or hereafter arising,
the New Debtor does hereby grant to the Agent for the benefit of itself and the
other Secured Creditors, and hereby agrees that the Agent has and shall continue
to have for the benefit of itself and the other Secured Creditors a continuing
lien on and security interest in, among
<PAGE>
other things, all of the New Debtor's Collateral (as such term is defined in the
Security Agreement), including, without limitation, all of the New Debtor's
Receivables, General Intangibles, Inventory, Equipment, Investment Property, and
all of the other Collateral described in Section 2 of the Security Agreement,
each and all of such granting clauses being incorporated herein by reference
with the same force and effect as if set forth in their entirety except that all
references in such clauses to the Existing Debtors or any of them shall be
deemed to include references to the New Debtor. Nothing contained herein shall
in any manner impair the priority of the liens and security interests heretofore
granted in favor of the Agent under the Security Agreement.
2. Schedules A (Locations), B (Trade Names) and C (Real Estate) to the
Security Agreement shall be supplemented by the information stated below with
respect to the New Debtor:
Supplement to Schedule A
Name of Debtor Chief
(and Federal Tax Executive Additional Places
I.D. Number) Office of Business
___________________________ __________________________ _____________________
___________________________ __________________________ _____________________
Supplement to Schedule B
Trade Names of
Name of Debtor Such Debtor
____________________________________ _________________________________
Supplement to Schedule C
Real Estate Legal Descriptions
__________________________________
__________________________________
3. The New Debtor hereby acknowledges and agrees that the Obligations are
secured by all of the Collateral according to, and otherwise on and subject to,
the terms and conditions of the Security Agreement to the same extent and with
the same force and effect
-2-
<PAGE>
as if the New Debtor had originally been one of the Existing Debtors under the
Security Agreement and had originally executed the same as such an Existing
Debtor.
4. All capitalized terms used in this Agreement without definition shall
have the same meaning herein as such terms have in the Security Agreement,
except that any reference to the term "Debtor" or "Debtors" and any provision of
the Security Agreement providing meaning to such term shall be deemed a
reference to the Existing Debtors and the New Debtor. Except as specifically
modified hereby, all of the terms and conditions of the Security Agreement shall
stand and remain unchanged and in full force and effect.
5. The New Debtor agrees to execute and deliver such further instruments
and documents and do such further acts and things as the Agent may deem
necessary or proper to carry out more effectively the purposes of this
Agreement.
6. No reference to this Agreement need be made in the Security Agreement
or in any other document or instrument making reference to the Security
Agreement, any reference to the Security Agreement in any of such to be deemed a
reference to the Security Agreement as modified hereby.
7. This Agreement shall be governed by and construed in accordance with
the State of Illinois (without regard to principles of conflicts of law).
[NEW DEBTOR]
By_____________________________
Name________________________
Title_______________________
Accepted and agreed to as of the date first above written.
Bank of Montreal, as Agent
By_____________________________
Name________________________
Title_______________________
-3-
<PAGE>
EXHIBIT 10.51
REVOLVING NOTE
U.S. $30,000,000.00 April 16, 1998
For Value Received, the undersigned, Fountain View, Inc., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of Bank of
Montreal (the "Bank") on the Revolving Credit Termination Date of the
hereinafter defined Credit Agreement, at the principal office of Bank of
Montreal, as Agent, in Chicago, Illinois, in immediately available funds, the
principal sum of Thirty Million and no/100 Dollars ($30,000,000.00) or, if less,
the aggregate unpaid principal amount of all Revolving Loans made by the Bank to
the Borrower pursuant to the Credit Agreement, together with interest on the
principal amount of each Revolving Loan from time to time outstanding hereunder
at the rates, and payable in the manner and on the dates, specified in the
Credit Agreement.
The Bank shall record on its books or records or on a schedule attached to
this Note, which is a part hereof, each Revolving Loan made by it pursuant to
the Credit Agreement, together with all payments of principal and interest and
the principal balances from time to time outstanding hereon, whether the
Revolving Loan is a Base Rate Loan or a Eurodollar Loan, the interest rate and
Interest Period applicable thereto, provided that prior to the transfer of this
Note all such amounts shall be recorded on a schedule attached to this Note.
The record thereof, whether shown on such books or records or on a schedule to
this Note, shall be prima facie evidence of the same, provided, however, that
the failure of the Bank to record any of the foregoing or any error in any such
record shall not limit or otherwise affect the obligation of the Borrower to
repay all Revolving Loans made to it pursuant to the Credit Agreement together
with accrued interest thereon.
This Note is one of the Revolving Notes referred to in the Credit Agreement
dated as of April 16, 1998, among the Borrower, Bank of Montreal, as Agent, and
the Banks party thereto (the "Credit Agreement"), and this Note and the holder
hereof are entitled to all the benefits and security provided for thereby or
referred to therein, to which Credit Agreement reference is hereby made for a
statement thereof. All defined terms used in this Note, except terms otherwise
defined herein, shall have the same meaning as in the Credit Agreement. This
Note shall be governed by and construed in accordance with the internal laws of
the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are required
to be made hereon, and this Note may be declared due prior to the expressed
maturity hereof (in each case without premium or penalty except as otherwise set
forth in the Credit Agreement), all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
<PAGE>
The Borrower hereby waives demand, presentment, protest or notice of any
kind hereunder.
Fountain View, Inc.
By /s/ Robert M. Snukal
--------------------------
Name Robert M. Snukal
Title President
<PAGE>
EXHIBIT 10.52
TERM NOTE
U.S. $85,000,000.00 April 16, 1998
FOR VALUE RECEIVED, the undersigned, FOUNTAIN VIEW, Inc., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of Bank of
Montreal (the "Bank") at the principal office of Bank of Montreal, as Agent, in
Chicago, Illinois, in immediately available funds, the principal sum of Eighty
Five Million and no/100 Dollars ($85,000,000.00) or, if less, the aggregate
unpaid principal amount of the Term Loan made or maintained by the Bank to the
Borrower pursuant to the Credit Agreement, in consecutive quarter-annual
principal installments in the amounts called for by Section 1.8(b) of the Credit
Agreement, commencing on March 31, 1999, and continuing on the last day of each
June, September, December and March occurring thereafter, together with interest
on the principal amount of such Term Loan from time to time outstanding
hereunder at the rates, and payable in the manner and on the dates, specified in
the Credit Agreement, except that all principal and interest not sooner paid on
the Term Loan evidenced hereby shall be due and payable on December 31, 2003,
the final maturity date hereof.
The Bank shall record on its books or records or on a schedule attached to
this Note, which is a part hereof, the Term Loan made or maintained by it
pursuant to the Credit Agreement, together with all payments of principal and
interest and the principal balances from time to time outstanding hereon,
whether the Term Loan is a Base Rate Loan or a Eurodollar Loan, the interest
rate and Interest Period applicable thereto, provided that prior to the transfer
of this Note all such amounts shall be recorded on a schedule attached to this
Note. The record thereof, whether shown on such books or records or on a
schedule to this Note, shall be prima facie evidence of the same, provided,
however, that the failure of the Bank to record any of the foregoing or any
error in any such record shall not limit or otherwise affect the obligation of
the Borrower to repay the Term Loan made to it pursuant to the Credit Agreement
together with accrued interest thereon.
This Note is one of the Term Notes referred to in the Credit Agreement
dated as of April 16, 1998, among the Borrower, Bank of Montreal, as Agent, and
the Banks party thereto (the "Credit Agreement"), and this Note and the holder
hereof are entitled to all the benefits and security provided for thereby or
referred to therein, to which Credit Agreement reference is hereby made for a
statement thereof. All defined terms used in this Note, except terms otherwise
defined herein, shall have the same meaning as in the Credit Agreement. This
Note shall be governed by and construed in accordance with the internal laws of
the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are required
to be made hereon, and this Note may be declared due prior to the expressed
maturity hereof (in each case without premium or penalty except as otherwise set
forth in the Credit Agreement), all in the events, on the terms and in the
manner as provided for in the Credit Agreement.
<PAGE>
The Borrower hereby waives demand, presentment, protest or notice of any
kind hereunder.
Fountain View, Inc.
By /s/ Robert M. Snukal
----------------------------
Name Robert M. Snukal
Title President
<PAGE>
EXHIBIT 12.1
FOUNTAIN VIEW, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
THREE MONTHS ENDED
ACTUAL MARCH 31,
---------------------------------- --------------------
PRO PRO
FORMA FORMA
1993 1994 1995 1996 1997 1997 1997 1998 1998
------ ------ ------ ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
income taxes........... $2,510 $4,594 $2,640 $3,878 $5,563 $(7,296) $2,315 $1,450 $ (573)
Fixed charges:
Interest expense...... 307 355 332 278 1,164 23,324 20 851 5,831
Portion of rent repre-
senting interest..... 1,334 1,339 1,315 1,299 1,258 2,251 314 328 569
------ ------ ------ ------ ------ ------- ------ ------ ------
Total fixed charges..... 1,641 1,694 1,647 1,577 2,422 25,575 334 1,179 6,400
------ ------ ------ ------ ------ ------- ------ ------ ------
Income (loss) before
income taxes and fixed
charges................ $4,151 $6,288 $4,287 $5,455 $7,985 $18,279 $2,649 $2,629 $5,827
====== ====== ====== ====== ====== ======= ====== ====== ======
Ratio of earnings to
fixed charges.......... 2.5 3.7 2.6 3.5 3.3 (1) 7.9 2.2 (1)
</TABLE>
(1) Earnings were insufficient to cover proforma fixed charges by $7,296 and
$573 for the year ended December 31, 1997, and the three months ended March
31, 1998, respectively.
<PAGE>
Exhibit 21.1
<TABLE>
<CAPTION>
List of Subsidiaries
Name Jurisdiction
- ---- ------------
<S> <C>
Summit Care Corporation California
Summit Care-california, Inc. California
Summit Care Pharmacy, Inc. California
Summit Care Texas Equity, Inc. California
Summit Care Texas, No. 2, Inc. Texas
Summit Care Texas, No. 3, Inc. Texas
Summit Care Management Texas, Inc. Texas
Summit Care Texas, L.p. Texas
Fountain View Holdings, Inc. Delaware
AIB Corp. California
Alexandria Convalescent Hospital, Inc. California
BIA Hotel Corp. California
Brier Oak Convalescent, Inc. California
Elmcrest Convalescent Hospital California
Fountainview Convalescent Hospital California
Fountain View Management, Inc. California
Rio Hondo Nursing Center California
Locomotion Holdings, Inc. Delaware
Locomotion Therapy, Inc. Delaware
On-track Therapy, Inc. California
I.'N O, Inc. California
Sycamore Park Convalescent Hospital California
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 11, 1998, with respect to the consolidated
financial statements of Fountain View, Inc. for the three years ended December
31, 1997 and the related financial statement schedule, and our report dated
August 22, 1997 with respect to the consolidated financial statements of
Summit Care Corporation for the three years ended June 30, 1997 included in
Amendment No. 1 to the Registration Statement (Form S-4 No. 333-57279) and
related Prospectus of Fountain View, Inc. for the registration of $120,000,000
of 11 1/4% Senior Subordinated Notes.
Ernst & Young LLP
Los Angeles, California
August 5, 1998
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
OF
FOUNTAIN VIEW, INC.
PURSUANT TO
PROSPECTUS DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME ON , 1998, UNLESS THE EXCHANGE OFFER IS EXTENDED BY
THE COMPANY IN ITS SOLE DISCRETION. TENDERS OF 11 1/4% SENIOR SUBORDINATED
NOTES DUE 2008 MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN
THE PROSPECTUS AND HEREIN.
The Exchange Agent for the Exchange Offer Is:
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A.
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Courier: By Hand before 4:30 P.M.:
State Street Bank and Trust State Street Bank and Trust State Street Bank and Trust
Company of California, N.A. Company of California, N.A. Company of California, N.A.
c/o State Street Bank and Trust c/o State Street Bank and Trust c/o State Street Bank and Trust
Company Company Company
Two International Place Two International Place Two International Place
Boston, Massachusetts 02110 Boston, Massachusetts 02110 Boston, Massachusetts 02110
Attention: Kellie Mullen Attention: Kellie Mullen Attention: Kellie Mullen
</TABLE>
By Facsimile: 617-664-5290
Confirm by Telephone to: Kellie Mullen 617-664-5587
PLEASE FOLLOW CAREFULLY THE INSTRUCTIONS HEREIN
<TABLE>
<CAPTION>
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- -----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF HOLDER(S)
(IF THE NAME AND ADDRESS SHOWN ARE NOT CURRENT PLEASE OUTSTANDING NOTES TENDERED
INDICATE ANY CHANGES NECESSARY)(1) (PLEASE FILL IN NUMBERS AND AMOUNTS AND
ATTACH ADDITIONAL LIST IF NECESSARY)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATE PRINCIPAL
NUMBER(S) (IF AMOUNT(S)
ENCLOSING OF OUTSTANDING
CERTIFICATES)(2) NOTES TENDERED(3)
- -----------------------------------------------------------------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
------------------------------------------
TOTAL
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED , 1998
(THE "PROSPECTUS"), OF FOUNTAIN VIEW, INC., A DELAWARE CORPORATION (THE
"COMPANY"), AND THIS LETTER OF TRANSMITTAL RELATING TO THE OFFER (THE
"EXCHANGE OFFER") OF THE COMPANY, UPON THE TERMS AND SUBJECT TO THE CONDITIONS
SET FORTH IN THE PROSPECTUS AND HEREIN AND THE INSTRUCTIONS HERETO, TO
EXCHANGE $1,000 PRINCIPAL AMOUNT OF ITS 11 1/4% SENIOR SUBORDINATED NOTES DUE
2008, SERIES B (THE "EXCHANGE NOTES") FOR EACH $1,000 PRINCIPAL AMOUNT OF ITS
OUTSTANDING 11 1/4% SENIOR SUBORDINATED NOTES DUE 2008 (THE "OUTSTANDING
NOTES"), OF WHICH $120 MILLION AGGREGATE PRINCIPAL AMOUNT IS OUTSTANDING. THE
MINIMUM PERMITTED TENDER IS $1,000 PRINCIPAL AMOUNT OF OUTSTANDING NOTES, AND
ALL OTHER TENDERS MUST BE IN INTEGRAL MULTIPLES OF $1,000.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION BY
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998 (the "Expiration Date"), unless extended by the Company in its sole
discretion, in which case the term Expiration Date shall mean the latest date
and time to which the Exchange Offer is extended.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER THEIR OUTSTANDING NOTES TO THE EXCHANGE
AGENT PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
This Letter of Transmittal should be used only to exchange the Outstanding
Notes, pursuant to the Exchange Offer as set forth in the Prospectus.
This Letter of Transmittal is to be used (a) if Outstanding Notes are to be
physically delivered to the Exchange Agent or (b) if delivery of Outstanding
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in the Prospectus
under the caption "The Exchange Offer-- Procedures for Tendering." Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
Holders whose Outstanding Notes are not available or who cannot deliver
their Outstanding Notes and all other documents required hereby to the
Exchange Agent by 5:00 p.m. on the Expiration Date nevertheless may tender
their Outstanding Notes in accordance with the guaranteed delivery procedures
set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures." See Instruction 1.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN
ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD
NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.
HOLDERS WHO WISH TO EXCHANGE THEIR OUTSTANDING NOTES MUST COMPLETE COLUMNS
(1) THROUGH (3) IN THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING NOTES
TENDERED" ON THE PRIOR PAGE, COMPLETE THE BOX BELOW ENTITLED "METHOD OF
DELIVERY" AND SIGN WHERE INDICATED BELOW.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE OUTSTANDING NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN
THE PROSPECTUS AND HEREIN.
2
<PAGE>
METHOD OF DELIVERY
[_]CHECK HERE IF CERTIFICATE FOR TENDERED OUTSTANDING NOTES ARE ENCLOSED
HEREWITH.
[_]CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Account Number: ___________________ Transaction Code Number: ____________
Principal Amount of Tendered Notes: _______________________________________
[_]CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE
AGENT AND COMPLETE THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4):
Name(s) of Registered Holder(s): ________________________________________
Window Ticket Number (if any): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: _____________________
Name of Eligible Institution which Guaranteed Delivery: _________________
IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, PROVIDE THE FOLLOWING
INFORMATION:
[_]The Depository Trust Company
Account Number: _________________ Transaction Code Number: ____________
------------------------------------------------------------------------
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN
ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES.
Name: ___________________________________________________________________
Address: ________________________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Outstanding
Notes indicated in the box entitled "Description of Outstanding Notes
Tendered." Subject to, and effective upon, the acceptance for exchange of the
Outstanding Notes tendered hereby, the undersigned hereby irrevocably sells,
assigns and transfers to or upon the order of the Company all right, title and
interest in and to such Outstanding Notes, and hereby irrevocably constitutes
and appoints the Exchange Agent the true and lawful agent and attorney-in-fact
of the undersigned (with full knowledge that said Exchange Agent also acts as
the agent of the Company and as Trustee under the Indenture governing the
Outstanding Notes and the Exchange Notes) with respect to such Outstanding
Notes, with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest) to (a) deliver certificates
representing such Outstanding Notes, and to deliver all accompanying evidences
of transfer and authenticity to or upon the order of the Company upon receipt
by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to
which the undersigned is entitled upon the acceptance by the Company of such
Outstanding Notes for exchange pursuant to the Exchange Offer, (b) receive all
benefits and otherwise to exercise all rights of beneficial ownership of such
Outstanding Notes, all in accordance with the terms of the Exchange Offer, and
(c) present such Outstanding Notes for transfer on the register for such
Outstanding Notes, and receive all benefits and otherwise exercise all rights
of beneficial ownership of such Notes, all in accordance with the terms of the
Exchange Offer.
The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Outstanding Notes or the Exchange Notes. If a
market for the Exchange Notes should develop, the Exchange Notes could trade
at a discount from their principal amount. The undersigned is aware that the
Company does not intend to list the Exchange Notes on a national securities
exchange and that there can be no assurance that an active market for the
Exchange Notes will develop.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes, it represents that the Outstanding Notes to be exchanged for
Exchange Notes were acquired as a result of market-making activities or other
trading activities and it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF THE OUTSTANDING NOTES IN ANY JURISDICTION IN WHICH
THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITY LAW.
The undersigned represents that (a) it is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company or any of the Subsidiary
Guarantors (as defined in the Prospectus), (b) it is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Exchange Notes, and (c) it is
acquiring the Exchange Notes in the ordinary course of business. In addition,
the undersigned acknowledges that an person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must, in the absence
of an exemption therefrom, comply with the registration and prospectus deliver
requirements of the Securities Act in connection with a secondary resale of
the Exchange Notes and cannot rely on the position of the staff of the
Securities and Exchange Commission enunciated in no action letters and failure
to comply with such requirements in such instance could result in the
undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Company. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the assignment,
transfer and purchase of the Notes tendered hereby.
The undersigned understands and acknowledges that the Company reserves the
right, in its sole discretion, the purchase or make offers for any Outstanding
Notes that remain outstanding subsequent to the Expiration Date or to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Outstanding Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers will
differ from the terms of the Exchange Offer.
4
<PAGE>
The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned
has a net long position within the meaning of Rule 14e-4 under the Exchange
Act ("Rule 14e-4") equal to or greater than the principal amount of
Outstanding Notes tendered hereby, (c) the tender of such Outstanding Notes
complies with Rule 14e-4 (to the extent that Rule 14e-4 is applicable to such
exchange), (d) the undersigned has full power and authority to tender,
exchange, assign and transfer the Outstanding Notes tendered hereby, and (e)
when the same are accepted for exchange by the Company, the Company will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim or
right. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the sale, assignment and transfer of the Outstanding
Notes tendered hereby.
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The undersigned also agrees that, except as
stated in the Prospectus, the Outstanding Notes tendered hereby cannot be
withdrawn.
The undersigned understands that tenders of the Outstanding Notes pursuant
to any one of the procedures described in the Prospectus under the caption
"The Exchange Offer--Procedures for Tendering Outstanding Notes" and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Company in accordance with the terms and subject to the
conditions of the Exchange Offer.
The undersigned understands that by tendering Outstanding Notes pursuant to
one of the procedures described in the Prospectus and the instructions
thereto, the tendering holder will be deemed to have waived the right to
receive any payment in respect of interest on the Outstanding Notes accrued up
to the date of issuance of the Exchange Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Outstanding Notes tendered. Outstanding Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, Exchange Notes, and Outstanding Notes not validly
tendered or accepted for exchange, will be issued in the name of the
undersigned. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, Exchange Notes, and Outstanding Notes
not validly tendered or accepted for exchange, will be delivered to the
undersigned at the address shown below the signature of the undersigned. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" to transfer any Outstanding Notes from the
name of the registered holder thereof if the Company does not accept for
exchange any of the principal amount of such Outstanding Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Outstanding Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Outstanding Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in this Letter of Transmittal) will be final and binding.
Unless waived, any defects or irregularities in connection with tenders of
Outstanding Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall
be under any duty to give notification of defects or irregularities with
respect to tenders of Outstanding Notes, nor shall any of them incur any
liability for failure to give such notification. Tenders of Outstanding Notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any Outstanding Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost to such holder by the Exchange
Agent to the tendering holders of Outstanding Notes, unless otherwise provided
in this Letter of Transmittal, as soon as practicable following the Expiration
Date.
5
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(SIGNATURE(S) OF TENDERING SHAREHOLDER(S))
Dated: , 1998
Must be signed by the registered holder(s) of the Outstanding Notes
exactly as their name(s) appear(s) on certificate(s) for the Outstanding
Notes or by person(s) with this Letter of Transmittal. If signature is by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation, agent or other person acting in a fiduciary or
representative capacity, please provide the following information. See
Instruction 3.
Name(s): __________________________________________________________________
(PLEASE PRINT)
Capacity (Full Title): ____________________________________________________
Address: __________________________________________________________________
---------------------------------------------------------------------------
(ZIP CODE)
Daytime Area Code and Telephone Number: ( )_____________________________
Tax Identification or Social Security Number: _____________________________
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5 OF THIS LETTER OF TRANSMITTAL)
Authorized Signature: _____________________________________________________
Name: _____________________________________________________________________
(PLEASE PRINT)
Title: ____________________________________________________________________
Name of Firm: _____________________________________________________________
Address: __________________________________________________________________
---------------------------------------------------------------------------
(ZIP CODE)
Area Code and Telephone Number: ___________________________________________
Dated: , 1998
6
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
(SEE INSTRUCTIONS 3, 4, AND 6)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Outstanding Notes in a cates for Outstanding Notes in a
principal amount not exchanged principal amount not exchange
and/or certificates for Exchange and/or certificates for Exchange
Notes are to be issued in the name Notes are to be sent to someone
of someone other than the under- other than undersigned at an ad-
signed, or if Outstanding Notes dress other than that shown above.
are to be returned by credit to an
account maintained by the Book-En-
try Transfer Facility.
Deliver (check appropriate box)
[_]Exchange Notes to:
[_]Outstanding Notes to:
Issue (check appropriate box)
Name: _____________________________
[_]Exchange Notes to:
(PLEASE PRINT)
[_]Outstanding Notes to:
Address ___________________________
Name ______________________________ (ZIP CODE)
(PLEASE PRINT)
-----------------------------------
Address ___________________________ (TAXPAYER IDENTIFICATION OR
(ZIP CODE)
SOCIAL SECURITY NUMBER)
----------------------------------- (ALSO COMPLETE SUBSTITUTE FORM W-9
(TAXPAYER IDENTIFICATION OR BELOW)
SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-9
BELOW)
Credit unaccepted Outstanding
Notes tendered by book-entry
transfer to:
[_The]Depository Trust Company ac-
count set forth below:
___________________________________
(DTC Account Number)
7
<PAGE>
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF
THE OFFER AND THE SOLICITATION
1. Delivery of this Letter of Transmittal and Certificates; Guaranteed
Delivery Procedures. To be effectively tendered pursuant to the Exchange
Offer, the Outstanding Notes, together with a properly completed Letter of
Transmittal (or facsimile thereof), duly executed by the registered holder
thereof, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at one of its addresses set forth on the
first page of this Letter of Transmittal. If the beneficial owner of any
Outstanding Notes is not the registered holder, then such person may validly
tender his or her Outstanding Notes only by obtaining and submitting to the
Exchange Agent a properly completed Letter of Transmittal from the registered
holder. OUTSTANDING NOTES SHOULD BE DELIVERED ONLY TO THE EXCHANGE AGENT AND
NOT TO THE COMPANY OR TO ANY OTHER PERSON.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND ALL OTHER REQUIRED DOCUMENTS
TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE
AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
If a holder desires to tender Outstanding Notes and such holder's
Outstanding Notes are not immediately available or time will not permit such
holder's Letter of Transmittal, Outstanding Notes or other required documents
to reach the Exchange Agent on or before the Expiration Date, such holder's
tender may be effected if:
(a) the tender is made through an Eligible Institution (as defined);
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Outstanding Notes,
the certificate number or numbers of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within three business days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Outstanding Notes to be
tendered in proper form for transfer or a Book-Entry Confirmation, as the
case may be, and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Outstanding Notes in proper form for transfer and all other
documents required by this Letter of Transmittal are received by the
Exchange Agent within three business days after the Expiration Date.
2. Withdrawal of Tenders. Tendered Outstanding Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth
on the first page of this Letter of Transmittal prior to 5:00 p.m., New York
City time, on the Expiration Date, unless previously accepted for exchange,
(b) specify the name of the person who tendered the Outstanding Notes, (c)
contain the description of the Outstanding Notes to be withdrawn, the
certificate numbers shown on the particular certificate evidencing such
Outstanding Notes and the aggregate principal amount represented by such
Outstanding Notes and (d) be signed by the holder of such Outstanding Notes in
the same manner as the original signature appears on this Letter of
Transmittal (including any required signature guarantee) or be accompanied by
evidence sufficient to have the Trustee with respect to the Outstanding Notes
register the transfer of such Outstanding Notes into the name of the holder
withdrawing the tender. The signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Outstanding Notes have been
tendered (a) by a registered holder of Outstanding Notes who has not completed
either the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery
8
<PAGE>
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices shall be determined by
the company, whose determination shall be final and binding on all parties. If
the Outstanding Notes to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, a signed notice of withdrawal is effective
immediately upon receipt by the Exchange Agent of a written or facsimile
transmission notice of withdrawal even if physical release is not yet
effected. In addition, such notice must specify, in the case of Outstanding
Notes tendered by delivery of certificates for such outstanding Notes, the
name of the registered holder (if different from that of the tendering holder)
to be credited with the withdrawn Outstanding Notes. Withdrawals may not be
rescinded, and any Outstanding Notes withdrawn will thereafter be deemed not
validly tendered for purposes of the Exchange Offer. However, properly
withdrawn Outstanding Notes may be retendered by following one of the
procedures described under "The Exchange Offer--Procedures for Tendering" in
the Prospectus at any time on or prior to the applicable Expiration Date.
3. Signatures on this Letter of Transmittal, Bond Powers and Endorsement;
Guarantee of Signatures. If this Letter of Transmittal is signed by the
registered holder(s) of the Outstanding Notes tendered hereby, the signature
must correspond exactly with the name(s) as written on the face of the
certificates without any change whatsoever.
If any Outstanding Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any Outstanding Notes tendered hereby are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required unless Exchange Notes are to be issued,
or certificates for any untendered principal amount of Outstanding Notes are
to be reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate bond powers, in
either cased signed exactly as the name(s) of the registered holder(s)
appear(s) on the certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorney-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the
Company of their authority so to act must be submitted with this Letter of
Transmittal.
Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution, Signatures of this Letter of Transmittal or a notice of
withdrawal, as the case may be, need not be guaranteed if the Outstanding
Notes tendered pursuant hereto are tendered (a) by a registered holder of
Outstanding Notes who has not completed either the box "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" on this
Letter of Transmittal or (b) for the account of an Eligible Institution. In
the event that signatures on this Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by a firm which is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.
or by a commercial bank or trust company having an office or correspondent in
the United States (each as "Eligible Institutions").
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by an Eligible
Incitation.
9
<PAGE>
4. Special Issuance and Delivery Instructions. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Exchange notes and/or substitute certificates evidencing Outstanding Notes for
the principal amounts not exchanged are to be issued or sent, if different
from the name and address of the person signing this Letter of Transmittal. In
the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. If not such
instructions are given, any Outstanding Notes not exchanged will be returned
to the name and address of the person signing this Letter of Transmittal.
5. Tax Identification Number Withholding. Federal income tax law of the
United States requires that a holder of Outstanding Notes whose Outstanding
Notes are accepted for exchange provide the Company with the holder's correct
taxpayer identification number, which, in the case of a holder who is an
individual, is his or her social security number, or otherwise establish an
exemption from backup withholding. If the Company is not provided with the
correct taxpayer identification number, the exchanging holder of Outstanding
Notes may be subject to a $50 penalty imposed by the Internal Revenue Service
(the "IRS"). In addition, interest on the Exchange Notes acquired pursuant to
the Exchange Offer may be subject to backup withholding in an amount equal to
31% of any interest payment. If withholding occurs and results in an
overpayment of taxes, a refund may be obtained.
To prevent backup withholding, an exchanging holder of Outstanding Notes
must provide his correct taxpayer identification number by completing the
Substitute Form W-9 provided in this Letter of Transmittal, certifying that
the taxpayer identification number provided is correct (or that the exchanging
holder of Outstanding Notes is awaiting a taxpayer identification number) and
that either (a) the exchanging holder has not yet been notified by the IRS
that such holder is subject to backup withholding as a result of failure to
report all interest or dividends or (b) the IRS has notified the exchanging
holder that such holder is no longer subject to backup withholding.
Certain exchanging holders of Outstanding Notes (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding requirements. A foreign individual and other exempt holders
other than foreign individuals (e.g., corporations) should certify, in
accordance with the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9," to such exempt status on the
Substitute Form W-9 provided in this Letter of Transmittal. Foreign
individuals should complete and provide Form W-8 to indicate their foreign
status.
6. Transfer Taxes. Holders tendering pursuant to the Exchange Offer will not
be obligated to pay brokerage commissions or fees or to pay transfer taxes
with respect to their exchange under the Exchange Offer unless the box
entitled "Special Issuance Instructions" in this Letter of Transmittal has
been completed, or unless the Exchange Notes are to be issued to any person
other than the holder of the Outstanding Notes tendered for exchange. The
company will pay all other charges or expenses in connection with the Exchange
Offer. If holders tender Outstanding Notes for exchange and the Exchange Offer
is not consummated, certificates representing the Outstanding Notes will be
returned to the holders at the Company's expense.
Except as provided in this Instructions 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this
Letter of Transmittal.
7. Inadequate Space. If the space provided herein is inadequate, the
aggregate principal amount of the Outstanding Notes being tendered and the
certificate numbers (if available) should be listed on a separate schedule
attached hereto and separately signed by all parties required to sign this
Letter of Transmittal.
8. Partial Tenders. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Outstanding Notes, fill in the
principal amount of Outstanding Notes which are tendered in column (3) in the
box on the cover entitled "Description of Outstanding Notes Tendered." In the
case of partial tenders, new certificates representing the
10
<PAGE>
Outstanding Notes in fully registered form for the remainder of the principal
amount of the Outstanding Notes will be sent to the person(s) as promptly as
practicable after the expiration or termination of the Exchange Offer.
9. Mutilated, Lost, Stolen or Destroyed Notes. Any holder whose Outstanding
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
10. Request for Assistance or Additional Copies. Requests for assistance or
additional copies of the Prospectus or this Letter of Transmittal may be
obtained from the Exchange Agent at its telephone number set forth on the
first page.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Notes on transmittal of this Letter of Transmittal will
be accepted.
11
<PAGE>
IMPORTANT TAX INFORMATION
PAYER'S NAME:
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE -----------------
YOUR TIN IN THE BOX AT Social Security
RIGHT AND CERTIFY BY SIGN- Number
ING AND DATING BELOW.
SUBSTITUTE
FORM W-9 or
DEPARTMENT OF -----------------
THE TREASURY Employer
INTERNAL Identification Number
REVENUE SERVICE PART 2--Check the box if you are not subject to
backup withholding under the provisions of section
3406(a)(1)(c) of the internal revenue code because
(1) you are exempt from backup withholding, or (2)
you have not been notified that you are subject to
backup withholding as a result of failure to re-
port all interest or dividends or (3) the internal
revenue service has notified you that you are no
longer subject to backup withholding. [_]
-----------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
-----------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES PART 3--
OF PERJURY, I CERTIFY THAT THE IN- Awaiting
FORMATION PROVIDED ON THIS FORM IS TIN [_]
TRUE, CORRECT, AND COMPLETE.
SIGNATURE _______________ DATE ______
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and either (a) I
have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service
Center or Social Security Administration Office or (b) I intend to
mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number to the
payer by the time of payment, 31% of all reportable payments made
to me will be withheld until I provide a number and that, if I do
not provide my taxpayer identification number within 60 days, such
retained amounts shall be remitted to the IRS as backup
withholding.
------------------------------- -------------------------------
Signature Date
12
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
11 1/4% SENIOR SECURED NOTES DUE 2008, SERIES B
OF
FOUNTAIN VIEW, INC.
PURSUANT TO
PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery or a form substantially equivalent hereto
must be used to accept the offer (the "Exchange Offer") of Fountain View,
Inc., a Delaware corporation (the "Company"), to exchange $1,000 principal
amount of its 11 1/4% Senior Subordinated Notes due 2008, Series B for each
$1,000 principal amount of its outstanding 11 1/4% Senior Subordinated Notes
due 2008 (the "Outstanding Notes") if (a) certificates representing the
Outstanding Notes are not immediately available or (b) time will not permit
the Outstanding Notes and all other required documents to reach the Exchange
Agent on or prior to the Expiration Date. This form may be delivered by an
Eligible Institution (as defined) by mail or hand delivery, or transmitted via
facsimile, telegram or telex, to the Exchange Agent as set forth below. All
capitalized terms used herein but not defined herein shall have the meanings
ascribed to them in the Prospectus dated , 1998 (the "Prospectus").
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF OUTSTANDING
NOTES IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE
OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ,
1998, UNLESS EXTENDED. TENDERS OF 11 1/4% SENIOR SUBORDINATED NOTES DUE
2008 MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
The Exchange Agent for the Exchange Offer Is:
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: By Overnight Courier: By Hand before 4:30 P.M.:
State Street Bank and Trust State Street Bank and Trust State Street Bank and Trust
Company of California, N.A. Company of California, N.A. Company of California, N.A.
c/o State Street Bank and Trust Company c/o State Street Bank and Trust Company c/o State Street Bank and Trust Company
Two International Place Two International Place Two International Place
Boston, Massachusetts 02110 Boston, Massachusetts 02110 Boston, Massachusetts 02110
Attention: Kellie Mullen Attention: Kellie Mullen Attention: Kellie Mullen
</TABLE>
By Facsimile: 617-664-5290
Confirm by Telephone to: Kellie Mullen 617-664-5587
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, TELEGRAM OR TELEX, OTHER THAN AS SET FORTH ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. if a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus, receipt of which is hereby
acknowledged, the principal amount of Outstanding Notes set forth below,
pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures."
Subject to and effective upon acceptance for exchange of the Outstanding
Notes tendered herewith, the undersigned hereby sells, assigns and transfers
to or upon the order of the Company all right, title and interest in and to,
and any and all claims in respect of or arising or having arisen as a result
of the undersigned's status as a holder of, all Outstanding Notes tendered
hereby. In the event of a termination of the Exchange Offer, the Outstanding
Notes tendered pursuant thereto will be returned promptly to the tendering
Outstanding Note holder.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Outstanding Notes tendered.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Registered
Holder(s) or
Addresses:
Authorized Signatory: ---------------------------------
--------------------------------- ---------------------------------
--------------------------------- ---------------------------------
--------------------------------- Area Code and Telephone
Name(s) of Registered Holder(s) ---------------------------------
No.: ---------------------------------
---------------------------------
---------------------------------
IF OUTSTANDING NOTES WILL BE DELIVERED BY A BOOK-ENTRY TRANSFER, PROVIDE
THE FOLLOWING INFORMATION:
Principal Amount of Outstanding Notes Tendered: ___________________________
Transaction Code No.: _____________________________________________________
Certificate No(s). of Outstanding Notes (if available): ___________________
Depository Account No.: ___________________________________________________
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as their name(s) appear(s) on the
Outstanding Notes or by person(s) authorized to become registered
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, guardian, attorney-in-
fact, officer of a corporation, executor, administrator, agent or other
representative, such person must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): __________________________________________________________________
_____________________________________________________________________
Capacity: _________________________________________________________________
_____________________________________________________________________
Address(es): ______________________________________________________________
___________________________________________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States (each, an "Eligible Institution"), hereby guarantees that,
within three business days from the date of this Notice of Guaranteed
Delivery, a properly completed and validly executed Letter of Transmittal
(or a facsimile thereof), together with Outstanding Notes tendered hereby
in proper form for transfer (or confirmation of the book-entry transfer of
such Outstanding Notes into the Exchange Agent's account at a Book-Entry
Transfer Facility) and all other required documents will be deposited by
the undersigned with the Exchange Agent at one of its addresses set forth
above.
Name of Firm: _____________________________________________________________
Authorized Signature: _____________________________________________________
Address: __________________________________________________________________
Name: _____________________________________________________________________
Title: ____________________________________________________________________
Area Code and Telephone No.: ______________________________________________
Date: _____________________________________________________________________
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery. A properly completed and duly executed copy of this Notice of
Guaranteed Delivery and any other documents required by this Notice of
Guaranteed Delivery must be received by the Exchange Agent at its address set
forth herein prior to the Expiration Date. The method of delivery is at the
election and sole risk of the holders and the delivery will be deemed made
only when actually received by the Exchange Agent. In all cases, sufficient
time should be allowed to assure timely delivery.
2. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of this document and/or the
Prospectus may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
<PAGE>
Exhibit 99.3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ---------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
5. Sole proprietorship The owner(3)
9. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(4)
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
--
<S> <C>
7. Corporate account The corporation
8. Religious, charitable, The organization
or educational
organization account
9. Partnership account The partnership
10. Association, club, or The organization
other tax-exempt
organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
--
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must
be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show your individual name. You may also enter your business or "doing
business as" name. You may use either your social security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name listed, the
number will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Note: Section references are to the Internal Revenue Code unless otherwise
noted.
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service (the "IRS") and apply
for a number.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisors
Act of 1940 who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7), except
a corporation (other than certain hospitals described in Regulations section
1.6041-3(c)) that provides medical and health care services or bills and
collects payments for such services is not exempt from backup withholding or
information reporting. Only payees described in items (1) through (5) are
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7), if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or instrumentalities.
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends that generally are exempt from
backup withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident alien partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
. Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding include
the following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payor.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments of mortgage interest to you.
Exempt payees described above should file substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT
ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A
COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044,
6045, 6049, 6050A and 6050N and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payors
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your correct taxpayer identification number to a requester,
you are subject to a penalty of $50 for each such failure unless your failure
is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 99.4
FOUNTAIN VIEW, INC.
11900 WEST OLYMPIC BOULEVARD, SUITE 680
LOS ANGELES, CA 90064
August 5, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form S-4 Registration Statement relating to the offer to exchange up
to $120,000,000 of 11 1/4% Senior Subordinated Notes (the "Exchange
Notes") due 2008, Series B of Fountain View, Inc., which have been
registered under the Securities Act of 1933, as amended, for any and
all of its outstanding 11 1/4% Senior Subordinated Notes due 2008
Dear Sir or Madam:
In connection with our above-captioned Registration Statement, Fountain
View, Inc. hereby represents that:
1. It is registering the Exchange Notes exchange offer registered thereby in
reliance on the Staff's position set forth in Exxon Capital Holdings Corp.,
SEC No-Action Letter (April 13, 1989), Morgan Stanley & Co., Inc., SEC No-
Action Letter (June 2, 1993) and Shearman & Sterling, SEC No-Action Letter
(July 2,1993).
2. It has not entered into any arrangement or understanding with any person to
distribute the Exchange Notes to be received in the exchange offer and, to
the best of its information and belief, each person participating in the
exchange offer is acquiring the Exchange Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes to be received in the
exchange offer;
3. It will make each person participating in the exchange offer aware that is
such person is participating in the exchange offer for the purpose of
distributing the Exchange Notes to be acquired in the exchange offer, such
person (i) cannot rely on the staff position enunciated in Exxon Capital or
interpretive letters to similar effect and (ii) must comply with
registration and prospectus delivery requirements of the Securities Act of
1933 in connection with a secondary resale transaction.
4. It acknowledges that such a secondary resale transaction by such person
participating in the exchange offer for the purpose of distributing the
Exchange Notes should be covered by an effective registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K; and
5. The preliminary prospectus included in the above-referenced registration
statement contains and the final prospectus included therein will contain
disclosures making persons participating in the exchange offer aware of
the limitations and obligations applicable to broker-dealers who
participate in the exchange offer.
Very truly yours,
Fountain View, Inc.
By: /s/ Robert M. Snukal
--------------------------
Robert M. Snukal
President and Chief Executive
Officer
