<PAGE> 1
================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-10858
HCR MANOR CARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 34-1687107
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE SEAGATE, TOLEDO, OHIO 43604-2616
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 252-5500
Registrants former name changed since last report: Health Care and Retirement
Corporation
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on October 31, 1998.
Common stock, $0.01 par value -- 110,846,981 shares
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited) Number
------
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 3
Consolidated Statements of Income -
Three months and nine months ended
September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
HCR MANOR CARE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 100,643 $ 47,933
Receivables, less allowances for
doubtful accounts of $55,692 and $52,590 302,597 308,797
Prepaid expenses and other assets 26,399 45,627
Deferred income taxes 61,173 59,912
----------- -----------
Total current assets 490,812 462,269
Property and equipment, net of accumulated
depreciation of $564,948 and $515,814 1,722,015 1,604,913
Intangible assets, net of amortization:
Goodwill 66,112 130,915
Other 20,550 32,124
Net investment in Genesis preferred stock 293,120
Investment in discontinued pharmacy segment 184,819
Other assets 178,669 169,865
----------- -----------
Total assets $ 2,771,278 $ 2,584,905
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 103,085 $ 101,746
Employee compensation and benefits 65,329 80,137
Accrued insurance liabilities 28,511 30,010
Other accrued liabilities 147,969 81,024
Revolving loans 177,500
Long-term debt due within one year 6,487 7,106
----------- -----------
Total current liabilities 528,881 300,023
Long-term debt 690,249 751,281
Deferred income taxes 307,260 266,617
Other liabilities 86,302 100,661
Minority interest 4,692 3,294
Stockholders' equity:
Preferred stock, $.01 par value, 5 million shares authorized
Common stock, $.01 par value, 300 million shares authorized,
110.8 and 115.9 million shares issued 1,108 7,199
Capital in excess of par value 322,896 471,930
Retained earnings 829,890 850,539
----------- -----------
1,153,894 1,329,668
Less treasury stock, at cost (7.8 million shares) (166,639)
----------- -----------
Total stockholders' equity 1,153,894 1,163,029
----------- -----------
Total liabilities and stockholders' equity $ 2,771,278 $ 2,584,905
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
HCR MANOR CARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except earnings per share)
<S> <C> <C> <C> <C>
Revenues $ 577,192 $ 551,677 $ 1,723,077 $ 1,656,994
Expenses:
Operating 439,622 445,663 1,329,918 1,311,625
General and administrative 22,100 24,231 74,518 77,279
Depreciation and amortization 32,959 28,455 93,610 82,879
Provision for restructuring charge, merger
expenses and asset impairment 240,655 254,155
----------- ----------- ----------- -----------
735,336 498,349 1,752,201 1,471,783
----------- ----------- ----------- -----------
Income (loss) from continuing operations before
other income (expenses) and income taxes (158,144) 53,328 (29,124) 185,211
Other income (expenses):
Interest expense (11,951) (13,998) (34,099) (43,420)
Minority interest (181) 9,227 (710) 10,252
Interest income and other 5,679 4,028 13,093 9,648
Gain on conversion of Vitalink stock 99,769 99,769
Interest income from advances to discontinued
lodging segment 2,604 (901) 13,668
----------- ----------- ----------- -----------
Total other income (expenses) 93,316 1,861 77,152 (9,852)
----------- ----------- ----------- -----------
Income (loss) from continuing operations before income taxes (64,828) 55,189 48,028 175,359
Income taxes 14,433 19,195 52,242 60,957
----------- ----------- ----------- -----------
Income (loss) from continuing operations (79,261) 35,994 (4,214) 114,402
Discontinued operations:
Income from discontinued pharmacy operations (net of taxes) 153 2,017 8,044 37,965
----------- ----------- ----------- -----------
Income (loss) before extraordinary item (79,108) 38,011 3,830 152,367
Extraordinary item - loss from early extinguishment
of debt (net of taxes of $12,690) (19,036) (19,036)
----------- ----------- ----------- -----------
Net income (loss) $ (98,144) $ 38,011 $ (15,206) $ 152,367
=========== =========== =========== ===========
Earnings per share - basic
Income (loss) from continuing operations $ (.73) $ .33 $ (.04) $ 1.06
Income from discontinued pharmacy operations (net of taxes) .02 .07 .35
Extraordinary item (net of taxes) (.18) (.18)
----------- ----------- ----------- -----------
Net income (loss) $ (.90)* $ .35 $ (.14)* $ 1.41
=========== =========== =========== ===========
Earnings per share - diluted
Income (loss) from continuing operations $ (.73) $ .32 $ (.04) 1.03
Income from discontinued pharmacy operations (net of taxes) .02 .07 .34
Extraordinary item (net of taxes) (.18) (.18)
----------- ----------- ----------- -----------
Net income (loss) $ (.90)* $ .34 $ (.14)* $ 1.37
=========== =========== =========== ===========
Weighted average shares:
Basic 108,475 108,261 108,317 108,148
Diluted 108,475 111,200 108,317 111,156
*Doesn't add due to rounding
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
HCR MANOR CARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1998 1997
---- ----
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ (15,206) $ 152,367
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued pharmacy operations (8,044) (37,965)
Depreciation and amortization 93,826 83,442
Provision for restructuring charge, merger expenses and asset impairment 254,155
Write-off of In Home Health Medicare receivables 12,951
Provision for bad debts 24,426 22,116
Deferred income taxes 42,795 33,473
Gain on conversion of Vitalink stock (99,769)
Gain on sale of assets (13,198)
Minority interest 710 (10,252)
Equity in earnings of partnership (3,787) (1,851)
Changes in assets and liabilities, excluding sold facilities and acquisitions:
Receivables (48,900) (95,147)
Prepaid expenses and other assets (23,587) (18,945)
Liabilities (26,355) 307
--------- ---------
Total adjustments 192,272 (11,871)
--------- ---------
Net cash provided by continuing operations 177,066 140,496
Net cash provided by (used in) discontinued pharmacy operations 17,836 (5,772)
--------- ---------
Net cash provided by operating activities 194,902 134,724
--------- ---------
INVESTING ACTIVITIES
Investment in property and equipment (225,241) (159,205)
Investment in systems development (22,158) (16,084)
Acquisition of skilled nursing facilities and businesses (9,841) (68,850)
Proceeds from sale of assets 22,920
Advances to discontinued pharmacy segment (2,799) (17,863)
Receipts from discontinued lodging segment 113,267
Other, net (6,071) (3,124)
--------- ---------
Net cash used in investing activities of continuing operations (243,190) (151,859)
Net cash used in investing activities of discontinued pharmacy operations (6,810) (100,865)
--------- ---------
Net cash used in investing activities (250,000) (252,724)
--------- ---------
FINANCING ACTIVITIES
Net borrowings under bank credit agreements 133,339 75,620
Principal payments of long-term debt (5,538) (47,664)
Proceeds from exercise of stock options 1,889 10,984
Purchase of common stock for treasury (4,838) (27,708)
Dividends paid by Manor Care (2,805) (4,742)
--------- ---------
Net cash provided by financing activities of continuing operations 122,047 6,490
Net cash provided by (used in ) financing activities of discontinued operations (11,026) 106,637
--------- ---------
Net cash provided by financing activities 111,021 113,127
--------- ---------
Net increase (decrease) in cash and cash equivalents 55,923 (4,873)
Cash and cash equivalents at beginning of period 44,720 52,816
--------- ---------
Cash and cash equivalents at end of period $ 100,643 $ 47,943
========= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
HCR MANOR CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Business Combination and Basis Of Presentation
- -------------------------------------------------------
On September 24, 1998, the stockholders of Health Care and Retirement
Corporation (HCR) and the stockholders of Manor Care, Inc. (Manor Care)
separately approved the merger of the companies, effective September 25, 1998.
In accordance with the Amended and Restated Agreement and Plan of Merger (the
Merger Agreement) dated June 10, 1998, each share of Manor Care common stock was
converted into one share of HCR common stock for a total of 64 million shares
and Manor Care stock options outstanding were converted into 2 million shares of
HCR common stock based on the option pricing formula defined in the Merger
Agreement. As a result of the transaction, Manor Care became a wholly owned
subsidiary of HCR and HCR changed its name to HCR Manor Care, Inc. (HCR Manor
Care or the Company).
The merger has been accounted for by the pooling-of-interests method.
Accordingly, the accompanying consolidated financial statements give retroactive
effect to the merger and include the combined operations for all periods
presented. The historical financial information of Manor Care (previously
reported on fiscal years ending May 31) has been restated as follows. As of
January 1, 1998, Manor Care's historical financial information has been restated
to conform with HCR's quarterly and annual reporting period for 1998. For 1997
Manor Care's historical financial information for the twelve months ended
November 30, 1997 will be combined with HCR's annual reporting period of
December 31, 1997. Accordingly, HCR Manor Care's consolidated results of
operations and cash flows for the quarter and nine months ended September 30,
1997 comprise HCR's results for those periods and Manor Care's results for the
quarter and nine months ended August 31, 1997. HCR Manor Care's financial
position as of December 31, 1997 consists of HCR's financial position as of
December 31, 1997 combined with Manor Care's financial position as of November
30, 1997.
Summarized results of the separate companies through September 30, 1998 follow
(dollars in thousands):
<TABLE>
<CAPTION>
Charge (see
Manor Note 2) and
HCR Care Vitalink Gain Consolidated
--- ---- ------------- ------------
<S> <C> <C> <C> <C>
Third Quarter:
1998
Revenues $226,794 $ 350,398 $ 577,192
Income (loss) from continuing operations 20,260 29,178 $(128,699) (79,261)
Net income (loss) 20,260 29,331 (147,735) (98,144)
1997
Revenues 226,606 325,071 551,677
Income from continuing operations 18,151 17,843 35,994
Net income 18,151 19,860 38,011
Nine months:
1998
Revenues 683,072 1,040,005 1,723,077
Income (loss) from continuing operations 59,979 73,567 (137,760) (4,214)
Net income (loss) 59,979 81,611 (156,796) (15,206)
1997
Revenues 660,874 996,120 1,656,994
Income from continuing operations 51,694 62,708 114,402
Net income 51,694 100,673 152,367
</TABLE>
6
<PAGE> 7
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The consolidated financial statements should be read in
conjunction with HCR's Annual Report on Form 10-K for the year ended December
31, 1997 and Manor Care's Annual Report on Form 10-K for the year ended May 31,
1998. In the opinion of management of the Company, the interim data includes all
adjustments necessary for a fair statement of the results of the interim periods
and, except as discussed in Note 2, all such adjustments are of a normal
recurring nature. Operating results for the three months and nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
NOTE 2 - Restructuring Charge, Merger Expenses and Asset Impairment
- -------------------------------------------------------------------
Manor Care recorded a restructuring charge of $13.5 million in the second
quarter in connection with its plan to separate its skilled nursing, assisted
living and home health businesses from its skilled nursing facility management,
real estate and healthcare facility development business. As a result of the
merger with HCR, the separation of Manor Care's businesses will not occur. In
connection with the merger, HCR Manor Care developed a plan to integrate the
businesses of both companies that includes closing Manor Care's corporate office
in Gaithersburg, Maryland and realigning the operating divisions from eight to
six. The Company recorded a third quarter charge to operating expense of $130.8
million related to restructuring and merger transaction costs and asset
impairment. In addition, a charge of $109.8 million related to other asset
impairment was recorded. The liability outstanding at September 30, 1998
relating to these charges is recorded in other accrued liabilities.
The components consist of the following (in thousands):
<TABLE>
<CAPTION>
2nd Quarter 3rd Quarter Remaining
Expense Expense Liability
------- ------- ---------
<S> <C> <C> <C>
Restructuring costs:
Employee benefits $ 5,300 $ 54,782 $56,182
Asset impairment 47,539
Other costs 7,887 7,887
Merger transaction costs 8,200 20,621 3,258
Asset impairment other than assets
involved in restructuring 109,826
------- -------- -------
Pretax total $13,500 $240,655 $67,327
======= ======== =======
After-tax total $ 9,061 $188,560
======= ========
</TABLE>
The restructuring costs for the third quarter consist of three components. The
employee benefit portion relates to severance and retention bonuses for
approximately 500 corporate employees and 100 field employees of Manor Care
whose positions are being eliminated in the next six to nine months, and
deferred compensation expense of $11.9 million which is attributable to the
lapsing of restrictions on HCR's restricted stock due to the merger. HCR Manor
Care identified two groups of assets that are impaired as a result of the
merger. The Company has a plan to integrate the information systems of the
companies which resulted in the write off of the net book value ($38.2 million)
of Manor Care's computer hardware and software that was no longer being utilized
by the Company as of September 30, 1998. Certain construction development
projects, excluding the land value, are being abandoned due to a change in
strategy. The other costs pertain to various lease agreements and hardware and
software contracts that are being terminated. The merger transaction costs
primarily included financial advisory, legal, and accounting fees and expenses
and printing
7
<PAGE> 8
and mailing costs.
The Company also recorded a third quarter charge for impairment of certain
assets based on its quarterly review of long-lived and intangible assets. A
significant feature of the Company's evaluation is the evolving impact of the
Balanced Budget Act of 1997 (Budget Act) under which a new Medicare prospective
payment system (PPS) commenced on July 1, 1998. The new payment system becomes
applicable to different segments of the health care continuum (hospitals,
skilled nursing, home health, etc.) at different times and even commences at
different dates for different nursing facilities. Although management believes
that PPS will ultimately be a net positive for its skilled nursing business, the
same may not be true for certain other businesses and customers of the Company.
The most significant impact of PPS is expected to be on customers of MileStone
Healthcare, Inc. (MileStone) a company that was acquired by the Company in early
1997. MileStone provides management services to skilled nursing, subacute care
and acute rehabilitation programs, primarily in hospitals. Under PPS,
MileStone's customers will look for ways to provide services at a lower cost,
which includes performing services internally or demanding significant price
concessions, or exit this segment of their business. Management determined that
MileStone's intangible assets were impaired due to the loss of certain contracts
at the end of the second quarter and during the third quarter that have not been
replaced and expected contract cancellations in 1999 due to the impact of PPS on
its customers. Accordingly, management determined that the intangible assets
with a net book value of $52.5 million were impaired and reduced the book value
by $44.6 million to their estimated fair value. The fair value was determined
based on a multiple of projected annual earnings. The remaining useful life has
been adjusted from 38 years to 20 years.
The Budget Act also had an unfavorable impact on the reimbursement for home
health care companies due to an interim payment system (IPS), which was
effective October 1997 for In Home Health, Inc., and January 1998 for HCR's home
health business. PPS is scheduled to replace IPS for home health reimbursement
in October 1999. Under IPS, reimbursement rates were reduced as a result of
revised rate ceilings combined with establishing an annual payment limitation
per individual. As a result of IPS, the Company has been focusing on reducing
its costs to offset the revenue reductions. Based on the impact of IPS through
September 1998 and the anticipated effects of PPS after October 1999, management
determined that the expected future earnings cannot support the carrying value
of these assets. Therefore, the book value was reduced by $19.1 million to its
estimated fair value that was determined based on a multiple of projected
annual earnings. The remaining useful life has been adjusted from 36 years to
20 years.
During the third quarter management determined that the fixed assets for two
skilled nursing and two assisted living facilities and the intangible assets for
several rehabilitation businesses were impaired based on the carrying value
exceeding the undiscounted cash flows and the inability to return the operations
to a level of profitability that would support the carrying value of the assets.
The book value was reduced by $24.1 million to its estimated fair value.
NOTE 3 - Debt
- -------------
Concurrent with the merger, a five-year, $500 million credit agreement (5 Year
Agreement) and a 364-day, $300 million credit agreement (364 Day Agreement) were
established with a group of banks, under which both HCR Manor Care and Manor
Care are borrowers. The credit agreements were established to repay borrowings
of the two companies under prior credit arrangements, as discussed below, to
provide additional credit capacity for future developments and to provide credit
back-up for the issuance of commercial paper. The credit agreements contain
various covenants, restrictions and events of default. Among other things,
8
<PAGE> 9
these provisions require HCR Manor Care to maintain certain financial ratios and
impose certain limits on its ability to incur indebtedness, create liens, pay
dividends, repurchase stock, dispose of assets and make acquisitions.
Loans under the 364 Day Agreement which mature September 24, 1999, bear interest
at variable rates that reflect, at the election of the Company, either the agent
bank's base lending rate or an increment over Eurodollar indices of .175% to
.525%, depending on the quarterly performance of a key ratio. In addition, the
364 Day Agreement provides for a fee of .10% to .225% on the total amount of the
facility, depending on the performance of the same ratio.
Loans under the 5 Year Agreement which mature September 24, 2003, bear interest
at variable rates that reflect, at the election of the Company, the agent bank's
base lending rate, rates offered by any of the participating banks under bid
procedures, or an increment over Eurodollar indices of .15% to .50%, depending
on the quarterly performance of a key ratio. In addition to direct borrowings,
the 5 Year Agreement may be used to support the issuance of up to $100 million
of letters of credit. The 5 Year Agreement also provides for a fee of .125% to
.25% on the total amount of the facility, depending on the performance of the
same key ratio.
Whenever the aggregate utilization of both credit facilities exceeds $400
million, an additional fee of .05% is due on loans. At September 30, 1998,
outstanding borrowings of both companies aggregated $470 million under the 5
Year Agreement and $177.5 million under the 364 Day Agreement - a total of
$647.5 million. After consideration of usage for letters of credit, the
remaining credit availability under the combined agreements totaled $144.5
million.
On September 25,1998, the Company repaid $264 million outstanding under HCR's
prior credit agreement and $325 million on Manor Care's prior credit
arrangements. The repayment of the prior credit facilities was accounted for as
an early extinguishment of debt. In conjunction with the extinguishment of debt,
the Company terminated three interest rate swaps with a total notional amount of
$350 million that were designated as a hedge of Manor Care's debt. The loss on
terminating the swaps along with the unamortized debt issue costs was recorded
as an extraordinary item that totaled $19.0 million after taxes of $12.7
million.
NOTE 4 - Conversion of Vitalink Pharmacy Services, Inc. Stock
- -------------------------------------------------------------
A subsidiary of Manor Care owned approximately 50% of Vitalink Pharmacy
Services, Inc. (Vitalink) common stock. On April 26, 1998 Vitalink entered into
an Agreement and Plan of Merger (Vitalink Merger Agreement) with Genesis Health
Ventures, Inc. (Genesis). Pursuant to the Vitalink Merger Agreement that was
consummated on August 28, 1998, Manor Care received 586,240 shares of Genesis
Series G Cumulative Convertible Preferred Stock valued at $293.1 million as
consideration for all of its shares of Vitalink. As a result of the conversion
of stock, the Company recorded a gain of $99.8 million ($59.9 million after
tax). The preferred stock bears cash dividends at the initial annual rate of
5.9375% and is paid quarterly.
NOTE 5 - Earnings Per Share
- ---------------------------
The calculation of earnings per share (EPS) for periods prior to the merger
include the combined weighted average shares for both companies. The three
months and nine months ended September 30, 1998 resulted in a loss from
continuing operations. As a result of the loss, the effect of stock options and
nonvested restricted stock are not included in the calculation as the effect
would be antidilutive. The details of the calculation are as follows:
9
<PAGE> 10
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
---------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
(In thousands, except earnings per share)
<S> <C> <C> <C> <C>
Numerator:
Income (loss) from continuing operations
(income available to common stockholders) $ (79,261) $ 35,994 $ (4,214) $ 114,402
========= ========= ========= =========
Denominator:
Denominator for basic EPS -
weighted-average shares 108,475 108,261 108,317 108,148
Effect of dilutive securities:
Stock options 2,939 3,008
--------- --------- --------- ---------
Denominator for diluted EPS -
adjusted for weighted-average
shares and assumed conversions 108,475 111,200 108,317 111,156
========= ========= ========= =========
EPS - income (loss) from continuing operations
Basic $ (.73) $ .33 $ (.04) $ 1.06
Diluted $ (.73) $ .32 $ (.04) $ 1.03
</TABLE>
NOTE 6 - New Accounting Pronouncements
- --------------------------------------
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
(FAS 131), which is effective December 31, 1998, with interim disclosures
beginning in 1999. Comparative information for prior years is required to be
restated. This Statement requires public business enterprises to report certain
information about operating segments, their products and services, the
geographic areas in which they operate, and their major customers. The operating
segments should be based on the structure of the enterprise's internal
organization whose operating results are regularly reviewed by the company's
chief operating decision maker to make decisions about resources to be allocated
to the segment and assess its performance. As a result of the recent merger,
management has not determined the effect, if any, of FAS 131 on the consolidated
financial statements.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-up Activities" (SOP
98-5), which is effective January 1, 1999. This Statement requires start-up
costs to be expensed as incurred. The Company will adopt this Statement on
January 1, 1999 and the previously capitalized start-up costs will be reported
as a cumulative effect of a change in accounting principle. This amount is
estimated to be $20 million after tax.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133), which is effective January 1,
2000. This Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. This Statement requires the Company to recognize all
derivatives on the balance sheet at fair value. Management has not determined
when it will adopt this Statement nor has it determined the impact of adoption.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results Of Operations
---------------------
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-Q which are not historical facts may be
forward-looking statements within the meaning of federal law. Such
forward-looking statements reflect management's beliefs and assumptions and are
based on information currently available to management. Forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company or
industry results to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which the Company operates;
industry capacity; demographic changes; existing government regulations and
changes in, or the failure to comply with, governmental regulations; legislative
proposals for health care reform; the ability to enter into managed care
provider arrangements on acceptable terms; changes in Medicare and Medicaid
reimbursement levels; liability and other claims asserted against the Company;
competition; changes in business strategy or development plans; and the ability
to attract and retain qualified personnel. All subsequent written and oral
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 or referred to above in this paragraph. The Company disclaims any
obligation to update such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
RESULTS OF OPERATIONS
At September 30, 1998 HCR Manor Care had 297 skilled nursing facilities, 56
assisted living facilities, 114 medical specialty units, 76 outpatient therapy
clinics, 34 home health offices and a 50% interest in an institutional pharmacy,
Heartland Healthcare Services. Some of the Company's assisted living facilities
operate under the brand names "Arden Courts" and "Springhouse." The Arden Courts
facilities are specifically focused on providing care to persons suffering from
early to middle-stage Alzheimer's disease and related memory impairment, while
the Springhouse facilities serve the general assisted living population of frail
elderly.
Changes in Medicare reimbursement affected the Company's results during 1998.
Under the Balanced Budget Act of 1997 (Budget Act), a new Medicare prospective
payment system (PPS) commenced on July 1, 1998. The new payment system becomes
applicable to different segments of the health care continuum (hospitals,
skilled nursing, home health, etc.) at different times and even commences at
different dates for different nursing facilities. Although management believes
that PPS will ultimately be a net positive for its skilled nursing business, the
same may not be true for certain other businesses and customers of the Company.
MileStone Healthcare, Inc. (MileStone) provides management services to skilled
nursing, subacute care and acute rehabilitation programs, primarily in
hospitals. MileStone lost certain contracts at the end of the second quarter and
during the third quarter that have not been replaced and expects contract
cancellations to occur in 1999 due to the impact of PPS on its customers. Under
PPS, MileStone's customers will look for ways to provide services at a lower
cost, which includes performing services internally or demanding significant
price concessions, or exit this segment of their business. In addition, the
Budget Act also had an unfavorable impact on the reimbursement for home health
care companies due to an interim payment system (IPS), which was effective
October 1997 for In Home Health,
11
<PAGE> 12
Inc.(In Home Health), and January 1998 for HCR's home health business. PPS is
scheduled to replace IPS for home health reimbursement in October 1999. Under
IPS, reimbursement rates were reduced as a result of revised rate ceilings
combined with establishing an annual payment limitation per individual. As a
result of IPS, the Company has been focusing on reducing its costs to offset the
revenue reductions. Also, the Company's rehabilitation business was impacted due
to reduced reimbursement from the April 1998 implementation of Medicare
reimbursement ceilings for speech and occupational therapy salaries (salary
equivalency).
Revenues for the three months ended September 30, 1998 increased $25.5 million
or 5% to $577.2 million as compared to the same period in 1997. Revenues from
skilled nursing and assisted living facilities increased $33.9 million due to
increases in rates ($18.8 million), capacity ($8.9 million) and occupancy ($6.2
million). This increase was offset by a decrease in revenues primarily due to
changes in reimbursement, as discussed above, from the Company's ancillary
businesses, such as MileStone, home health and rehabilitation.
Revenues for the nine months ended September 30, 1998 increased $66.1 million or
4% to $1.7 billion as compared to the same period in 1997. Revenues from skilled
nursing and assisted living facilities increased $78.4 million due to increases
in rates ($32.9 million), capacity ($23.4 million) and occupancy ($22.1
million). This increase was offset by a decrease in revenues primarily due to
changes in reimbursement, as discussed above, from the Company's ancillary
businesses, primarily In Home Health ($14.1 million).
The growth in bed capacity during 1998 was due to the opening of 15 Arden Court
facilities, 3 Springhouse facilities and 2 skilled nursing facilities. The
occupancy levels were 88% for the three months and nine months ended September
30, 1997 compared to 89% for the same periods in 1998. The quality mix of
revenue from Medicare, private pay and insured patients related to skilled
nursing and assisted living facilities and rehabilitation operations decreased
from the prior year. The quality mix of revenue was 72% and 73% for the three
months and nine months ended September 30, 1997, respectively compared to 70%
and 71% for the same periods in 1998.
Operating expenses for the three months ended September 30, 1998 decreased $6.0
million or 1% to $439.6 million from the comparable period in 1997. Operating
expenses for the nine months ended September 30, 1998 increased $18.3 million or
1% to $1.3 billion from the same period in 1997. Operating expenses from skilled
nursing and assisted living facilities increased $16.6 million and $49.7 million
for the quarter and year-to-date period, respectively. The increases were
primarily due to labor costs and general increases in expenses. The increase was
offset by decreases in the Company's ancillary businesses, primarily In Home
Health. In Home Health's operating expenses decreased $13.9 million and $30.0
million for the quarter and year-to-date period as a result of a plan to
restructure its field operations and reduce its cost structure.
General and administrative expense decreased $2.1 million and $2.8 million for
the three months and nine months ended September 30, 1998 as compared to the
same periods in 1997. The decreases were attributable to an adjustment of
earnings on deferred compensation during the quarter due to the decline in the
stock market, net gains of $12 million in the first half of 1998 related to the
sale of Manor Care's former corporate office buildings, and a reduction in Manor
Care employees from reengineering efforts during 1998. The increase in
depreciation and amortization of $4.5 million and $10.7 million for the three
months and nine months ended September 30, 1998 as compared to the same periods
in the prior year, related to additional depreciation for new construction and
renovations in the past year.
12
<PAGE> 13
During the third quarter, the Company recorded a charge of $240.7 million
consisting of restructuring costs of $130.8 million related to employee benefits
($54.8 million), asset impairment ($47.5 million), other costs ($7.9 million)
and merger expenses ($20.6 million), and other asset impairment write downs of
$109.8 million. The employee benefit portion relates to severance and retention
bonuses for approximately 500 corporate employees and 100 field employees of
Manor Care whose positions are being eliminated in the next six to nine months,
and deferred compensation expense which is attributable to the lapsing of
restrictions on HCR's restricted stock due to the merger. HCR Manor Care
identified two groups of assets that are impaired as a result of the merger: The
Company's plan for integrating the information systems of the companies resulted
in the write off of the net book value ($38.2 million) of Manor Care's computer
hardware and software that are no longer being utilized by the Company as of
September 30, 1998. Certain construction development projects, excluding the
land value, are being abandoned due to a change in strategy. The other costs
pertain to various lease agreements and hardware and software contracts that are
being terminated. The merger transaction costs primarily included financial
advisory, legal, and accounting fees and expenses and printing and mailing
costs. The Company anticipates saving $20 million in 1999 from the termination
of employees, reduced depreciation expense, reduced deferred compensation
expense and reduced contract costs, offset by compensation expense for
approximately 200 employees hired or to be hired in the Company's corporate
office in Toledo, Ohio. The Company has identified certain additional computer
hardware and software of approximately $25 million at Manor Care in use at
September 30, 1998 that will be abandoned as a result of the integration of the
information systems. The assets will be written off over the next two quarters
based on the timing of completing the restructuring plan.
The Company recorded a $109.8 million third quarter charge for impairment of
certain other assets based on its quarterly review of long-lived and intangible
assets. Management determined that MileStone's intangible assets of $52.5
million were impaired based on the effects of changes in the Medicare
reimbursement system discussed above. The carrying value of the assets was
reduced by $44.6 million to its estimated fair value that was determined based
on a multiple of projected annual earnings. The remaining useful life has been
adjusted from 38 years to 20 years.
The asset impairment of the Company's home health businesses was also related
largely to the Medicare reimbursement changes discussed above. Based on the
impact of IPS through September 1998 and the anticipated effects of PPS after
October 1999, management determined that the expected future earnings cannot
support the carrying value of the home health assets. Therefore, the book value
was reduced by $19.1 million to its estimated fair value that was determined
based on a multiple of projected annual earnings. The remaining useful life has
been adjusted from 36 years to 20 years.
During the third quarter management determined that the fixed assets for two
skilled nursing and two assisted living facilities and the intangible assets for
several rehabilitation businesses were impaired based on the carrying value
exceeding the undiscounted cash flows and the inability to return the operations
to a level of profitability that would support the carrying value of the
assets. The book value was reduced by $24.1 million to its estimated fair value.
As a result of the write down of assets and change in the estimated useful life,
depreciation and amortization is expected to decline by $2.9 million on an
annual basis.
Interest expense decreased $2.0 million and $9.3 million for the three months
and nine months ended September 30, 1998 as compared to the same periods in 1997
due to the retirement of Manor
13
<PAGE> 14
Care's 9 1/2% Senior Subordinated Debt in November 1997 and the increase in
capitalized interest associated with its construction projects. Interest income
and other increased $1.7 million and $3.4 million for the three months and nine
months ended September 30, 1998 as compared to the same periods in the prior
year primarily attributable to the increase in equity in earnings from HCR's
pharmacy partnership of $.5 million and $1.9 million for the quarter and
year-to-date period.
During the third quarter of 1998 the Company recorded a gain of $99.8 million
($59.9 million after tax) from the conversion of Vitalink Pharmacy Services,
Inc. (Vitalink) common stock to Genesis Health Ventures, Inc. (Genesis)
preferred stock. On April 26, 1998 Vitalink entered into an Agreement and Plan
of Merger (Vitalink Merger Agreement) with Genesis. Pursuant to the Vitalink
Merger Agreement that was consummated on August 28, 1998, Manor Care received
586,240 shares of Genesis Series G Cumulative Convertible Preferred Stock valued
at $293.1 million as consideration for all of its shares of Vitalink. The
financial results of Vitalink are recorded as income from discontinued pharmacy
operations.
The income taxes recorded for the three months and nine months ended September
30, 1998 included the tax effects of the provision for restructuring charge,
merger expenses and asset impairment, and the Vitalink gain, some of which are
not deductible for income tax purposes. The effective tax rate excluding these
items was 35% and 34% for the three months and nine months ended September 30,
1998, respectively, compared to the 35% effective tax rate for the year ended
December 31, 1997.
During the third quarter of 1998 the Company recorded an extraordinary loss from
the early extinguishment of debt totaling $31.7 million ($19.0 million after
tax). On September 25,1998 the Company repaid the outstanding debt under HCR's
and Manor Care's prior credit arrangements. In conjunction with the
extinguishment of debt, the Company terminated three interest rate swaps with a
total notional amount of $350 million that were designated as a hedge of Manor
Care's debt. The extraordinary loss primarily related to the termination of the
swaps but also included the unamortized debt issue costs.
The loss from continuing operations of $79.3 million and $4.2 million for the
three months and nine months ended September 30, 1998, respectively, included
the net of tax effects of the provision for the restructuring charge, merger
expenses and asset impairment, and the Vitalink gain. The loss from continuing
operations on a diluted per share basis was $.73 and $.04 for the three months
and nine months ended September 30, 1998, respectively, and by excluding the
effects of these items, the income from operations on a diluted per share basis
would have been $.46 and $1.23 for the same periods, respectively. The income
from continuing operations on a diluted per share basis was $.32 and $1.03 for
the three months and nine months ended September 30, 1997, respectively.
FINANCIAL CONDITION
Stockholders' equity decreased $9.1 million between December 31, 1997 and
September 30, 1998 along with changes in the components of equity due to the
merger. Common stock at September 30 represented the par value of HCR Manor
Care common stock ($.01). Prior to the merger, Manor Care's par value was $.10
and HCR's par value was $.01. Capital in excess of par value decreased $149.0
million primarily due to the merger, Manor Care's treasury stock was retired
and HCR's remaining treasury stock was exchanged for some of Manor Care's
common stock. Retained earnings decreased $20.6 million primarily due to the
net loss of %15.2 million for the nine months ended September 30, 1998 and
payment of dividends by Manor Care.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (FAS 131), which is effective December
31, 1998, with interim disclosures beginning in 1999. Comparative information
for prior years is required to be restated. This Statement requires public
business enterprises to report certain information about operating segments,
their products and services, the geographic areas in which they operate, and
their major
14
<PAGE> 15
customers. The operating segments should be based on the structure of the
enterprise's internal organization whose operating results are regularly
reviewed by the company's chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its performance. As a result
of the recent merger, management has not determined the effect, if any, of FAS
131 on the consolidated financial statements.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-up Activities" (SOP
98-5), which is effective January 1, 1999. This Statement requires start-up
costs to be expensed as incurred. The Company will adopt this Statement on
January 1, 1999 and the previously capitalized start-up costs will be reported
as a cumulative effect of a change in accounting principle. This amount is
estimated to be $20 million after tax.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133), which is effective January 1,
2000. This Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. This Statement requires the Company to recognize all
derivatives on the balance sheet at fair value. Management has not determined
when it will adopt this Statement nor has it determined the impact of adoption.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1998, the Company satisfied its cash
requirements from a combination of cash generated from operating activities and
borrowings under bank credit agreements. The Company used the cash principally
for capital expenditures, systems development and merger expenses. At September
30, 1998, the Company maintained $100.6 million in cash and cash equivalents, of
which $48.2 million was invested in short-term investments. Expenditures for
property and equipment during the nine months ended September 30,1998 consisted
of $134.3 million for construction of new facilities and $90.9 million for
renovation and maintenance of existing facilities.
Concurrent with the merger, a five-year, $500 million credit agreement (5 Year
Agreement) and a 364-day, $300 million credit agreement (364 Day Agreement) were
established with a group of banks, under which both HCR Manor Care and Manor
Care are borrowers. The credit agreements were established to repay borrowings
of the two companies under prior credit arrangements, to provide additional
credit capacity for future developments and to provide credit back-up for the
issuance of commercial paper. At September 30, 1998, outstanding borrowings of
both companies aggregated $470 million under the 5 Year Agreement and $177.5
million under the 364 Day Agreement - a total of $647.5 million. After
consideration of usage for letters of credit, the remaining credit availability
under the combined agreements totaled $144.5 million.
The Company has cash flow commitments related to the restructuring plan that
will require approximately $45 million in the next six months, primarily for
employee benefits. In addition, the Company expects to spend $54 million in the
fourth quarter for construction of assisted living facilities.
HCR Manor Care believes that its cash flow from operations will be sufficient to
cover debt payments, future capital expenditures and operating needs. It is
likely that the Company will pursue growth from acquisitions, partnerships and
other ventures which would be funded from excess cash from operations, credit
available under the bank credit agreement and other financing
15
<PAGE> 16
arrangements that are normally available in the marketplace.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the year. Any of the HCR Manor Care
computer software and hardware that are date sensitive and all of our embedded
chip devices could recognize a two digit date of `00' as `1900' rather than
`2000'. This could result in system failures and miscalculations causing
disruptions to our operations.
In 1995, HCR began an evaluation and upgrade to all of its technical
infrastructure including hardware, operating systems and business applications.
With the completion of that upgrade process, we will have in place, a complete
package of technical solutions that properly utilize dates beyond December 31,
1999. The estimated costs of this package are expected to be $20 million. Most
of these costs will be capitalized and amortized over a five to twelve year
period. As of September 30, 1998 the Company has incurred $15 million ($2
million expensed and $13 million capitalized). To standardize the recently
acquired Manor Care businesses we will be transitioning those operating
entities to the package of Year 2000 technical solutions with an estimated
additional cost of $15 million. We have completed the technical solution
definition and are 60% complete with the implementation. All computer hardware,
software and operating system upgrades are expected to be in place by the end
of the third quarter of 1999. It has not been necessary to accelerate our
original implementation plan due to the Year 2000 issue.
To insure that our embedded chip devices, vendor and supplier interfaces are
also Year 2000 compliant, we have put into place an assessment, remediation,
testing, implementation and contingency plan for all products, services and
relationships that do not meet our Year 2000 compliance standards. We expect all
phases along with the contingency plan to be completed by the end of the third
quarter of 1999 with internal resources. We have queried our significant
suppliers and at this point, based on their representations, we do not believe
that Year 2000 presents a material exposure as it relates to our embedded chip
devices, system interfaces, significant suppliers or vendors. We are unable to
determine the worst case scenario; however, if the federal and state healthcare
reimbursement agencies or their intermediaries fail to implement Year 2000
compliant technologies before December 31, 1999, a significant cash flow problem
could result. Those agencies and intermediaries have Year 2000 plans in place
and we continue to monitor the status of those projects. However, all of the
governmental agencies have stated that interim payment procedures would be
implemented if their Year 2000 solutions are not in place by January 1, 2000.
16
<PAGE> 17
RESTATED QUARTERLY INFORMATION
HCR MANOR CARE, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
<TABLE>
<CAPTION>
2nd Quarter 1st Quarter 4th Quarter 2nd Quarter 1st Quarter
1998 1998 1997 1997 1997
---- ---- ---- ---- ----
(In thousands, except earnings per share)
<S> <C> <C> <C> <C> <C>
Revenues $ 568,664 $ 577,221 $ 571,540 $ 558,774 $ 546,543
Expenses:
Operating 443,929 446,367 449,298 436,004 429,958
General and administrative 24,624 27,794 22,602 28,785 24,263
Depreciation and amortization 30,471 30,180 29,844 28,071 26,353
Provision for restructuring charge, merger
expenses and asset impairment 13,500
--------- --------- --------- --------- ---------
512,524 504,341 501,744 492,860 480,574
--------- --------- --------- --------- ---------
Income from continuing operations before
other income (expenses) and income taxes 56,140 72,880 69,796 65,914 65,969
Other income (expenses):
Interest expense (11,466) (10,682) (13,385) (14,998) (14,424)
Minority interest (309) (220) 2,993 476 549
Interest income and other 3,597 3,817 3,202 4,239 1,381
Interest income from advances to discontinued
lodging segment (901) 2,390 5,985 5,079
--------- --------- --------- --------- ---------
(8,178) (7,986) (4,800) (4,298) (7,415)
--------- --------- --------- --------- ---------
Income from continuing operations before income taxes 47,962 64,894 64,996 61,616 58,554
Income taxes 15,843 21,966 24,107 20,412 21,350
--------- --------- --------- --------- ---------
Income from continuing operations 32,119 42,928 40,889 41,204 37,204
Discontinued operations:
Income (loss) from discontinued pharmacy
operations (net of taxes) 3,521 4,370 3,244 (4,564) 40,512
--------- --------- --------- --------- ---------
Income before extraordinary item and cumulative effect 35,640 47,298 44,133 36,640 77,716
Extraordinary item (net of taxes) (3,216)
Cumulative effect of change in accounting
principle (net of taxes) (3,173)
--------- --------- --------- --------- ---------
Net income $ 35,640 $ 47,298 $ 37,744 $ 36,640 $ 77,716
========= ========= ========= ========= =========
Earnings per share - basic
Income from continuing operations $ .30 $ .40 $ .38 $ .38 $ .34
Income (loss) from discontinued pharmacy
operations (net of taxes) .03 .04 .03 (.04) .38
Extraordinary item (net of taxes) (.03)
Cumulative effect (net of taxes) (.03)
--------- --------- --------- --------- ---------
Net income $ .33 $ .44 $ .35 $ .34 $ .72
========= ========= ========= ========= =========
Earnings per share - diluted
Income from continuing operations $ .29 $ .39 $ .37 $ .37 $ .34
Income (loss) from discontinued pharmacy
operations (net of taxes) .03 .04 .03 (.04) .37
Extraordinary item (net of taxes) (.03)
Cumulative effect (net of taxes) (.03)
--------- --------- --------- --------- ---------
Net income $ .32 $ .43 $ .34 $ .33 $ .70*
========= ========= ========= ========= =========
Weighted average shares:
Basic 108,296 108,175 108,192 108,185 108,005
Diluted 111,007 111,165 111,123 110,959 110,679
*Doesn't add due to rounding
</TABLE>
17
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or
operator of real property or an entity that arranges for the
disposal or treatment of hazardous or toxic substances at a
disposal site may be held jointly and severally liable for the
cost of removal or remediation of certain hazardous or toxic
substances, that could be located on, in or under such
property. Such laws and regulations often impose liability
whether or not the owner, operator or otherwise responsible
party knew of, or caused, the presence of hazardous or toxic
substances. The costs of any required remediation or removal
of these substances can be substantial and the liability of a
responsible party as to any property is generally not limited
under such laws and regulations and could exceed the
property's value and the aggregate assets of the liable party.
Certain federal and state laws govern the handling and
disposal of medical, infectious and hazardous waste. Failure
to comply with such laws or the regulations promulgated
thereunder could subject an entity covered by these laws to
fines, criminal penalties and other enforcement actions. The
Company has developed policies with respect to the handling
and disposal of medical, infectious and hazardous waste to
ensure compliance with those laws and regulations. The Company
believes that it is in material compliance with applicable
laws and regulations governing medical, infectious and
hazardous waste.
One or more subsidiaries or affiliates of Manor Care have been
identified as potentially responsible parties (PRPs) in a
variety of actions (the Actions) relating to waste disposal
sites which allegedly are subject to remedial action under the
Comprehensive Environmental Response Compensation Liability
Act, as amended, 42 U.S.C. Sections 9601 et seq. (CERCLA) and
similar state laws. CERCLA imposes retroactive, strict joint
and several liability on PRPs for the costs of hazardous waste
clean-up. The Actions arise out of the alleged activities of
Cenco, Incorporated and its subsidiary and affiliated
companies (Cenco). Cenco was acquired in 1981 by a wholly
owned subsidiary of Manor Care. The Actions allege that Cenco
transported and/or generated hazardous substances that came to
be located at the sites in question. The Company believes the
waste disposal activities at issue occurred prior to the Manor
Care subsidiary's acquisition of Cenco. Environmental
proceedings such as the Actions may involve owners and/or
operators of the hazardous waste site, multiple waste
generators and multiple waste transportation disposal
companies. Such proceedings involve efforts by governmental
entities and/or private parties to allocate or recover site
investigation and clean-up costs, which costs may be
substantial. The potential liability exposure for currently
pending environmental claims and litigation, without regard to
insurance coverage, cannot be quantified with precision
because of the inherent uncertainties of litigation in the
Actions and the fact that the ultimate cost of the remedial
actions for some of the waste disposal sites where Manor Care
is alleged to be a potentially responsible party has not yet
been quantified. The Company believes that the potential
environmental liability exposure, after consideration of
insurance coverage, is approximately $5 million. Future
liabilities for the pending environmental claims and
litigation, without regard to insurance, currently are not
18
<PAGE> 19
expected to exceed approximately $32 million.
The Company is party to various other legal proceedings
arising in the ordinary course of business. The Company does
not believe the results of such proceedings, even if
unfavorable to the Company, would have a material adverse
effect on its financial position.
Item 2. Changes in Securities.
----------------------
Manor Care, Inc.'s 7 1/2% Senior Notes due 2006 have been
guaranteed by HCR Manor Care and certain HCR and Manor Care
subsidiaries.
Item 3. Defaults Upon Senior Securities.
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
At HCR's Special Meeting of Stockholders held on September 24,
1998 the stockholders approved the following items: a)
issuance up to 70,000,000 shares of HCR common stock to
holders of Manor Care common stock and amend certain sections
of HCR's By-laws , b) an increase in the number of authorized
shares of HCR common stock, c) an increase in the number of
shares of HCR common stock authorized for issuance pursuant to
the Amended Stock Option Plan for Key Employees, d) an
increase in the number of shares of HCR common stock
authorized for issuance pursuant to the Option Plan for
Outside Directors, and e) an increase in the number of shares
of HCR common stock authorized for issuance pursuant to the
Amended Restricted Stock Plan. The items were approved by a
vote as follows:
Item For Against Abstain Not Voted
---- --- ------- ------- ---------
a 34,685,631 240,952 677,706
b 33,536,859 1,401,299 666,131
c 18,398,357 16,464,413 741,519
d 32,234,261 2,626,105 743,923
e 32,604,617 2,243,909 755,763
At Manor Care's Special Meeting of Stockholders held on
September 24, 1998 the stockholders approved the merger with
HCR and the transactions contemplated by the Merger Agreement
by a vote as follows:
For Against Abstain Not Voted
--- ------- ------- ---------
53,727,551 257,510 83,497
Item 5. Other Information.
------------------
None
19
<PAGE> 20
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a)Exhibits
S-K Item
601 NO.
-------
4 Credit Agreement dated as of September 25,
1998 among HCR Manor Care, Inc., Manor Care,
Inc., Bank of America National Trust and
Savings Association, The Chase Manhattan
Bank, TD Securities (USA) Inc., and the
Other Financial Institutions Party Hereto
4.1 364 Day Credit Agreement dated as of
September 25, 1998 among HCR Manor Care,
Inc., Manor Care, Inc., Bank of America
National Trust and Savings Association, The
Chase Manhattan Bank, TD Securities (USA)
Inc., and the Other Financial Institutions
Party Hereto
27 Financial Data Schedule for the nine months
ended September 30, 1998
27.1 Financial Data Schedules that are being
restated for the three months ended March
31, 1998 and the six months ended June 30,
1998
27.2 Financial Data Schedules that are being
restated for the three months ended March
31, 1997, the six months ended June 30,
1997, the nine months ended September 30,
1997 and the year ended December 31, 1997
27.3 Financial Data Schedule that is being
restated for the year ended December 31,
1996
The Financial Data Schedules are being
restated due to the merger with Manor Care.
(b) Reports on Form 8-K
There were no Form 8-K's filed during the third quarter of
1998. On October 1, 1998, HCR Manor Care filed a Form 8-K
announcing the consummation of the merger between HCR and
Manor Care.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HCR Manor Care, Inc.
(Registrant)
Date November 16, 1998 By /s/ Geoffrey G. Meyers
--------------------- ------------------------------------------
Geoffrey G. Meyers, Executive Vice-President
and Chief Financial Officer
21
<PAGE> 22
EXHIBIT INDEX
Exhibit
- -------
4 Credit Agreement dated as of September 25, 1998 among HCR
Manor Care, Inc., Manor Care, Inc., Bank of America National
Trust and Savings Association, The Chase Manhattan Bank, TD
Securities (USA) Inc., and the Other Financial Institutions
Party Hereto
4.1 364 Day Credit Agreement dated as of September 25, 1998 among
HCR Manor Care, Inc., Manor Care, Inc., Bank of America
National Trust and Savings Association, The Chase Manhattan
Bank, TD Securities (USA) Inc., and the Other Financial
Institutions Party Hereto
27 Financial Data Schedule for the nine months ended September
30, 1998
27.1 Financial Data Schedules that are being restated for the three
months ended March 31, 1998 and the six months ended June 30,
1998
27.2 Financial Data Schedules that are being restated for the three
months ended March 31, 1997, the six months ended June 30,
1997, the nine months ended September 30, 1997 and the year
ended December 31, 1997
27.3 Financial Data Schedule that is being restated for the year
ended December 31, 1996
22
<PAGE> 1
Exhibit 4
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 25, 1998
AMONG
HCR MANOR CARE, INC.,
MANOR CARE, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT,
SWINGLINE BANK
AND
LETTER OF CREDIT ISSUING BANK,
THE CHASE MANHATTAN BANK,
AS SYNDICATION AGENT,
TD SECURITIES (USA) INC.,
AS DOCUMENTATION AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANCAMERICA SECURITIES, INC.,
AS LEAD ARRANGER
AND
CHASE SECURITIES INC.
AND
TD SECURITIES (USA) INC.,
AS CO-ARRANGERS
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS...........................................................2
1.1. CERTAIN DEFINED TERMS.................................................2
1.3. ACCOUNTING PRINCIPLES................................................30
ARTICLE II THE CREDITS..........................................................31
2.1. AMOUNTS AND TERMS OF COMMITMENTS.....................................31
2.2. LOAN ACCOUNTS........................................................31
2.3. PROCEDURE FOR COMMITTED BORROWING....................................32
2.4. CONVERSION AND CONTINUATION ELECTIONS FOR COMMITTED
BORROWINGS...........................................................33
2.5. BID BORROWINGS.......................................................35
2.6. PROCEDURE FOR BID BORROWINGS.........................................35
2.7. SWINGLINE............................................................39
2.8. VOLUNTARY TERMINATION OR REDUCTION OF
COMMITMENTS..........................................................41
2.9. OPTIONAL AND MANDATORY PREPAYMENTS; MANDATORY
COMMITMENT REDUCTIONS................................................42
2.10. REPAYMENT............................................................43
2.11. INTEREST.............................................................43
2.12. FEES.................................................................44
2.13. COMPUTATION OF FEES AND INTEREST.....................................44
2.14. PAYMENTS BY THE BORROWERS............................................45
2.15. PAYMENTS BY THE BANKS TO THE AGENT...................................46
2.16. SHARING OF PAYMENTS, ETC.............................................46
ARTICLE III THE LETTERS OF CREDIT................................................47
3.1. THE LETTER OF CREDIT SUBFACILITY.....................................47
3.2. ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF
CREDIT...............................................................49
3.3. EXISTING BOFA LETTERS OF CREDIT; RISK
PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS..........................51
3.4. REPAYMENT OF PARTICIPATIONS..........................................53
3.5. ROLE OF THE ISSUING BANK.............................................54
3.6. OBLIGATIONS ABSOLUTE.................................................55
3.7. CASH COLLATERAL PLEDGE...............................................56
3.8. LETTER OF CREDIT FEES................................................56
3.9. UNIFORM CUSTOMS AND PRACTICE.........................................57
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY...............................57
4.1. TAXES................................................................57
4.2. ILLEGALITY...........................................................59
4.3. INCREASED COSTS AND REDUCTION OF RETURN..............................59
4.4. FUNDING LOSSES.......................................................60
4.5. INABILITY TO DETERMINE RATES.........................................61
4.6. CERTIFICATES OF BANKS................................................61
4.7. SUBSTITUTION OF BANKS................................................61
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
-----------------
CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.8. AFFECTED BANK'S OBLIGATION TO MITIGATE...............................62
4.9. PRESENTATION OF CLAIMS; SURVIVAL.....................................62
ARTICLE V CONDITIONS PRECEDENT.................................................62
5.1. CONDITIONS OF INITIAL CREDIT EXTENSION...............................62
(a) CREDIT AGREEMENT AND NOTES........................63
(b) RESOLUTIONS; INCUMBENCY...........................63
(c) ORGANIZATION DOCUMENTS; GOOD STANDING.............63
(d) GUARANTIES........................................63
(e) PRIOR CREDIT AGREEMENTS...........................63
(f) MERGER AGREEMENT..................................63
(g) LITIGATION........................................64
(h) LEGAL OPINIONS....................................64
(i) PAYMENT OF FEES...................................64
(j) CERTIFICATE.......................................64
(k) OTHER DOCUMENTS...................................65
5.2. CONDITIONS TO ALL CREDIT EXTENSIONS......................................65
(a) NOTICE OF BORROWING; APPLICATION..................65
(b) CONTINUATION OF REPRESENTATIONS AND
WARRANTIES........................................65
(c) NO EXISTING DEFAULT...............................65
ARTICLE VI REPRESENTATIONS AND WARRANTIES.......................................65
6.1. ORGANIZATION, POWER, AUTHORITY, ETC..................................66
6.2. DUE AUTHORIZATION, NONCONTRAVENTION, ETC.............................66
6.3. GOVERNMENT APPROVAL, REGULATION, ETC.................................67
6.4. VALIDITY, ETC........................................................67
6.5. FINANCIAL INFORMATION................................................67
6.6. NO MATERIALLY ADVERSE EFFECT.........................................68
6.7. LITIGATION, ETC......................................................68
6.8. REGULATIONS T, U AND X...............................................69
6.9. PENSION AND WELFARE PLANS............................................69
6.10. SUBSIDIARIES.........................................................70
6.11. TAXES................................................................70
6.12. ABSENCE OF DEFAULT...................................................70
6.13. LABOR CONTROVERSIES..................................................70
6.14. OWNERSHIP OF PROPERTIES..............................................70
6.15. PATENTS, TRADEMARKS, ETC.............................................70
6.16. ENVIRONMENTAL MATTERS................................................71
6.17. ACCURACY OF INFORMATION..............................................71
6.18. YEAR 2000 REPRESENTATIONS............................................71
6.19. HEALTH CARE REGULATORY MATTERS.......................................71
6.20. MERGER AGREEMENT.....................................................72
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
-----------------
CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VII COVENANTS............................................................73
7.1. AFFIRMATIVE COVENANTS................................................73
7.1.1. FINANCIAL INFORMATION, ETC...........................................73
7.1.2. MAINTENANCE OF EXISTENCES, ETC.......................................75
7.1.3. FOREIGN QUALIFICATION................................................76
7.1.4 Payment of Taxes, etc................................................76
7.1.5. INSURANCE............................................................76
7.1.6. NOTICE OF DEFAULT, LITIGATION, ETC...................................76
7.1.7. PERFORMANCE OF OBLIGATIONS...........................................77
7.1.8. BOOKS AND RECORDS....................................................78
7.1.9. COMPLIANCE WITH LAWS, ETC............................................78
7.1.10. MANOR CARE OBLIGORS..................................................78
7.1.11. MAINTENANCE OF PROPERTY..............................................79
7.1.12. ASSUMPTION BY NEW SUBSIDIARIES.......................................79
7.1.13. USE OF PROCEEDS......................................................79
7.2. NEGATIVE COVENANTS...................................................80
7.2.1. BUSINESS ACTIVITIES..................................................80
7.2.2. INDEBTEDNESS.........................................................80
7.2.3. LIENS................................................................81
7.2.4. FINANCIAL CONDITION..................................................83
7.2.5. RESTRICTED PAYMENTS..................................................83
7.2.6. CONSOLIDATION, MERGER, ETC...........................................84
7.2.7. ASSET DISPOSITIONS, ETC..............................................84
7.2.8. MODIFICATION OF CERTAIN INSTRUMENTS, ORGANIZATIONAL
DOCUMENTS, ETC.......................................................85
7.2.9. TRANSACTIONS WITH AFFILIATES.........................................85
7.2.10. AGREEMENTS RESTRICTING LIENS AND DISTRIBUTIONS.......................86
7.2.11. ENVIRONMENTAL MATTERS................................................86
7.2.12. ACQUISITIONS. .......................................................87
ARTICLE VIII EVENTS OF DEFAULT....................................................87
8.1. EVENTS OF DEFAULT....................................................87
8.1.1. NONPAYMENT OF OBLIGATIONS............................................87
8.1.2. NONPERFORMANCE OF CERTAIN COVENANTS..................................87
8.1.3. NONPERFORMANCE OF OTHER OBLIGATIONS..................................87
8.1.4. BANKRUPTCY, INSOLVENCY, ETC..........................................88
8.1.5. BREACH OF WARRANTY...................................................88
8.1.6. CROSS DEFAULT........................................................88
8.1.7. ERISA................................................................89
8.1.8. JUDGMENTS............................................................89
8.1.9. IMPERMISSIBLE CHANGE IN CONTROL......................................89
8.1.10. GUARANTOR DEFAULTS...................................................89
8.1.11. LOSS OF LICENSES.....................................................90
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
-----------------
CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
8.2. REMEDIES.............................................................90
8.3. RIGHTS NOT EXCLUSIVE.................................................90
ARTICLE IX THE AGENT............................................................91
9.1. APPOINTMENT AND AUTHORIZATION........................................91
9.2. DELEGATION OF DUTIES.................................................91
9.3. LIABILITY OF AGENT...................................................91
9.4. RELIANCE BY AGENT....................................................92
9.5. NOTICE OF DEFAULT....................................................93
9.6. CREDIT DECISION......................................................93
9.7. INDEMNIFICATION OF AGENT.............................................94
9.8. AGENT IN INDIVIDUAL CAPACITY.........................................94
9.9. SUCCESSOR AGENT......................................................94
9.10. WITHHOLDING TAX......................................................95
9.11. DOCUMENTATION AGENTS AND SYNDICATION AGENT...........................97
ARTICLE X MISCELLANEOUS........................................................97
10.1. AMENDMENTS AND WAIVERS...............................................97
10.2. NOTICES..............................................................98
10.3. NO WAIVER; CUMULATIVE REMEDIES.......................................99
10.4. COSTS AND EXPENSES...................................................99
10.5. COMPANY INDEMNIFICATION..............................................99
10.6. PAYMENTS SET ASIDE..................................................100
10.7. SUCCESSORS AND ASSIGNS..............................................100
10.8. ASSIGNMENTS, PARTICIPATIONS, ETC....................................101
10.9. DESIGNATED BIDDERS..................................................102
10.10. CONFIDENTIALITY.....................................................103
10.11. SETOFF..............................................................104
10.12. NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC.....................104
10.13. COUNTERPARTS........................................................104
10.14. SEVERABILITY........................................................104
10.15. NO THIRD PARTIES BENEFITED..........................................104
10.16. GOVERNING LAW AND JURISDICTION......................................104
10.17. WAIVER OF JURY TRIAL................................................105
10.18. ENTIRE AGREEMENT....................................................105
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of September 25, 1998, among
HCR MANOR CARE, Inc., a Delaware corporation formerly known as Health Care and
Retirement Corporation (the "COMPANY"), MANOR CARE, INC., a Delaware corporation
("MANOR CARE"; Manor Care and the Company are collectively called the
"BORROWERS" and are each individually called a "BORROWER"), the several
financial institutions from time to time party to this Agreement (collectively,
the "BANKS"; individually, a "BANK"), Bank of America National Trust and Savings
Association, as letter of credit issuing bank, as Swingline Bank and as
administrative agent for the Banks, The Chase Manhattan Bank, as syndication
agent and TD Securities (USA) Inc., as documentation agent.
WHEREAS, the Banks have agreed to make available to the Borrowers a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1. CERTAIN DEFINED TERMS. The following terms have the
following meanings:
"ABSOLUTE RATE" has the meaning specified in
SECTION 2.6(C).
"ABSOLUTE RATE AUCTION" means a solicitation of
Competitive Bids setting forth Absolute Rates pursuant
to SECTION 2.6.
"ABSOLUTE RATE BID LOAN" means a Bid Loan that bears interest
at a rate determined with reference to the Absolute Rate.
"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 line or segment of 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
1
<PAGE> 7
combination with another Person (other than a Person that is a
Subsidiary) provided that (i) the Company or the Subsidiary is the
surviving entity or (ii) after giving effect to such merger or
consolidation, such other Person has become a Subsidiary of the
Company.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling 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, membership interests, by contract, or
otherwise; PROVIDED, HOWEVER, the existence of a management contract by
the Company or one of its Affiliates to manage another entity shall not
be deemed to be control.
"AGENT" means BofA in its capacity as administrative agent for
the Banks hereunder, and any successor agent arising under SECTION 9.9.
"AGENT-RELATED PERSONS" means BofA and any successor agent
arising under SECTION 9.9, together with their respective Affiliates
(including, in the case of BofA, the Lead Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"AGENT'S PAYMENT OFFICE" means the address for payments set
forth on SCHEDULE 10.2 or such other address as the Agent may from time
to time specify.
"AGREEMENT" means this Credit Agreement.
"APPLICABLE FACILITY FEE RATE" means a rate per annum
determined by reference to the Leverage Ratio as follows:
Applicable
Level Leverage Ratio Facility Fee Rate
- ----- -------------- -----------------
Level 1 * 1.50 0.125%
Level 2 ** = 1.50 but * 2.00 0.150%
Level 3 ** = 2.00 but * 2.50 0.175%
Level 4 ** = 2.50 but * 3.00 0.200%
Level 5 ** = 3.00 0.250%
* Less than
** Greater than or equal to
2
<PAGE> 8
From the Effective Date until the delivery of the first Compliance
Certificate, the Applicable Facility Fee Rate shall be Level 2.
Thereafter, the Applicable Facility Fee Rate shall be effective from
and including the date on which the Agent receives a Compliance
Certificate to but excluding the date on which the Agent receives the
next Compliance Certificate; PROVIDED, HOWEVER, that if the Agent does
not receive a Compliance Certificate by the date required by SECTION
6.1, the Applicable Facility Fee Rate shall, effective as of such date,
be Level 5 to but excluding the date the Agent receives such Compliance
Certificate.
"APPLICABLE LAW" with respect to any Person or matter means
any law, rule, statute, regulation, order, decree or other requirement
having the force of law relating to such Person or matter and, where
applicable, any official interpretation thereof by any Person having
jurisdiction with respect thereto or charged with the administration or
interpretation thereof.
"APPLICABLE LETTER OF CREDIT FEE RATE" means a rate per annum
equal to the Applicable Margin for Offshore Rate Committed Loans.
"APPLICABLE MARGIN" means in the case of Base Rate Committed
Loans, zero, and in the case of Offshore Rate Committed Loans, a rate
per annum determined by reference to the Leverage Ratio as follows:
Applicable
Offshore
Level Leverage Ratio Rate Margin
- ----- -------------- -----------
Level 1 * 1.50 +0.150%
Level 2 ** = 1.50 but * 2.00 +0.200%
Level 3 ** = 2.00 but * 2.50 +0.275%
Level 4 ** = 2.50 but * 3.00 +0.350%
Level 5 ** = 3.00 +0.500%
* Less than
** Greater than or equal to
From the Effective Date until the delivery of the first Compliance
Certificate, the Applicable Margin shall be Level 2. Thereafter, the
Applicable Margin shall be effective from and including the date on
which the Agent receives a Compliance Certificate to but excluding the
date on which the Agent receives the next Compliance Certificate;
PROVIDED, HOWEVER, that if the
3
<PAGE> 9
Agent does not receive a Compliance Certificate by the date required by
SECTION 6.1, the Applicable Margin shall, effective as of such date, be
Level 5 to but excluding the date the Agent receives such Compliance
Certificate.
"ASSIGNEE" has the meaning specified in SECTION
10.8(a).
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the
non-duplicative allocated cost of internal legal services and all
disbursements of internal counsel.
"BANK" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BofA, including in its
capacity as Issuing Bank and Swingline Bank; for purposes of
clarification only, to the extent that BofA may have any rights or
obligations in addition to those of the Banks due to its status as
Issuing Bank or Swingline Bank, its status as such will be specifically
referenced.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. Section 101, et seq.).
"BASE RATE" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.) Any change in
the reference rate announced by BofA shall take effect at the opening
of business on the day specified in the public announcement of such
change.
"BASE RATE COMMITTED LOAN" means a Committed Loan that bears
interest based on the Base Rate.
"BID BORROWING" means a Borrowing hereunder consisting of one
or more Bid Loans made to a Borrower on the same day by one or more
Banks or Designated Bidders.
"BID LOAN" means a Loan by a Bank or a Designated Bidder to a
Borrower under SECTION 2.5, which may be a LIBOR Bid Loan or an
Absolute Rate Bid Loan.
4
<PAGE> 10
"BID LOAN LENDER" means, in respect of any Bid Loan, the Bank
or Designated Bidder making such Bid Loan to a Borrower.
"BID LOAN NOTE" means a note, delivered pursuant to SECTION
2.2, that evidences a Bank's or Designated Bidder's Bid Loans.
"BOFA" means Bank of America National Trust and Savings
Association, a national banking association.
"BORROWERS" has the meaning specified in the
introductory clause hereto.
"BORROWING" means a borrowing hereunder consisting of Loans of
the same Type made to a Borrower on the same day by the Banks or (in
the case of Bid Borrowings) Designated Bidders under Article II, and
may be a Committed Borrowing or a Bid Borrowing and, other than in the
case of Base Rate Committed Loans, having the same Interest Period.
"BORROWING DATE" means any date on which a Borrowing occurs
under SECTION 2.3.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, San Francisco or
Toledo, Ohio are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means such a
day on which dealings are carried on in the applicable offshore dollar
interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"CAPITALIZED LEASE" means any lease of property which as
determined in accordance with GAAP should be capitalized on the balance
sheet of any Person.
"CAPITALIZED LEASE LIABILITIES" of any Person means all
monetary obligations of such Person under any leasing or similar
arrangement which, in accordance with GAAP, are or would be classified
as capitalized leases on a balance sheet for such Person.
5
<PAGE> 11
"CASH COLLATERALIZE" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent, the Issuing Bank
and the Banks, as collateral for the L/C Obligations, cash or deposit
account balances pursuant to documentation in form and substance
satisfactory to the Agent and the Issuing Bank (which documents are
hereby consented to by the Banks). Derivatives of such term shall have
corresponding meaning. Cash collateral shall be maintained in blocked,
non-interest bearing deposit accounts of BofA.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States
Government;
(b) commercial paper, maturing not more than one year from the
date of issue, which is issued by
(i) a corporation (except an Affiliate of the
Company) organized under the laws of any State of the United
States of America or of the District of Columbia and rated at
least A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Service, Inc., at the time of investment, or
(ii) any Bank (or its holding company);
(c) any certificate of deposit or bankers' acceptance or
eurodollar time deposit, maturing not more than one year after the date
of issue, which is issued by either
(i) a financial institution that is a member of the
Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $100,000,000, or
(ii) any Bank; or
(e) any repurchase agreement with a term of one year
or less which
(i) vis entered into with
(A) any Bank, or
(B) any other commercial banking institution
of the stature referred to in CLAUSE (c)(i),
6
<PAGE> 12
(ii) is secured by a fully perfected Lien in any
obligation of the type described in any of CLAUSES (a) through
(c), and
(iii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the
repurchase obligation of such Bank (or other commercial
banking institution) thereunder; or
(f) investments in money market funds that invest solely in
Cash Equivalent Investments described in CLAUSES (a) through (d).
"CATERA" means Catera Acquisition Corp., a wholly- owned
Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"COMMITMENT", as to each Bank, has the meaning specified in
SECTION 2.1.
"COMMITTED BORROWING" means a Borrowing hereunder consisting
of Committed Loans made on the same day by the Banks ratably according
to their respective Pro Rata Shares and, in the case of Offshore Rate
Committed Loans, having the same Interest Periods.
"COMMITTED LOAN" means a Loan by a Bank to a Borrower under
SECTION 2.1, and may be an Offshore Rate Committed Loan or a Base Rate
Committed Loan (each, a "Type" of Committed Loan).
"COMMITTED LOAN NOTE" means a note, delivered pursuant to
SECTION 2.2, that evidences a Bank's Committed Loans.
"COMPANY" has the meaning specified in the introductory clause
hereto.
"COMPANY GUARANTY" means a guaranty, substantially in the form
of EXHIBIT L, by the Company in favor of the Agent for its benefit and
ratable benefit of the Banks.
"COMPETITIVE BID" means an offer by a Bank or a Designated
Bidder to make a Bid Loan in accordance with SECTION 2.6(c).
"COMPETITIVE BID REQUEST" has the meaning specified in SECTION
2.6(a).
7
<PAGE> 13
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C.
"CON" means a certificate of need or other license or permit
issued by a state health facilities planning board or similar agency or
body required for the construction, expansion, or investment in a
health facility.
"CONSOLIDATED" means when used with reference to any financial
term the aggregate for each Person and its Subsidiaries of the amounts
signified by such term for all such Persons determined on a
consolidated basis in accordance with GAAP including principles of
consolidation, and, in the case of the Company and its Subsidiaries,
consistent with those applied in the preparation of the consolidated
financial statements referred to in SECTION 6.5(a).
"CONSOLIDATED CAPITALIZATION" means the sum of (x)
Consolidated Indebtedness for Borrowed Money of the Company and its
Subsidiaries and (y) Consolidated Net Worth of the Company and its
Subsidiaries.
"CONSOLIDATED EBITDA" means, for any period, the Company's and
its Subsidiaries' earnings before Consolidated Interest Expense, taxes,
depreciation, amortization, extraordinary items of gain and all
Specified Losses.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period,
for the Company and its Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), all interest in
respect of Indebtedness for Borrowed Money accrued or capitalized
during such period (whether or not actually paid during such period),
excluding amortization of fees related to this Agreement and the 364
Day Credit Agreement.
"CONSOLIDATED NET WORTH" means, at any time, the sum of the
following amounts with respect to the Company and its Subsidiaries on a
Consolidated basis set forth in the Consolidated balance sheet of the
Company, prepared in accordance with GAAP: (A) the par or stated value
of all outstanding capital stock LESS the amount of treasury stock
separately classified; (B) capital surplus; and (C) retained earnings
(without deduction for Specified Losses).
"CONTINGENT LIABILITY" means any agreement, undertaking or
arrangement by which any Person (a) guarantees, endorses or otherwise
becomes or is
8
<PAGE> 14
contingently liable upon (by direct or indirect agreement, contingent
or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the debt, obligation or other liability of any other
Person (other than by endorsements of instruments in the course of
collection), or (b) guarantees the payment of dividends or other
distributions upon the shares of any other Person, or (c) undertakes or
agrees (contingently or otherwise) (i) to purchase, repurchase, or
otherwise acquire any Indebtedness, obligation or liability of any
other Person or any security therefor, or (ii) to provide funds for the
payment or discharge thereof (whether in form of loans, advances, stock
purchases, capital contributions or otherwise), or (iii) to maintain
solvency, assets, level of income, or other financial condition of any
other Person, or (iv) to make payment on behalf of any other Person
other than for value received. The amount of any Person's obligation
under any Contingent Liability shall (subject to any limitation set
forth therein) be deemed to be the outstanding principal amount (or
maximum permitted principal amount, if larger) of the debt, obligation
or other liability guaranteed or supported thereby.
"CONTRACTUAL OBLIGATION" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"CONVERSION/CONTINUATION DATE" means any date on which, under
SECTION 2.4, a Borrower (a) converts Committed Loans of one Type to
another Type, or (b) continues as Committed Loans of the same Type, but
with a new Interest Period, Committed Loans having Interest Periods
expiring on such date.
"CREDIT EXTENSION" means and includes (a) the making of any
Loans hereunder, and (b) the Issuance of any Letters of Credit
hereunder (including the Existing BofA Letters of Credit).
"DEBT TO CAPITALIZATION RATIO" means the aggregate outstanding
principal amount of Consolidated Indebtedness for Borrowed Money of the
Company and its Subsidiaries at the time of determination divided by
the Consolidated Capitalization of the Company and its Subsidiaries at
the time of determination.
9
<PAGE> 15
"DEFAULT" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"DESIGNATED BIDDER" means an Affiliate of a Bank that is an
entity described in clause (c) of the definition of "Eligible Assignee"
and that has become a party hereto pursuant to SECTION 10.9.
"DESIGNATION AGREEMENT" means a designation agreement entered
into by a Bank and a Designated Bidder and accepted by the Agent, in
substantially the form of EXHIBIT K.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached
hereto as SCHEDULE 1.
"DOLLARS", "DOLLARS" and "$" each mean lawful money of
the United States.
"EFFECTIVE AMOUNT" means the amount of any L/C Obligations on
any date after giving effect to any Issuances of Letters of Credit
occurring on such date and any other changes in the aggregate amount of
the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing
under Letters of Credit taking effect on such date.
"EFFECTIVE DATE" means the date on which all conditions
precedent set forth in SECTION 5.1 are satisfied or waived (or, in the
case of SECTION 5.1(i), waived by the Person entitled to receive such
payment).
"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the "OECD"),
or a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch or agency located in the United States; (c)
a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (iii) a Person of which a
Bank is a Subsidiary; or (d) any insurance company, mutual fund or
other financial institution or fund which has been approved in writing
by the Company and the Agent as an Eligible Assignee for
10
<PAGE> 16
purposes of this Agreement, PROVIDED that in each such case such
approval shall not be unreasonably withheld, and PROVIDED, FURTHER that
the term "Eligible Assignee" shall exclude healthcare competitors of
the Company or any Subsidiary and healthcare REITS.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA EVENT" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Company or any ERISA Affiliate.
11
<PAGE> 17
"EURODOLLAR RESERVE PERCENTAGE" has the meaning specified in
the definition of "Offshore Rate".
"EVENT OF DEFAULT" means any of the events or circumstances
specified in SECTION 8.1.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934,
and regulations promulgated thereunder.
"EXISTING BOFA LETTERS OF CREDIT" means the letters of credit
issued under the Prior Credit Agreement of the Company and described in
SCHEDULE 3.3.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and
its Subsidiaries existing on the Effective Date.
"FACILITY" means any nursing home or other health care
facility (including any facility operating an assisted living unit)
operated by the Company or a Subsidiary of the Company.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"FEE LETTER" has the meaning specified in SECTION 2.12(a).
"FIXED CHARGE COVERAGE RATIO" means the ratio of (a) the sum
of (i) Consolidated EBITDA plus (ii) lease and rental expense of the
Company and its Subsidiaries, in each case for the period of
determination, to (b) the sum of (i) Consolidated Interest Expense,
(ii) scheduled payments of principal on Consolidated Indebtedness for
Borrowed Money of the Company and its Subsidiaries having a final
maturity of one or more
12
<PAGE> 18
than one year from the date of origin thereof (or which is renewable or
extendible at the option of the obligor for a period or periods more
than one year from the date of origin) other than credit extensions
under this Agreement and the 364 Day Credit Agreement for the period of
determination and (iii) lease and rental expense of the Company and its
Subsidiaries, in each case for the period of determination.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"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 stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"GUARANTY" means a guaranty, substantially in the form of
EXHIBIT E, by the Subsidiaries (other than Non- Obligors) of the
Company in favor of the Agent for its benefit and the ratable benefit
of the Banks.
"HAZARDOUS MATERIAL" means and includes at any time (a) any
friable asbestos (or asbestos which becomes friable), PCBs or dioxins
or insulation or other material composed of or containing friable
asbestos (or asbestos which becomes friable), PCBs or dioxins and (b)
any petroleum or any fraction thereof and any hazardous or toxic waste,
substance or material defined as such in (or for purposes of) CERCLA,
any applicable so-called "superfund" or "superlien" law, or any other
Applicable Law regulating or pertaining to any such waste, substance or
material, as then or at any time thereafter in effect.
13
<PAGE> 19
"HCFA" means the Health Care Financing Administration of HHS
and any Person succeeding to the functions thereof.
"HEALTH FACILITY LICENSE" means a license or permit to provide
skilled and/or intermediate care nursing services, operate an assisted
living unit or otherwise operate a Facility, including any permit under
Medicare Regulations, Medicaid Regulations or
applicable state laws.
"HHS" means the Department of Health and Human Services and
any Person succeeding to the functions thereof.
"HILL-BURTON ACT" means, collectively, the Hill- Burton Act
established by Title VI and XVI of the Public Health Service Act, the
Health Manpower Program established by Title VII of the Public Health
Service Act or other grant, loan, subsidy or assistance program
of a Governmental Authority.
"HONOR DATE" has the meaning specified in SECTION 3.3(c).
"IHH" means In Home Health, Inc., a Minnesota corporation.
"IMPERMISSIBLE CHANGE IN CONTROL" means the occurrence of any
of the following, in each case without the prior written consent of the
Majority Banks:
(a) at any time, any Person or group of Persons (within the
meaning of Rule 13d-5 promulgated by the SEC under the Securities
Exchange Act of 1934) (other than underwriters holding pending
distribution) owns beneficially (within the meaning of Rule 13d-3
promulgated by the SEC under the Securities Exchange Act of 1934), 51%
or more of the issued and outstanding shares of capital stock of the
Company having ordinary voting power for the election of directors of
the Company; or
(b) at any time, a majority of the seats (other than vacant
seats) on the Company's board of directors shall be occupied by persons
who were neither (i) recommended by the Company's management in
connection with an annual meeting of the Company's stockholders, nor
(ii) appointed by directors who were recommended as described in the
foregoing CLAUSE (b)(i).
14
<PAGE> 20
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of any Person, any qualification or exception to
such opinion or certification which:
(a) is of a "going concern" or similar nature;
(b) relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Obligors to be in default of any of its
obligations under SECTION 7.2.4.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money
(including all notes payable and drafts accepted representing
extensions of credit) and all obligations evidenced by bonds,
debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations as lessee under leases which have been or
should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities; and
(d) whether or not so included as liabilities in accordance
with GAAP
(i) all obligations of such Person to pay the
deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse, and
(ii) all Contingent Liabilities of such Person (but
not to exceed the net worth of such Person) in respect of any
Indebtedness of any Person.
15
<PAGE> 21
"INDEBTEDNESS FOR BORROWED MONEY" with respect to any Person
means, without duplication, any obligation of such Person for borrowed
money, but in any event shall include (i) any obligation incurred for
all or any part of the purchase price of property or other assets or
for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities
and incurred in respect of property purchased in the ordinary course of
business, (ii) the face amount of all letters of credit issued for the
account of such Person (other than (x) documentary letters of credit
including commercial and trade letters of credit) issued to secure
payment obligations in respect of goods and services in the ordinary
course of business and (y) letters of credit and surety bonds with
respect to obligations of such Person that are fully accounted for as
liabilities in the financial records of such Person) and all drafts
drawn thereunder, (iii) obligations of the type described in CLAUSES
(i), (ii), (iv), or (v) (whether or not such Person has assumed or
become liable for the payment of such obligation) secured by Liens,
(iv) the amount of all Capitalized Lease Liabilities, and (v) all
Contingent Liabilities of such Person (but not to exceed the net worth
of such Person) with respect to Indebtedness for Borrowed Money
described in the foregoing CLAUSES (i) through (iv); PROVIDED, HOWEVER,
that Indebtedness for Borrowed Money shall not include Indebtedness
fully secured by the cash surrender value of life insurance policies.
"INDEMNIFIED LIABILITIES" has the meaning specified in
SECTION 10.5.
"INDEMNIFIED PERSON" has the meaning specified in SECTION
10.5.
"INSOLVENCY PROCEEDING" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"INTEREST PAYMENT DATE" means, as to any Loan other than a
Base Rate Committed Loan, the last day of each Interest Period
applicable to such Loan and, as to any Base
16
<PAGE> 22
Rate Committed Loan, the last Business Day of each calendar quarter,
PROVIDED, HOWEVER, that (a) if any Interest Period for an Offshore Rate
Committed Loan exceeds three months, the date that falls three months
after the beginning of such Interest Period and three months after each
Interest Payment Date thereafter is also an Interest Payment Date, and
(b) as to any Bid Loan, such intervening dates prior to the maturity
thereof as may be specified by the Borrowers and agreed to by the
applicable Bid Loan Lender in the applicable Competitive Bid shall also
be Interest Payment Dates.
"INTEREST PERIOD" means,
(a) as to any Offshore Rate Committed Loan, the period
commencing on the Borrowing Date of such Loan, or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Committed Loan, and ending on the date
(i) one, two, three or six months thereafter (and any period of nine or
twelve months to the extent that the Agent reasonably determines that
funding therefor is available to the Banks) and, in addition, (ii) for
the period from the Effective Date through October 31, 1998 only, seven
days thereafter as selected by a Borrower in its Notice of Borrowing,
Notice of Conversion/Continuation or Notice of Bid Request, as the case
may be;
(b) as to any Absolute Rate Bid Loan, a period of not less
than 7 days and not more than 183 days as selected by a Borrower in the
applicable Competitive Bid Request; and
(c) as to any LIBOR Bid Loan, a period that is one, two, three
or six months as selected by a Borrower in the applicable Competitive
Bid Request;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day
17
<PAGE> 23
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of
the calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond September 24, 2003.
"INVITATION FOR COMPETITIVE BIDS" means a solicitation for
Competitive Bids, substantially in the form of EXHIBIT F.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"ISSUANCE DATE" has the meaning specified in SECTION 3.1(a).
"ISSUE" means, with respect to any Letter of Credit, to
incorporate the Existing BofA Letters of Credit into this Agreement, or
to issue or to extend the expiry of, or to renew or increase the amount
of, such Letter of Credit; and the term "Issued," "Issuing" and
"Issuance" have corresponding meanings.
"ISSUING BANK" means BofA in its capacity as issuer of one or
more Letters of Credit hereunder, together with any replacement letter
of credit issuer arising under SECTION 9.1(b) or SECTION 9.9. In the
event any proposed beneficiary of a requested Letter of Credit does not
accept BofA as the issuer or BofA declines to issue a Letter of Credit
pursuant to SECTION 3.1(b)(vi), the Borrowers may, after notice to BofA
request another Bank to act as Issuing Bank with respect to such Letter
of Credit.
"L/C ADVANCE" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
"L/C AMENDMENT APPLICATION" means an application form for
amendment of outstanding standby or commercial documentary letters of
credit as shall at any time be in use at the Issuing Bank, as the
Issuing Bank shall request.
"L/C APPLICATION" means an application form for issuances of
standby letters of credit as shall at any time be in use at the Issuing
Bank, as the Issuing Bank shall request.
18
<PAGE> 24
"L/C BORROWING" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Revolving Loans
under SECTION 3.3(c).
"L/C COMMITMENT" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to participate in,
Letters of Credit (including the Existing BofA Letters of Credit) from
time to time Issued or outstanding under Article III, in an aggregate
amount not to exceed on any date the amount of $100,000,000, as the
same shall be reduced as a result of a reduction in the L/C Commitment
pursuant to SECTION 2.8; PROVIDED that the L/C Commitment is a part of
the combined Commitments, rather than a separate, independent
commitment.
"L/C OBLIGATIONS" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Letters of
Credit, including all outstanding L/C Borrowings.
"L/C-RELATED DOCUMENTS" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Bank's
standard form documents for letter of credit issuances.
"LEAD ARRANGER" means BancAmerica Securities, Inc., a Delaware
corporation.
"LENDING OFFICE" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on SCHEDULE
10.2, or such other office or offices as such Bank may from time to
time notify the
Company and the Agent.
"LETTERS OF CREDIT" means the Existing BofA Letters of Credit
and any standby letters of credit Issued by the Issuing Bank pursuant
to Article III.
"LEVERAGE RATIO" means the ratio of (i) Consolidated
Indebtedness for Borrowed Money of the Company and its Subsidiaries to
(ii) Consolidated EBITDA. The amount determined under clause (ii) shall
be calculated for the four fiscal quarter period then ending and
adjusted on a pro forma basis for any acquisitions or investments as if
such acquisition or investment took place on the first day of said four
fiscal quarter period.
19
<PAGE> 25
"LIBO RATE" means, for any Interest Period with respect to a
LIBOR Bid Loan the rate of interest per annum determined by the Agent
to be the arithmetic mean (rounded upward, if necessary, to the nearest
1/16th of 1%) of the rates of interest per annum at which dollar
deposits in the approximate amount of the LIBOR Bid Loans to be
borrowed in such Bid Loan Borrowing and having a maturity comparable to
such Interest Period, would be offered to major banks in the interbank
market at their request at approximately 11:00 a.m. (New York time) two
Business Days prior to the commencement of such Interest Period.
"LIBOR AUCTION" means a solicitation of Competitive Bids
setting forth a LIBOR Bid Margin pursuant to SECTION 2.6.
"LIBOR BID LOAN" means any Bid Loan that bears interest at a
rate based upon the LIBO Rate.
"LIBOR BID MARGIN" has the meaning specified in
SECTION 2.6(c)(ii)(c).
"LIEN" means any security interest, mortgage, deed of trust,
pledge, hypothecation, collateral assignment, charge or deposit
arrangement, encumbrance or lien (statutory or other) of any kind or
nature whatsoever in respect of any property (including those created
by, arising under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a Capitalized
Lease, any financing lease having substantially the same economic
effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as
debtor, under the Uniform Commercial Code or any comparable law) but
not including the interest of a lessor under an operating lease
(whether or not a protective UCC filing is made).
"LOAN" means an extension of credit by a Bank or a Designated
Bidder to a Borrower under Article II, and may be a Committed Loan, a
Swingline Loan or a Bid Loan.
"LOAN DOCUMENTS" means this Agreement, any Notes, the Fee
Letter, the L/C Related Documents, the Guaranty, the Company Guaranty,
the Manor Care Subsidiary Guaranty and all other documents delivered to
the Agent or any Bank or Designated Bidder in connection herewith and
expressly identified as a "Loan Document".
"MAJORITY BANKS" means (a) at any time prior to the Revolving
Termination Date, or after the Revolving Termination Date if no Loans
are then outstanding, Banks
20
<PAGE> 26
then holding more than 50% of the Commitments, and (b) otherwise, Banks
then holding more than 50% of the then aggregate unpaid principal
amount of the Loans. For purposes of this definition, each Bank shall
be deemed to hold all outstanding Bid Loans of such Bank's Designated
Bidders.
"MANOR CARE" has the meaning specified in the introductory
clause hereto.
"MANOR CARE INDENTURE" means that certain Indenture dated as
of June 4, 1996 between Manor Care and Wilmington Trust Company, as
Trustee, as amended, modified or supplemented from time to time.
"MANOR CARE OBLIGORS" means the Subsidiaries of Manor Care
listed on Part II of SCHEDULE 6.10 excluding those Subsidiaries
described in clauses (i)(a), (i)(b) and (ii) of the definition of the
term "Non-Obligors".
"MANOR CARE SUBSIDIARY GUARANTY" means a guaranty,
substantially in the form of EXHIBIT J, by the Manor Care Obligors in
favor of the Agent for its benefit and the ratable benefit of the
Banks.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
"MATERIAL GROUP OF SUBSIDIARIES" means any Subsidiary or
Subsidiaries having 5% or more of the Consolidated assets of the
Company and its Subsidiaries.
"MATERIALLY ADVERSE EFFECT" means (a) a material adverse
change in, or a material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole; or (b) a material impairment of the
ability of the Borrowers to perform any of their payment or other
material obligations under any Loan Document to which they are a party.
"MEDICAID CERTIFICATION" means certification by a state agency
that the health facility fully complies with all the requirements for
participation in the Medicaid Regulations.
21
<PAGE> 27
"MEDICAID PROVIDER AGREEMENT" means an agreement entered into
between a state agency or other such entity administering the Medicaid
program and a health facility under which the agency agrees to pay for
services provided by the health facility to qualified Medicaid
beneficiaries in accordance with the terms of the agreement and
Medicaid Regulations.
"MEDICAID REGULATIONS" means, collectively, (i) all federal
statutes (whether set forth in Title XIX of the Social Security Act or
elsewhere) affecting the medical assistance program established by
Title XIX of the Social Security Act (42 U.S.C. Sections 1396,
ET SEQ.); (ii) all applicable provisions of all federal rules,
regulations, manuals, orders and administrative, reimbursement and
other guidelines of all Governmental Authorities (whether or not having
the force of law) promulgated pursuant to or in connection with the
statutes described in clause (i) above; (iii) all state statutes and
plans for medical assistance enacted in connection with the statutes
and provisions described in clauses (i) and (ii) above; and (iv) all
applicable provisions of all rules, regulations, manuals, orders and
administrative, reimbursement and other guidelines of all Governmental
Authorities (whether or not having the force of law) promulgated
pursuant to or in connection with any of the foregoing.
"MEDICARE CERTIFICATION" means certification by HCFA or a
state agency or entity under contract with HCFA that the health
facility complies with all the requirements for participation set forth
in the Medicare Regulations.
"MEDICARE PROVIDER AGREEMENT" means an agreement entered into
between HCFA or a state agency under contract with HCFA and a health
facility under which HCFA agrees to pay for services provided by the
health facility to qualified Medicare beneficiaries in accordance with
the terms of the agreement and Medicare Regulations.
"MEDICARE REGULATIONS" means, collectively, all federal
statutes (whether set forth in Title XVIII of the Social Security Act
or elsewhere) affecting the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42
U.S.C. Sections 1395, ET SEQ.), together with all applicable provisions
of all rules, regulations, manuals, orders and administrative,
reimbursement and other guidelines of all Governmental Authorities
22
<PAGE> 28
including HHS, HCFA, the Office of the Inspector General of HHS, or any
Person succeeding to the functions of any of the foregoing (whether or
not having the force of law).
"MERGER AGREEMENT" means that certain Amended and Restated
Agreement and Plan of Merger dated as of June 10, 1998 among Health
Care and Retirement Corporation, Manor Care and Catera, as amended by
that certain First Amendment to the Amended and Restated Agreement and
Plan of Merger by and among Manor Care, Health Care and Retirement
Corporation and Catera, dated as of June 10, 1998.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"NON-OBLIGOR" means (i) (a) any Subsidiary identified as a
Non-Obligor on ITEM 6.10 of the Disclosure Schedule; PROVIDED, however
that any Subsidiary identified thereon as dormant shall cease to be a
Non-Obligor at such time as it ceases to be dormant; and PROVIDED
FURTHER that any Subsidiary identified thereon as a Subsidiary having
minority shareholders or other joint venturers or partners shall cease
to be a Non-Obligor at such time as it is wholly-owned by the Company
or its Subsidiaries, (b) any Subsidiary incorporated under the laws of
any jurisdiction other than the United States and (c), until they shall
have executed the Manor Care Subsidiary Guaranty, the Manor Care
Obligors and (ii) any Subsidiary of any Obligor created after the
Effective Date that is designated as such by such Obligor by written
notice to the Agent within 30 days of its formation or acquisition,
PROVIDED that such Subsidiary has an asset value not exceeding
$1,000,000, and PROVIDED FURTHER that the total Consolidated asset
value of all Non-Obligors, excluding those Non-Obligors described in
clause (i) above, shall not exceed $25,000,000 at any time.
"NON-U.S. BANK" means any Bank or Designated Bidder that is
not a citizen or resident of the United States of America, a
corporation, partnership or other entity created or organized in or
under the laws of the United States of America (or any jurisdiction
thereof), or any estate or trust that is subject to United States
23
<PAGE> 29
federal income taxation regardless of its source of income.
"NOTES" means the Committed Loan Notes, the Bid Loan Notes and
the Swingline Note, to the extent requested by any Bank pursuant to
SECTION 2.2.
"NOTICE OF BORROWING" means a notice in substantially
the form of EXHIBIT A.
"NOTICE OF CONVERSION/CONTINUATION" means a notice in
substantially the form of EXHIBIT B.
"OBLIGATIONS" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document,
owing by the Borrowers to any Bank, Designated Bidder, the Agent, or
any Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising.
"OBLIGOR" means the Company and each Subsidiary of the Company
other than the Non-Obligors and any Subsidiaries created or acquired
after the Effective Date as to which no request has been made for such
Subsidiaries to become party to the Guaranty pursuant to SECTION
7.1.12.
"OFFSHORE RATE" means, for any Interest Period, with respect
to Offshore Rate Committed Loans comprising part of the same Borrowing,
the rate of interest per annum determined by the Agent as follows:
Offshore Rate = IBOR
----------------------
1.00 - Eurodollar Reserve Percentage
Where,
"EURODOLLAR RESERVE PERCENTAGE" means for any day for any
Interest Period the maximum reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in effect on such day
(whether or not applicable to any Bank) under regulations issued from
time to time by the FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred
to as "Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined by the
Agent to be the arithmetic mean (rounded upward, if necessary, to the
nearest 1/16th of 1%) of the rates of
24
<PAGE> 30
interest per annum at which dollar deposits in the approximate amount
of the amount of the Loan to be made or continued as, or converted
into, an Offshore Rate Loan and having a maturity comparable to such
Interest Period would be offered by BofA to major banks in the
interbank market at their request at approximately 11:00 a.m. (New York
time) two Business Days prior to the commencement of such Interest
Period.
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
"OFFSHORE RATE COMMITTED LOAN" means any Committed Loan that
bears interest based on the Offshore Rate.
"OFFSHORE RATE LOAN" means any LIBOR Bid Loan or any Offshore
Rate Committed Loan.
"ORGANIZATION DOCUMENTS" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"OTHER TAXES" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"PARTICIPANT" has the meaning specified in SECTION 10.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"PENSION PLAN" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"PERSON" means an individual, partnership, corporation,
limited liability company, business trust, joint stock
25
<PAGE> 31
company, trust, unincorporated association, joint venture or
Governmental Authority.
"PLAN" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"PRIOR CREDIT AGREEMENTS" means that certain Amended and
Restated Credit Agreement dated as of August 2, 1994, as amended,
among, INTER ALIA, the Company and BofA, as agent, and that certain
Amended and Restated Competitive Advance and Multi-Currency Revolving
Credit Facility Agreement dated as of September 6, 1996, among, INTER
ALIA, Manor Care and The Chase Manhattan Bank, as agent.
"PRO RATA SHARE" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"REPORTABLE EVENT" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"REQUIREMENT OF LAW" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer or the
president of a Borrower, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants or Credit Extensions, the chief financial officer,
comptroller or the treasurer of a Borrower, or any other officer having
substantially the same authority and responsibility.
"RESTRUCTURING CHARGES" means up to $350,000,000 of charges
and extraordinary losses taken by the Company and its Subsidiaries
prior to March 31, 1999 in connection with the Manor Care merger.
"REVOLVING LOAN" has the meaning specified in SECTION 2.1.
26
<PAGE> 32
"REVOLVING TERMINATION DATE" means the earlier to occur
of:
(a) September 24, 2003; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its
principal functions.
"SPECIFIED LOSSES" means the Restructuring Charges, the
$13,500,000 of charges taken by Manor Care in the quarter ending May
31, 1998 and up to $25,000,000 of extraordinary losses of the Company
and its Subsidiaries in each fiscal year commencing January 1, 1999.
"SUBSIDIARY" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company; PROVIDED, HOWEVER, that during the period prior to the date
that IHH becomes a wholly owned subsidiary of the Company, IHH shall be
deemed not to be a "Subsidiary" for purposes of this Agreement;
PROVIDED FURTHER, HOWEVER, that notwithstanding the foregoing, at any
time that IHH is considered a consolidated subsidiary of the Company
for financial accounting purposes, IHH shall be considered a Subsidiary
for determining compliance with the covenants in SECTIONS 7.1.1 and
7.2.4.
"SWINGLINE" means the revolving line of credit established by
the Swingline Bank in favor of the Borrowers pursuant to SECTION 2.7.
"SWINGLINE BANK" means, when acting in such capacity, BofA,
its successors and assigns.
"SWINGLINE DOCUMENTS" means the promissory note and any other
documents executed by the Borrowers in favor of the Swingline Bank in
connection with the Swingline.
"SWINGLINE LOANS" means Loans made by the Swingline Bank to
the Borrowers pursuant to Section 2.7.
27
<PAGE> 33
"SWINGLINE NOTE" means a note, delivered to the Swingline
Bank, that evidences the Swingline Loans.
"SWINGLINE OUTSTANDINGS" means, as of any date of
determination, the aggregate principal Indebtedness of the Borrowers on
all Swingline Loans then outstanding.
"TAXES" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, (i) in the case of each Bank, each
Designated Bidder and the Agent, such taxes (including income taxes or
branch profits taxes) as are imposed on or measured by each Bank's or
Designated Bidder's net income and franchise taxes imposed by the
jurisdiction (or any political subdivision thereof) under the laws of
which such Bank, such Designated Bidder or the Agent, as the case may
be, is organized or maintains a lending office; (ii) in the case of
each Bank, each Designated Bidder and the Agent, such taxes (including
income taxes or branch profits taxes) imposed on or measured by each
Bank's or Designated Bidder's net income and franchise taxes imposed as
a result of a present or former connection between such Bank, such
Designated Bidder or the Agent and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising
solely from such Bank, such Designated Bidder or the Agent having
executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document); (iii)
in the case of each Bank, each Designated Bidder and the Agent, any
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings that are in effect and that would apply to a payment to
such Bank, such Designated Bidder or the Agent, as applicable, as of
the Effective Date; and (iv) if any Person acquires any interest in
this Agreement pursuant to the provisions hereof, including, without
limitation, a participation (whether or not by operation of law) or a
Non- U.S. Bank or the Agent in that event, being referred to as a "TAX
TRANSFEREE"), any taxes, levies, imposts, duties, deductions or
withholdings in excess of amounts treated as Taxes under this
definition in the hands of the Person from whom such interest was
acquired or prior to any change in the office in which the Loans were
made, accounted for or booked.
"364 DAY CREDIT AGREEMENT" means that certain 364 Day Credit
Agreement of even date herewith among, INTER ALIA, the Borrowers, the
Banks and the Agent.
28
<PAGE> 34
"TYPE" has the meaning specified in the definition of
"Committed Loan."
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"UNITED STATES" and "U.S." each means the United States
of America.
1.2. OTHER INTERPRETIVE PROVISIONS.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii)In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
29
<PAGE> 35
(f) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.
1.3. ACCOUNTING PRINCIPLES.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP. In the event a change in GAAP causes a change in the
results of calculation of the financial covenants, standards or terms found in
this Agreement, the Borrowers, the Agent and the Banks agree to negotiate in
good faith adjustments to the provisions of this Agreement to reflect such
change with the desired result that the criteria for evaluating the Borrowers'
financial condition shall be the same after such change as if such change had
not been made, it being understood that any such adjustments are subject to the
consent of the Majority Banks.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1. AMOUNTS AND TERMS OF COMMITMENTS. Each Bank severally agrees,
on the terms and conditions set forth herein, to make loans to the Borrowers
(each such loan, a "REVOLVING LOAN") from time to time on any Business Day
during the period from the Effective Date to the Revolving Termination Date, in
an aggregate amount not to exceed at any time outstanding the amount set forth
on SCHEDULE 2.1 (such amount as the same may be reduced under SECTION 2.8 or as
a result of one or more assignments under SECTION 10.8, the Bank's
"COMMITMENT"); PROVIDED, HOWEVER, that, after giving effect to any Committed
Borrowing of Revolving Loans, the aggregate principal amount of all outstanding
Revolving Loans, together with the aggregate principal amount of all Bid Loans
and all Swingline Loans outstanding at such time plus the Effective Amount of
all L/C Obligations, shall not at any time exceed the combined Commitments; and
PROVIDED FURTHER, that, after giving effect to such Committed Borrowing of
Revolving Loans, the aggregate principal amount of all outstanding Revolving
Loans of any Bank together with the participation of such Bank in the aggregate
principal amount of all Swingline Loans and in the Effective Amount of all L/C
30
<PAGE> 36
Obligations outstanding at such time shall not at any time exceed such Bank's
Commitment. Within the limits of each Bank's Commitment, and subject to the
other terms and conditions hereof, the Borrowers may borrow under this SECTION
2.1, prepay under SECTION 2.9 and reborrow under this SECTION 2.1.
2.2. LOAN ACCOUNTS.
(a) The Loans made by each Bank or Designated Bidder and the
Letters of Credit issued by the Issuing Bank shall be evidenced by one or more
accounts or records maintained by such Bank, Designated Bidder, Issuing Bank or
Swingline Bank, as the case may be, in the ordinary course of business. The
accounts or records maintained by the Agent, the Issuing Bank, the Swingline
Bank and each Bank or Designated Bidder shall, in the absence of manifest or
demonstrable error, be presumptive evidence of the amount of the Loans made by
the Banks and Designated Bidders to the Borrowers and the Letters of Credit
Issued for the account of the Borrowers, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrowers hereunder to pay any amount
owing with respect to the Loans or any Letter of Credit.
(b) Upon the request of any Bank or Designated Bidder made
through the Agent, the Loans made by such Bank may be evidenced by one or more
Notes, instead of or in addition to loan accounts. Each such Bank or Designated
Bidder shall endorse on the schedules annexed to its Note(s) the date, amount
and maturity of each Loan made by it and the amount of each payment of principal
made by the Borrowers with respect thereto. Each such Bank and Designated Bidder
is irrevocably authorized by the Borrowers to endorse its Note(s) and each
Bank's or Designated Bidder's record shall be conclusive absent manifest or
demonstrable error; provided, however, that the failure of a Bank or Designated
Bidder to make, or an error in making, a notation thereon with respect to any
Loan shall not limit or otherwise affect the obligations of the Borrowers
hereunder or under any such Note to such Bank or Designated Bidder.
2.3. PROCEDURE FOR COMMITTED BORROWING.
(a) Each Committed Borrowing shall be made upon a Borrower's
irrevocable telephonic notice delivered to the Agent (which notice must be
received by the Agent prior to (i) 8:00 a.m. (San Francisco time) two Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans,
and (ii) 10:00 a.m. (San Francisco time) on the requested Borrowing Date, in the
case of Base Rate Committed Loans, and which notice shall be promptly confirmed
by a written Notice of Borrowing transmitted by facsimile, in each case
specifying:
31
<PAGE> 37
(i) the amount of the Committed Borrowing, which shall be in
an aggregate minimum amount of $3,000,000 or any multiple of $1,000,000
in excess thereof;
(ii) the requested Borrowing Date, which shall be
a Business Day;
(iii) the Type of Loans comprising the Committed Borrowing;
and
(iv) the duration of the Interest Period applicable to such
Committed Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any Committed
Borrowing comprised of Offshore Rate Loans, such Interest Period shall
be one month.
(b) The Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of
each Committed Borrowing available to the Agent for the account of the
applicable Borrower at the Agent's Payment Office by 11:00 a.m. (San Francisco
time) on the Borrowing Date requested by such Borrower in funds immediately
available to the Agent. The proceeds of all such Committed Loans will then be
made available to the applicable Borrower by the Agent by wire transfer in
accordance with written instructions provided to the Agent by such Borrower of
like funds as received by the Agent.
(d) After giving effect to any Committed Borrowing, unless the
Agent shall otherwise consent, there may not be more than 15 different Interest
Periods in effect in respect of all Committed Loans then outstanding.
2.4. CONVERSION AND CONTINUATION ELECTIONS FOR COMMITTED
BORROWINGS.
(a) A Borrower may, upon irrevocable telephonic notice in the
form of EXHIBIT B to the Agent in accordance with SECTION 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate
Committed Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Committed Loans, to convert
any such Committed Loans (or any part thereof in an amount not less
than $3,000,000, or that is in an integral multiple of $1,000,000 in
excess thereof) into Committed Loans of any other Type; or
32
<PAGE> 38
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Committed Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
$3,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof);
PROVIDED, that if at any time the aggregate amount of Offshore Rate Committed
Loans in respect of any Committed Borrowing is reduced, by payment, prepayment,
or conversion of part thereof to be less than $3,000,000, such Offshore Rate
Committed Loans shall automatically convert into Base Rate Committed Loans, and
on and after such date the right of such Borrower to continue such Committed
Loans as, and convert such Committed Loans into, Offshore Rate Committed Loans
shall terminate.
(b) A Borrower shall deliver telephonic notice to be received
by the Agent not later than (i) 8:00 a.m.(San Francisco time) at least two
Business Days in advance of the Conversion/ Continuation Date, if the Committed
Loans are to be converted into or continued as Offshore Rate Committed Loans,
and (ii) 10:00 a.m. (San Francisco time) on the Conversion/Continuation Date, if
the Loans are to be converted into Base Rate Committed Loans, and which notice
shall be promptly confirmed by a written Notice of Conversion/Continuation
transmitted by facsimile, in each case specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Committed Loans to be converted
or continued;
(iii) the Type of Committed Loans resulting from the proposed
conversion or continuation; and
(iv) other than in the case of conversions into Base Rate
Committed Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Committed Loans, a Borrower has failed to select timely a new
Interest Period to be applicable to such Offshore Rate Committed Loans, or if
any Event of Default then exists, such Borrower shall be deemed to have elected
to convert such Offshore Rate Committed Loans into Base Rate Committed Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of
a Notice of Conversion/ Continuation, or, if no timely notice is provided by a
Borrower, the Agent will promptly notify
33
<PAGE> 39
each Bank of the details of any automatic conversion. All conversions and
continuations shall be made ratably according to the respective outstanding
principal amounts of the Committed Loans with respect to which the notice was
given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the
existence of an Event of Default, the Borrowers may not elect to have a
Committed Loan converted into or continued as an Offshore Rate Committed Loan.
(f) After giving effect to any conversion or continuation of
Committed Loans, unless the Agent shall otherwise consent, there may not be more
than 15 different Interest Periods in effect in respect of all Committed Loans.
2.5. BID BORROWINGS. In addition to Committed Borrowings pursuant to
SECTION 2.3, each Bank severally agrees that the Borrowers may, as set forth in
SECTION 2.6, from time to time request the Banks prior to the Revolving
Termination Date to submit offers to make Bid Loans to them; PROVIDED, HOWEVER,
that the Banks may, but shall have no obligation to, submit such offers and the
Borrowers may, but shall have no obligation to, accept any such offers, and any
Bank may designate one or more Designated Bidders to make such offers from time
to time and, if such offers are accepted by a Borrower, to make such Bid Loans;
and PROVIDED, FURTHER, that at no time shall the outstanding aggregate principal
amount of all Bid Loans made by all Banks and Designated Bidders, plus the
outstanding aggregate principal amount of all Committed Loans made by all Banks,
plus the outstanding principal amount of all Swingline Loans made by the
Swingline Bank plus the Effective Amount of all L/C Obligations exceed the
combined Commitments.
2.6. PROCEDURE FOR BID BORROWINGS.
(a) When a Borrower wishes to request the Banks to submit
offers to make Bid Loans hereunder, it shall transmit to the Agent by telephone
call followed promptly by facsimile transmission a notice in substantially the
form of EXHIBIT G (a "Competitive Bid Request") so as to be received no later
than 7:00 a.m. (San Francisco time) (x) five Business Days prior to the date of
a proposed Bid Borrowing in the case of a LIBOR Auction, or (y) two Business
Days prior to the date of a proposed Bid Borrowing in the case of an Absolute
Rate Auction, specifying:
(i) the date of such Bid Borrowing, which shall
be a Business Day;
34
<PAGE> 40
(ii) the aggregate amount of such Bid Borrowing, which shall
be a minimum amount of $5,000,000 or in multiples of $1,000,000 in
excess thereof;
(iii) whether the Competitive Bids requested are to be for
LIBOR Bid Loans or Absolute Rate Bid Loans or both; and
(iv) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of "Interest Period"
herein.
Subject to SECTION 2.6(c), the Borrowers may not request Competitive Bids for
more than five Interest Periods in a single Competitive Bid Request and may not
request Competitive Bids more than once in any period of five Business Days.
(b) Upon receipt of a Competitive Bid Request, the Agent will
promptly send to the Banks and Designated Bidders by facsimile transmission an
Invitation for Competitive Bids, which shall constitute an invitation by the
applicable Borrower to each Bank and Designated Bidder to submit Competitive
Bids offering to make the Bid Loans to which such Competitive Bid Request
relates in accordance with this SECTION 2.6.
(c) (i) Each Bank and Designated Bidder may at its discretion
submit a Competitive Bid containing an offer or offers to make Bid Loans in
response to any Invitation for Competitive Bids. Each Competitive Bid must
comply with the requirements of this SECTION 2.6(c) and must be submitted to the
Agent by facsimile transmission at the Agent's office for notices set forth on
the signature pages hereto not later than (1) 6:30 a.m. (San Francisco time)
three Business Days prior to the proposed date of Borrowing, in the case of a
LIBOR Auction or (2) 6:30 a.m. (San Francisco time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction; provided that Competitive
Bids submitted by the Agent (or any Affiliate of the Agent) in the capacity of a
Bank or Designated Bidder may be submitted, and may only be submitted, if the
Agent or such Affiliate notifies the applicable Borrower of the terms of the
offer or offers contained therein not later than (A) 6:15 a.m. (San Francisco
time) three Business Days prior to the proposed date of Borrowing, in the case
of a LIBOR Auction or (B) 6:15 a.m. (San Francisco time) on the proposed date of
Borrowing, in the case of an Absolute Rate Auction.
(ii) Each Competitive Bid shall be in substantially the form
of EXHIBIT H, specifying therein:
(A) the proposed date of Borrowing;
35
<PAGE> 41
(B) the principal amount of each Bid Loan for which such
Competitive Bid is being made, which principal amount (x) may be equal
to, greater than or less than the Commitment of the quoting Bank, (y)
must be $5,000,000 or in multiples of $1,000,000 in excess thereof, and
(z) may not exceed the principal amount of Bid Loans for which
Competitive Bids were requested;
(C) in case a Borrower elects a LIBOR Auction, the margin
above or below the LIBO Rate (the "LIBOR BID MARGIN") offered for each
such Bid Loan, expressed in multiples of 1/1000th of one basis point to
be added to or subtracted from the applicable LIBO Rate and the
Interest Period applicable thereto;
(D) in case a Borrower elects an Absolute Rate Auction, the
rate of interest per annum expressed in multiples of 1/1000th of one
basis point (the "ABSOLUTE RATE") offered for each such Bid Loan; and
(E) the identity of the quoting Bank or Designated Bidder.
A Competitive Bid may contain up to three separate offers by the quoting Bank or
Designated Bidder with respect to each Interest Period specified in the related
Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with EXHIBIT H or does
not specify all of the information required by SECTION (c)(ii) of this
Section;
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bids; or
(D) arrives after the time set forth in SECTION (C)(I).
(d) Promptly on receipt and not later than 7:00 a.m. (San
Francisco time) three Business Days prior to the proposed date of Borrowing in
the case of a LIBOR Auction, or 7:00 a.m. (San Francisco time) on the proposed
date of Borrowing, in the case of an Absolute Rate Auction, the Agent will
notify the applicable Borrower of the terms (i) of any Competitive Bid submitted
by a Bank or Designated Bidder that is in accordance with SECTION 2.6(c), and
(ii) of any Competitive Bid that amends,
36
<PAGE> 42
modifies or is otherwise inconsistent with a previous Competitive Bid submitted
by such Bank or Designated Bidder with respect to the same Competitive Bid
Request. Any such subsequent Competitive Bid shall be disregarded by the Agent
unless such subsequent Competitive Bid is submitted solely to correct a manifest
error in such former Competitive Bid and only if received within the times set
forth in SECTION 2.6(c). The Agent's notice to the applicable Borrower shall
specify (1) the aggregate principal amount of Bid Loans for which offers have
been received for each Interest Period specified in the related Competitive Bid
Request; and (2) the respective principal amounts and LIBOR Bid Margins or
Absolute Rates, as the case may be, so offered. Subject only to the provisions
of SECTIONS 4.2, 4.5 and 5.2 hereof and the provisions of this subsection (d),
any Competitive Bid shall be irrevocable except with the written consent of the
Agent given on the written instructions of the applicable Borrower.
(e) Not later than 7:30 a.m. (San Francisco time) three
Business Days prior to the proposed date of Borrowing, in the case of a LIBOR
Auction, or 7:30 a.m. (San Francisco time) on the proposed date of Borrowing, in
the case of an Absolute Rate Auction, the applicable Borrower shall notify the
Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to SECTION 2.6(d). Such Borrower shall be under no obligation to accept
any offer and may choose to reject all offers. In the case of acceptance, such
notice shall specify the aggregate principal amount of offers for each Interest
Period that is accepted. Such Borrower may accept any Competitive Bid in whole
or in part; provided that:
(i) the aggregate principal amount of each Bid Borrowing may
not exceed the applicable amount set forth in the related Competitive
Bid Request;
(ii) the principal amount of each Bid Borrowing must be
$5,000,000 or in any multiple of $1,000,000 in excess thereof;
(iii) acceptance of offers may only be made on the basis of
ascending LIBOR Bid Margins or Absolute Rates within each Interest
Period, as the case may be; and
(iv) such Borrower may not accept any offer that is described
in SECTION 2.6(c)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(f) If offers are made by two or more Banks or Designated
Bidders with the same LIBOR Bid Margins or Absolute
37
<PAGE> 43
Rates, as the case may be, for a greater aggregate principal amount than the
amount in respect of which such offers are accepted for the related Interest
Period, the principal amount of Bid Loans in respect of which such offers are
accepted shall be allocated by the Agent among such Banks or Designated Bidders
as nearly as possible (in such multiples, not less than $1,000,000, as the Agent
may deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determination by the Agent of the amounts of Bid Loans shall be
conclusive in the absence of manifest error.
(g) (i) The Agent will promptly notify each Bank or Designated
Bidder having submitted a Competitive Bid if its offer has been accepted and, if
its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be
made by it on the date of the Bid Borrowing.
(ii) Each Bank or Designated Bidder, which has received notice
pursuant to SECTION 2.6(g)(i) that its Competitive Bid has been
accepted, shall make the amounts of such Bid Loans available to the
Agent for the account of the applicable Borrower at the Agent's Payment
Office, by 11:00 a.m. (San Francisco time) in the case of Absolute Rate
Bid Loans, and by 11:00 a.m. (San Francisco time) in the case of LIBOR
Bid Loans, on such date of Bid Borrowing, in funds immediately
available to the Agent for the account of such Borrower at the Agent's
Payment Office. Promptly thereafter the proceeds of such Bid Borrowing
shall then be made available to the applicable Borrower by wire
transfer in accordance with such Borrower's instructions.
(iii) Promptly following each Bid Borrowing, the Agent shall
notify each Bank and Designated Bidder of the ranges of bids submitted
and the highest and lowest Bids accepted for each Interest Period
requested by such Borrower and the aggregate amount borrowed pursuant
to such Bid Borrowing.
(iv) From time to time, the Borrowers and the Banks and
Designated Bidders shall furnish such information to the Agent as the
Agent may request relating to the making of Bid Loans, including the
amounts, interest rates, dates of borrowings and maturities thereof,
for purposes of the allocation of amounts received from the Borrowers
for payment of all amounts owing hereunder.
(h) If, on or prior to the proposed date of Borrowing, the
Commitments have not been terminated and if, on such proposed date of Borrowing
all applicable conditions to funding referenced
38
<PAGE> 44
in SECTIONS 4.2, 4.5 and 5.2 hereof are satisfied, the Banks and Designated
Bidders whose offers a Borrower has accepted will fund each Bid Loan so
accepted. Nothing in this SECTION 2.6 shall be construed as a right of first
offer in favor of the Banks or Designated Bidders or to otherwise limit the
ability of the Borrowers to request and accept credit facilities from any Person
(including any of the Banks or Designated Bidders).
2.7. SWINGLINE.
(a) The Swingline Bank shall from time to time from the
Effective Date through the day prior to the Revolving Termination Date make
Swingline Loans to the Borrowers in such amounts as the Borrowers may request,
PROVIDED that (i) after giving effect to such Swingline Loan, the Swingline
Outstandings shall not exceed $20,000,000, (ii) after giving effect to such
Swingline Loan, the aggregate principal amount of all outstanding Loans plus the
Effective Amount of all L/C Obligations shall not exceed the combined
Commitments, and (iii) without the consent of all of the Banks, no Swingline
Loan may be made during the continuation of any Default or Event of Default. The
Borrowers may borrow, repay and reborrow under this Section. Unless notified to
the contrary by the Swingline Bank, borrowings under the Swingline may be made
in amounts which are integral multiples of $100,000 upon telephonic request by a
Responsible Officer of a Borrower made to the Agent not later than 10:00 a.m.,
San Francisco time, on the Business Day of the requested Swingline Loan (which
telephonic request shall be promptly confirmed in writing by telecopier).
Promptly after receipt of such a request for a Swingline Loan, the Agent shall
provide telephonic verification to the Swingline Bank that, after giving effect
to such request, the aggregate principal amount of all outstanding Loans plus
the Effective Amount of all L/C Obligations shall not exceed the combined
Commitments (and such verification shall be promptly confirmed in writing by
telecopier). Promptly thereafter the proceeds of such Swingline Loan shall then
be made available to the applicable Borrower by the Swingline Lender by wire
transfer in accordance with such Borrower's instructions. Unless the Swingline
Bank otherwise agrees, each repayment of a Swingline Loan shall be in an amount
which is an integral multiple of $100,000. If a Borrower instructs the Swingline
Bank to debit its demand deposit account at the Swingline Bank in the amount of
any payment with respect to Swingline Loan, or the Swingline Bank otherwise
receives repayment, after 3:00 p.m., San Francisco time, on a Business Day, such
payment shall be deemed received on the next Business Day. The Swingline Bank
shall promptly notify the Agent of the Swingline Loan Outstandings each time
there is a change therein.
(b) Swingline Loans shall bear interest at a fluctuating rate
per annum equal to the Base Rate. Interest
39
<PAGE> 45
shall be payable quarterly on the last Business Day of each calendar quarter and
in any event on the Revolving Termination Date. The Swingline Bank shall be
responsible for submitting invoices to the Borrowers for such interest. The
interest payable on Swingline Loans shall be solely for the account of the
Swingline Bank unless and until the Banks fund their participations therein
pursuant to clause (d) of this Section.
(c) The Swingline Loans shall be payable on demand made by the
Swingline Bank and in any event on the Revolving Termination Date.
(d) Upon the making of a Swingline Loan, each Bank shall be
deemed to have purchased from the Swingline Bank a participation therein in an
amount equal to that Bank's Pro Rata Share TIMES the amount of the Swingline
Loan. Upon demand made by the Swingline Bank, each Bank shall, according to its
Pro Rata Share, promptly provide to the Swingline Bank its purchase price
therefor in an amount equal to its participation therein. The obligation of each
Bank to so provide its purchase price to the Swingline Bank shall be absolute
and unconditional (except only demand made by the Swingline Bank) and shall not
be affected by the occurrence of a Default or Event of Default; PROVIDED that no
Bank shall be obligated to purchase its Pro Rata Share of (i) Swingline Loans to
the extent that Swingline Outstandings are in excess of $20,000,000 and (ii) any
Swingline Loan made (absent the consent of all of the Banks) when the Swingline
Bank has written notice that a Default or Event of Default has occurred and such
Default or Event of Default remains continuing. Each Bank that has provided to
the Swingline Bank the purchase price due for its participation in Swingline
Loans shall thereupon acquire a pro rata participation, to the extent of such
payment, in the claim of the Swingline Bank against the applicable Borrower for
principal and interest and shall share, in accordance with that pro rata
participation, in any principal payment made by such Borrower with respect to
such claim and in any interest payment made by such Borrower (but only with
respect to periods subsequent to the date such Bank paid the Swingline Bank its
purchase price) with respect to such claim.
(e) Upon any demand for payment of the Swingline Outstandings
by the Swingline Bank (unless the applicable Borrower has made other
arrangements acceptable to the Swingline Bank to repay in full all Swingline
Outstandings), such Borrower shall request a Committed Loan in an amount
sufficient to repay Swingline Outstandings. In each case, the Agent shall
automatically provide the Committed Loans made by each Bank to the Swingline
Bank (which the Swingline Bank shall then apply to the Swingline Outstandings).
In the event that the applicable Borrower fails to request a Committed Loan
within the time specified by SECTION 2.3 on any such date, the Agent may, but
40
<PAGE> 46
shall not be required to, without notice to or the consent of such Borrower,
cause Committed Loans to be made by the Banks under the Commitment in amounts
which are sufficient to reduce the Swingline Outstandings as required above. The
conditions precedent set forth in ARTICLE V shall not apply to Committed Loans
to be made by the Banks pursuant to the three preceding sentences. The proceeds
of such Committed Loans shall be paid directly to the Swingline Bank for
application to the Swingline Outstandings.
2.8. VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The
Borrowers may, upon not less than three Business Days' prior notice to the
Agent, terminate the Commitments, or permanently reduce the Commitments by an
aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in excess
thereof; unless, after giving effect thereto and to any prepayments of Committed
Loans made on the effective date thereof, (a) the then-outstanding principal
amount of the Loans plus the Effective Amount of all L/C Obligations would
exceed the amount of the combined Commitments then in effect or (b) the
Effective Amount of all L/C Obligations then outstanding would exceed the L/C
Commitment. Once reduced in accordance with this Section, the Commitments may
not be increased. Any reduction of the Commitments shall be applied to each Bank
according to its Pro Rata Share. If and to the extent specified by the Borrowers
in the notice to the Agent, some or all of the reduction in the combined
Commitments shall be applied to reduce the L/C Commitment.
2.9. OPTIONAL AND MANDATORY PREPAYMENTS; MANDATORY COMMITMENT
REDUCTIONS.
(a) Subject to SECTION 4.4, the Borrowers may, at any time or
from time to time, upon not less than one Business Day's irrevocable notice to
the Agent, ratably prepay Committed Loans in whole or in part, in minimum
amounts of $3,000,000 or any multiple of $1,000,000 in excess thereof. Such
notice of prepayment shall specify the date and amount of such prepayment and
the Type(s) of Committed Loans to be prepaid. The Agent will promptly notify
each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share
of such prepayment. If such notice is given by the Borrowers, the Borrowers
shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein, together with (except in the
case of Base Rate Committed Loans) accrued interest to each such date on the
amount prepaid and any amounts required pursuant to SECTION 4.4.
(b) Bid Loans may not be voluntarily prepaid unless consented
to by the applicable Bank or Designated Bidder.
41
<PAGE> 47
(c) If on any date the Effective Amount of L/C Obligations
exceeds the L/C Commitment, the Borrowers shall Cash Collateralize on such date
the outstanding Letters of Credit in an amount equal to the excess of the
maximum amount then available to be drawn under the Letters of Credit over the
L/C Commitment. Subject to SECTION 4.4, if on any date the aggregate principal
amount of all Loans then outstanding plus the Effective Amount of all L/C
Obligations and minus the face amount of the Letters of Credit that have been
Cash Collateralized exceeds the combined Commitments, the Borrowers shall
immediately, and without notice or demand, prepay the outstanding principal
amount of the Loans and L/C Advances by an amount equal to the applicable
excess.
2.10. REPAYMENT.
(a) REVOLVING LOANS. The Borrowers shall repay to the Banks on
the Revolving Termination Date the aggregate principal amount of Revolving Loans
outstanding on such date.
(b) BID LOANS. The Borrowers shall repay each Bid Loan on the
last day of the relevant Interest Period.
2.11. INTEREST.
(a) Each Committed Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate or the Base Rate, as the case may be (and subject to
the Borrowers' right to convert to other Types of Loans under SECTION 2.4), plus
the Applicable Margin. Each Bid Loan shall bear interest on the outstanding
principal amount thereof from the relevant Borrowing Date at a rate per annum
equal to the LIBO Rate plus (or minus) the LIBOR Bid Margin, or at the Absolute
Rate, as the case may be.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. During the existence of any Event of Default, interest
shall be paid on demand of the Agent at the request or with the consent of the
Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any
Event of Default exists or after acceleration, the Borrowers shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Obligations, at a rate per annum
which is determined by adding 2% per annum to the Applicable Margin then in
effect for such Loans and, in the case of Obligations not subject to an
Applicable Margin, at a rate per annum equal to the Base Rate plus 2%; PROVIDED,
HOWEVER, that, on and after the expiration of any Interest Period applicable to
any Offshore Rate
42
<PAGE> 48
Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Loan shall, during the continuation
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrowers to any Bank or Designated Bidder hereunder shall be
subject to the limitation that payments of interest shall not be required for
any period for which interest is computed hereunder, to the extent (but only to
the extent) that contracting for or receiving such payment by such Bank or
Designated Bidder would be contrary to the provisions of any law applicable to
such Bank or Designated Bidder limiting the highest rate of interest that may be
lawfully contracted for, charged or received by such Bank or Designated Bidder,
and in such event the Borrowers shall pay such Bank or Designated Bidder
interest at the highest rate permitted by applicable law.
2.12. FEES.
(a) ARRANGEMENT, AGENCY FEES. The Company shall pay an
arrangement fee to the Lead Arranger for the Lead Arranger's own account, and
shall pay an agency fee to the Agent for the Agent's own account, as required by
the letter agreement ("Fee Letter") between the Company and the Lead Arranger
and Agent dated August 26, 1998.
(b) FACILITY FEES. The Borrowers shall pay to the Agent for
the account of each Bank a facility fee on such Bank's Commitment (whether used
or unused), computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter, at a rate per annum equal to the Applicable Facility Fee
Rate. Such facility fee shall accrue from the Effective Date to the Revolving
Termination Date and shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter, commencing on December 31, 1998 through
the Revolving Termination Date, with the final payment to be made on the
Revolving Termination Date. The facility fees provided in this subsection shall
accrue at all times after the above-mentioned commencement date, including at
any time during which one or more conditions in Article V are not met.
(c) UTILIZATION FEES. If on any date the sum of (i) the
aggregate utilization of this Agreement and (ii) the aggregate utilization of
the 364 Day Credit Agreement shall exceed 50% (fifty percent) of the sum of (i)
the aggregate Commitments under this Agreement and (ii) the aggregate
commitments of the Banks under the 364 Day Credit Agreement, the Borrowers shall
pay to the Agent for the account of each Bank an amount equal to .05 of 1% (one
percent)of the aggregate amount of
43
<PAGE> 49
the utilization of the Agreement as of each such date, computed on a quarterly
basis in arrears on the last Business Day of each calendar quarter, commencing
on December 31, 1998 through the Revolving Termination Date, with the final
payment, if any, to be made on the Revolving Termination Date. The aggregate
outstanding principal amount of Bid Loans shall not be included in any
calculation of the aggregate utilization of this Agreement; HOWEVER, all other
Loans and all L/C Obligations shall be so included.
2.13. COMPUTATION OF FEES AND INTEREST.
(a) All computations of interest for Base Rate Committed Loans
when the Base Rate is determined by BofA's "reference rate" shall be made on the
basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.
All other computations of fees and interest shall be made on the basis of a
360-day year and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and fees shall accrue
during each period during which interest or such fees are computed from the
first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall
be conclusive and binding on the Borrowers, the Banks and Designated Bidders in
the absence of manifest or demonstrable error. The Agent will, at the request of
the Borrowers or any Bank or Designated Bidder, deliver to the Borrowers or the
Bank or Designated Bidder, as the case may be, a statement showing the
quotations used by the Agent in determining any interest rate.
2.14. PAYMENTS BY THE BORROWERS.
(a) All payments to be made by the Borrowers shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Borrowers shall be made to the Agent for
the account of the Banks and Designated Bidders at the Agent's Payment Office,
and shall be made in dollars and in immediately available funds, no later than
10:00 a.m. (San Francisco time) on the date specified herein. The Agent will
promptly distribute to each Bank (or Designated Bidder) its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Any payment received by the Agent later than 10:00 a.m. (San
Francisco time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be
44
<PAGE> 50
made on the following Business Day, and such extension of time shall in such
case be included in the computation of interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Borrowers prior
to the date on which any payment is due to the Banks or Designated Bidders that
a Borrower will not make such payment in full as and when required, the Agent
may assume that the Borrowers have made such payment in full to the Agent on
such date in immediately available funds and the Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each Bank or
Designated Bidder on such due date an amount equal to the amount then due such
Bank or Designated Bidder. If and to the extent the Borrowers have not made such
payment in full to the Agent, each Bank or Designated Bidder shall repay to the
Agent on demand such amount distributed to such Bank or Designated Bidder,
together with interest thereon at the Federal Funds Rate for each day from the
date such amount is distributed to such Bank or Designated Bidder until the date
repaid.
2.15. PAYMENTS BY THE BANKS TO THE AGENT.
(a) Unless the Agent receives notice from a Bank on or prior
to the Effective Date or, with respect to any Borrowing after the Effective
Date, at least one Business Day prior to the date of such Committed Borrowing,
that such Bank will not make available as and when required hereunder to the
Agent for the account of the Borrowers the amount of that Bank's Pro Rata Share
of the Committed Borrowing, the Agent may assume that each Bank has made such
amount available to the Agent in immediately available funds on the Borrowing
Date and the Agent may (but shall not be so required), in reliance upon such
assumption, make available to the Borrowers on such date a corresponding amount.
If and to the extent any Bank shall not have made its full amount available to
the Agent in immediately available funds and the Agent in such circumstances has
made available to the Borrowers such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Bank with respect to amounts owing under
this subsection (a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Agent shall constitute such Bank's
Loan on the date of Borrowing for all purposes of this Agreement. If such amount
is not made available to the Agent on the Business Day following the Borrowing
Date, the Agent will notify the Borrowers of such failure to fund and, upon
demand by the Agent, the Borrowers shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day elapsed since the
date of such Committed Borrowing, at a rate per annum
45
<PAGE> 51
equal to the interest rate applicable at the time to the Committed Loans
comprising such Committed Borrowing.
(b) The failure of any Bank to make any Committed Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Committed Loan on such Borrowing Date, but no Bank shall be responsible
for the failure of any other Bank to make the Committed Loan to be made by such
other Bank on any Borrowing Date.
2.16. SHARING OF PAYMENTS, ETC. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of the Committed
Loans made by it any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share,
such Bank shall immediately (a) notify the Agent of such fact, and (b) purchase
from the other Banks such participations in the Committed Loans made by them as
shall be necessary to cause such purchasing Bank to share the excess payment pro
rata with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from the purchasing Bank, such purchase
shall to that extent be rescinded and each other Bank shall repay to the
purchasing Bank the purchase price paid therefor, together with an amount equal
to such paying Bank's ratable share (according to the proportion of (i) the
amount of such paying Bank's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Borrowers agree that any Bank so purchasing a participation from another Bank
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to SECTION 10.9) with respect to
such participation as fully as if such Bank were the direct creditor of the
Borrowers in the amount of such participation. The Agent will keep records
(which shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments. Any Bank having outstanding
both Committed Loans and Bid Loans at any time a right of set-off is exercised
by such Bank and applying such setoff to the Loans shall apply the proceeds of
such set-off first to such Bank's Committed Loans, until its Committed Loans are
reduced to zero, and thereafter to its Bid Loans.
46
<PAGE> 52
ARTICLE III
THE LETTERS OF CREDIT
3.1. THE LETTER OF CREDIT SUBFACILITY.
(a) On the terms and conditions set forth herein (i) the
Issuing Bank agrees, (A) from time to time on any Business Day during the period
from the Effective Date to the Revolving Termination Date to issue Letters of
Credit for the account of the Borrowers and their Subsidiaries, and to amend or
renew Letters of Credit previously issued by it, in accordance with SECTIONS
3.2(c) and 3.2(d), and (b) to honor drafts under the Letters of Credit; and (ii)
the Banks severally agree to participate in Letters of Credit Issued for the
account of the Borrowers and their Subsidiaries; PROVIDED, that the Issuing Bank
shall not be obligated to Issue, and no Bank shall be obligated to participate
in, any Letter of Credit if as of the date of Issuance of such Letter of Credit
(the "ISSUANCE DATE") (1) the Effective Amount of all L/C Obligations plus the
outstanding principal amount of all Loans exceeds the combined Commitments, (2)
the participation of any Bank in the Effective Amount of all L/C Obligations
plus the outstanding principal amount of the Revolving Loans of such Bank plus
the participation of such Bank in the outstanding principal amount of Swingline
Loans exceeds such Bank's Commitment, or (3) the Effective Amount of L/C
Obligations exceeds the L/C Commitment. Within the foregoing limits, and subject
to the other terms and conditions hereof, the Borrowers' ability to obtain
Letters of Credit shall be fully revolving, and, accordingly, the Borrowers may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any
Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Bank from Issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit, or request that the Issuing Bank refrain from, the Issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated hereunder) not in effect on
the Effective Date, or shall impose upon the Issuing Bank any
47
<PAGE> 53
unreimbursed loss, cost or expense which was not applicable on the
Effective Date and which the Issuing Bank in good faith deems material
to it;
(ii) the Issuing Bank has received written notice from any
Bank, the Agent or the Borrowers, on or prior to the Business Day prior
to the requested date of Issuance of such Letter of Credit, that one or
more of the applicable conditions contained in Article V is not then
satisfied;
(iii) the expiry date of any requested Letter of Credit is (A)
more than 364 days after the date of Issuance, unless the Majority
Banks have approved such expiry date in writing, or (B) later than the
fifth Business Day prior to the Revolving Termination Date, unless all
of the Banks have approved such expiry date in writing;
(iv) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to the
Issuing Bank, or the Issuance of a Letter of Credit shall violate any
applicable policies of the Issuing Bank;
(v) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person; or
(vi) such Letter of Credit is in a face amount less than
$500,000 (or such lesser amount as may be acceptable to the Issuing
Bank) or to be denominated in a currency other than Dollars.
3.2. ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of a Borrower received by the Issuing Bank (with a copy sent by
such Borrower to the Agent) at least two Business Days (or such shorter time as
the Issuing Bank may agree in a particular instance in its sole discretion)
prior to the proposed date of issuance. Each such request for issuance of a
Letter of Credit shall be by facsimile, confirmed immediately in an original
writing, in the form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Bank: the proposed date of issuance of the Letter of
Credit (which shall be a Business Day); the face amount of the Letter of Credit;
the expiry date of the Letter of Credit; the name and address of the beneficiary
thereof; the documents to be presented by the beneficiary of the Letter of
Credit in case of any drawing thereunder; the full text of any certificate to be
presented by the beneficiary in case of any drawing thereunder; and such other
matters as the Issuing Bank may require.
48
<PAGE> 54
(b) At least one Business Day prior to the Issuance of any
Letter of Credit, the Issuing Bank will confirm with the Agent (by telephone or
in writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from a Borrower and, if not, the Issuing Bank will provide
the Agent with a copy thereof. Unless the Issuing Bank has received notice on or
before the Business Day immediately preceding the date the Issuing Bank is to
issue a requested Letter of Credit from the Agent (A) directing the Issuing Bank
not to issue such Letter of Credit because such issuance is not then permitted
under SECTION 3.1(a) as a result of the limitations set forth in clauses (1)
through (3) thereof or SECTION 3.1(b)(ii); or (B) that one or more conditions
specified in Article V are not then satisfied; then, subject to the terms and
conditions hereof, the Issuing Bank shall, on the requested date, issue a Letter
of Credit for the account of the applicable Borrower in accordance with the
Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding
and prior to the Revolving Termination Date, the Issuing Bank will, upon the
written request of a Borrower received by the Issuing Bank (with a copy sent by
such Borrower to the Agent) at least two days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole discretion) prior to
the proposed date of amendment, amend any Letter of Credit issued by it. Each
such request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory to the
Issuing Bank: the Letter of Credit to be amended; the proposed date of amendment
of the Letter of Credit (which shall be a Business Day); the nature of the
proposed amendment; and such other matters as the Issuing Bank may require. The
Issuing Bank shall be under no obligation to amend any Letter of Credit if: (A)
the Issuing Bank would have no obligation at such time to issue such Letter of
Credit in its amended form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed amendment
to the Letter of Credit. The Agent will promptly notify the Banks of the receipt
by it of any L/C Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that, while a Letter
of Credit is outstanding and prior to the Revolving Termination Date, at the
option of a Borrower and upon the written request of such Borrower received by
the Issuing Bank (with a copy sent by such Borrower to the Agent) at least two
days (or such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of notification of
renewal, the Issuing Bank shall be entitled to authorize the renewal of any
Letter of Credit issued
49
<PAGE> 55
by it. Each such request for renewal of a Letter of Credit shall be made by
facsimile, confirmed immediately in an original writing, in the form of an L/C
Amendment Application, and shall specify in form and detail satisfactory to the
Issuing Bank: the Letter of Credit to be renewed; the proposed date of
notification of renewal of the Letter of Credit (which shall be a Business Day);
the revised expiry date of the Letter of Credit; and such other matters as the
Issuing Bank may require. The Issuing Bank shall be under no obligation so to
renew any Letter of Credit if: (A) the Issuing Bank would have no obligation at
such time to issue or amend such Letter of Credit in its renewed form under the
terms of this Agreement; or (B) the beneficiary of any such Letter of Credit
does not accept the proposed renewal of the Letter of Credit. If any outstanding
Letter of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Bank
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this SECTION 3.2(d) upon the request of a Borrower but the
Issuing Bank shall not have received any L/C Amendment Application from a
Borrower with respect to such renewal or other written direction by such
Borrower with respect thereto, the Issuing Bank shall nonetheless be permitted
to allow such Letter of Credit to renew, and such Borrower and the Banks hereby
authorize such renewal, and, accordingly, the Issuing Bank shall be deemed to
have received an L/C Amendment Application from a Borrower requesting such
renewal.
(e) The Issuing Bank may, at its election (or as required by
the Agent at the direction of the Majority Banks), deliver any notices of
termination or other communications to any Letter of Credit beneficiary or
transferee, and take any other action as necessary or appropriate, at any time
and from time to time, in order to cause the expiry date of such Letter of
Credit to be a date not later than the Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
3.3. EXISTING BofA LETTERS OF CREDIT; RISK PARTICIPATIONS,
DRAWINGS AND REIMBURSEMENTS.
50
<PAGE> 56
(a) On and after the Effective Date, the Existing BofA Letters
of Credit shall be deemed for all purposes, including for purposes of the fees
to be collected pursuant to SECTIONS 3.8(a) and 3.8(c), and reimbursement of
costs and expenses to the extent provided herein, Letters of Credit outstanding
under this Agreement and entitled to the benefits of this Agreement and the
other Loan Documents, and shall be governed by the applications and agreements
pertaining thereto and by this Agreement. Each Bank shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank
on the Effective Date a participation in each such Letter of Credit and each
drawing thereunder in an amount equal to the product of such Bank's Pro Rata
Share times the maximum amount available to be drawn under such Letter of Credit
and the amount of such drawing, respectively. For purposes of SECTION 2.1, the
Existing BofA Letters of Credit shall be deemed to utilize pro rata the
Commitment of each Bank.
(b) Immediately upon the Issuance of each Letter of Credit in
addition to those described in SECTION 3.3(a), each Bank shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank
a participation in such Letter of Credit and each drawing thereunder in an
amount equal to the product of the Pro Rata Share of such Bank, times the
maximum amount available to be drawn under such Letter of Credit and the amount
of such drawing, respectively. For purposes of SECTION 2.1, each Issuance of a
Letter of Credit shall be deemed to utilize the Commitment of each Bank by an
amount equal to the amount of such participation.
(c) In the event of any request for a drawing under a Letter
of Credit by the beneficiary or transferee thereof, the Issuing Bank will
promptly notify the Borrowers. The applicable Borrower shall reimburse the
Issuing Bank prior to 10:00 a.m. (San Francisco time), on each date that any
amount is paid by the Issuing Bank under any Letter of Credit (each such date,
an "HONOR DATE"), in an amount equal to the amount so paid by the Issuing Bank.
In the event the Borrowers fail to reimburse the Issuing Bank for the full
amount of any drawing under any Letter of Credit by 10:00 a.m. (San Francisco
time) on the Honor Date, the Issuing Bank will promptly notify the Agent and the
Agent will promptly notify each Bank thereof, and the applicable Borrower shall
be deemed to have requested that Base Rate Committed Loans be made by the Banks
to be disbursed on the Honor Date under such Letter of Credit, subject to the
amount of the unutilized portion of the Commitments and subject to the
conditions set forth in SECTION 5.2. Any notice given by the Issuing Bank or the
Agent pursuant to this SECTION 3.3(c) may be oral if immediately confirmed in
writing (including by facsimile); provided that the lack of such an immediate
51
<PAGE> 57
confirmation shall not affect the conclusiveness or binding effect of such
notice.
(d) Each Bank shall upon any notice pursuant to SECTION 3.3(c)
make available to the Agent for the account of the relevant Issuing Bank an
amount in Dollars and in immediately available funds equal to its Pro Rata Share
of the amount of the drawing, whereupon the participating Banks shall (subject
to SECTION 3.3(e)) each be deemed to have made a Revolving Loan consisting of a
Base Rate Committed Loan to the applicable Borrower in that amount. If any Bank
so notified fails to make available to the Agent for the account of the Issuing
Bank the amount of such Bank's Pro Rata Share of the amount of the drawing by no
later than 12:00 noon (San Francisco time) on the Honor Date, then interest
shall accrue on such Bank's obligation to make such payment, from the Honor Date
to the date such Bank makes such payment, at a rate per annum equal to the
Federal Funds Rate in effect from time to time during such period. The Agent
will promptly give notice of the occurrence of the Honor Date, but failure of
the Agent to give any such notice on the Honor Date or in sufficient time to
enable any Bank to effect such payment on such date shall not relieve such Bank
from its obligations under this SECTION 3.3.
(e) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Committed Loans to a
Borrower in whole or in part, because of the Borrower's failure to satisfy the
conditions set forth in SECTION 5.2 or for any other reason, the applicable
Borrower shall be deemed to have incurred from the Issuing Bank an L/C Borrowing
in the amount of such drawing, which L/C Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at a rate per annum
equal to the Base Rate plus 2% per annum, and each Bank's payment to the Issuing
Bank pursuant to SECTION 3.3(d) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Bank in satisfaction of its participation obligation under this SECTION
3.3.
(f) Each Bank's obligation in accordance with this Agreement
to make the Revolving Loans or L/C Advances, as contemplated by this SECTION
3.3, as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be affected
by any circumstance, including any set-off, counterclaim, recoupment, defense or
other right which such Bank may have against the Issuing Bank, the Borrowers or
any other Person for any reason whatsoever; the occurrence or continuance of a
Default, an Event of Default or a Materially Adverse Effect; or any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing; PROVIDED, HOWEVER, that each
52
<PAGE> 58
Bank's obligation to make Revolving Loans under this SECTION 3.3 is subject to
the conditions set forth in SECTION 5.2. Each Bank's obligations under this
clause (f) are several and not joint or joint and several, and no Bank shall be
responsible for the failure of any other Bank to satisfy its obligations under
this clause (f).
3.4. REPAYMENT OF PARTICIPATIONS.
(a) Upon (and only upon) receipt by the Agent for the account
of the Issuing Bank of immediately available funds from the Borrowers in
reimbursement of any payment made by the Issuing Bank under the Letter of Credit
with respect to which any Bank has paid the Agent for the account of the Issuing
Bank for such Bank's participation in the Letter of Credit pursuant to SECTION
3.3 or in payment of interest thereon, the Agent will pay to each Bank, in the
same funds as those received by the Agent for the account of the Issuing Bank,
the amount of such Bank's Pro Rata Share of such funds, and the Issuing Bank
shall receive the amount of the Pro Rata Share of such funds of any Bank that
did not so pay the Agent for the account of the Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time
to return to the Borrowers, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the payments made by a
Borrower to the Agent for the account of the Issuing Bank pursuant to this
SECTION 3.4 in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Bank shall, on demand of the Agent, forthwith
return to the Agent or the Issuing Bank the amount of its Pro Rata Share of any
amounts so returned by the Agent or the Issuing Bank plus interest thereon from
the date such demand is made to the date such amounts are returned by such Bank
to the Agent or the Issuing Bank, at a rate per annum equal to the Federal Funds
Rate in effect from time to time.
3.5. ROLE OF THE ISSUING BANK.
(a) Each Bank and the Borrowers agree that, in paying any
drawing under a Letter of Credit, the Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank shall be liable to
any Bank for: any action taken or omitted in connection herewith at the request
or with the approval of the
53
<PAGE> 59
Banks (including the Majority Banks, as applicable); any action taken or omitted
in the absence of gross negligence or willful misconduct; or the due execution,
effectiveness, validity or enforceability of any L/C-Related Document.
(c) The Borrowers hereby assume all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; PROVIDED, HOWEVER, that this assumption is not intended to, and shall
not, preclude the Borrowers' pursuing such rights and remedies as they may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of SECTION 3.6; PROVIDED,
HOWEVER, anything in such clauses to the contrary notwithstanding, that the
Borrowers may have a claim against the Issuing Bank, and the Issuing Bank may be
liable to the Borrowers, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered by the Borrowers
which the Borrowers prove were caused by the Issuing Bank's willful misconduct
or gross negligence or the Issuing Bank's willful failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions of a
Letter of Credit. In furtherance and not in limitation of the foregoing: the
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary; and the Issuing Bank shall not be responsible for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
3.6. OBLIGATIONS ABSOLUTE. The obligations of the Borrowers under
this Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit, and to repay any L/C Borrowing and any drawing
under a Letter of Credit converted into Revolving Loans, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(i) any lack of validity or enforceability of this Agreement
or any L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrowers in
respect of any Letter of Credit or any other amendment or waiver of or
any
54
<PAGE> 60
consent to departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Borrowers may have at any time against any beneficiary
or any transferee of any Letter of Credit (or any Person for whom any
such beneficiary or any such transferee may be acting), the Issuing
Bank or any other Person, whether in connection with this Agreement,
the transactions contemplated hereby or by the L/C-Related Documents or
any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit; or any payment made by
the Issuing Bank under any Letter of Credit to any Person purporting to
be a trustee in bankruptcy, debtor-in-possession, assignee for the
benefit of creditors, liquidator, receiver or other representative of
or successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any Insolvency
Proceeding;
(vi) any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of the Borrowers in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, the Borrowers or a guarantor.
3.7. CASH COLLATERAL PLEDGE. Upon the request of the Agent,
(i) (A) while an Event of Default exists, if the Issuing Bank
has honored any full or partial drawing request on any Letter of Credit
and such drawing has resulted in an L/C Borrowing hereunder, or (B) if,
as of the Revolving Termination Date, any Letters of
55
<PAGE> 61
Credit may for any reason remain outstanding and partially or wholly
undrawn, or
(ii) the occurrence of the circumstances described in SECTION
2.9 requiring the Borrowers to Cash Collateralize Letters of Credit,
then, the Borrowers shall immediately Cash Collateralize the L/C
Obligations in an amount equal to such L/C Obligations.
3.8. LETTER OF CREDIT FEES.
(a) The Borrowers shall pay to the Agent for the account of
each of the Banks a letter of credit fee on average daily maximum amount
available to be drawn of the outstanding Letters of Credit, computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter
based upon Letters of Credit outstanding for that quarter as calculated by the
Agent, at a rate per annum equal to the Applicable Letter of Credit Fee Rate.
Such letter of credit fees shall be due and payable quarterly in arrears on the
last Business Day of each calendar quarter during which Letters of Credit are
outstanding, commencing on September 30, 1998, through the Revolving Termination
Date (or such later date upon which the outstanding Letters of Credit shall
expire), with the final payment to be made on the Revolving Termination Date (or
such later expiration date).
(b) The Borrowers shall pay to the Issuing Bank a letter of
credit fronting fee for each Letter of Credit Issued by the Issuing Bank equal
to .125 of 1% of the face amount (or increased face amount, as the case may be)
of such Letter of Credit. Such Letter of Credit fronting fee shall be due and
payable on each date of Issuance of a Letter of Credit.
(c) The Borrowers shall pay to the Issuing Bank from time to
time on demand the normal Issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of the Issuing Bank relating to
Letters of Credit as from time to time in effect.
3.9. UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice
for Documentary Credits as published by the International Chamber of Commerce
most recently at the time of issuance of any Letter of Credit shall (unless
otherwise expressly provided in the Letters of Credit) apply to the Letters of
Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
56
<PAGE> 62
4.1. TAXES.
(a) Any and all payments by the Borrowers to each Bank,
Designated Bidder, Tax Transferee or the Agent under this Agreement and any
other Loan Document shall be made free and clear of, and without deduction or
withholding for any Taxes. In addition, the Borrowers shall pay all Other Taxes.
(b) The Borrowers agree to indemnify and hold harmless each
Bank, Designated Bidder, and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Bank, Designated Bidder, or the Agent
and any liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Payment under this indemnification
shall be made within 30 days after the date the Bank, Designated Bidder, or the
Agent makes written demand therefor.
(c) If the Borrowers shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank, Designated Bidder, Tax Transferee or the Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section) such Bank, Designated Bidder, Tax Transferee or the
Agent, as the case may be, receives an amount equal to the sum it would
have received had no such deductions or withholdings been made;
(ii) the Borrowers shall make such deductions and
withholdings;
(iii) the Borrowers shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Borrowers shall also pay to each Bank, Designated
Bidder, Tax Transferee or the Agent for the account of such Bank,
Designated Bidder or Tax Transferee, at the time interest is paid, all
additional amounts which the respective Bank or Designated Bidder
specifies as necessary to preserve the after-tax yield the Bank,
Designated Bidder or Tax Transferee would have received if such Taxes
or Other Taxes had not been imposed.
57
<PAGE> 63
(d) Within 30 days after the date of any payment by the
Borrowers of Taxes or Other Taxes, the Borrowers shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) Within 30 days after the date that any Bank, Tax
Transferee or the Agent receives a refund of any Taxes or Other Taxes for which
it has been indemnified by the Borrowers pursuant to this Agreement (other than
through potential use of such Taxes as a Foreign tax credit on a tax return
filed by such Bank, Tax Transferee or Agent), such Bank, Tax Transferee or the
Agent, as the case may be, shall pay to the applicable Borrower such refund of
Taxes or Other Taxes. Notwithstanding the foregoing, such Bank, Tax Transferee
or the Agent shall not be required to make any payment hereunder before such
time as the Borrowers shall have made all payments or indemnities then due
pursuant to this Agreement; PROVIDED HOWEVER, that such Bank, Tax Transferee or
the Agent shall be required to make such payments promptly after such time as
the Borrowers shall have made all such payments or indemnities.
(f) Notwithstanding anything to the contrary herein, the
Borrowers shall not be required to indemnify any Bank or Tax Transferee or pay
any additional amounts to any Bank or Tax Transferee pursuant to this SECTION
4.1 to the extent that such additional amounts are attributable to a
determination by the Internal Revenue Service that such Bank or Tax Transferee
is a "conduit entity" participating in a "conduit financing arrangement" within
the meaning of Treas. Reg. Section 1.881-3.
4.2. ILLEGALITY.
(a) If the introduction of any Requirement of Law, or any
change in any Requirement of Law, or in the interpretation or administration of
any Requirement of Law, in each case occurring after the Effective Date, has
made it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Bank or its applicable Lending Office, or
such Bank's Designated Bidders in the case of LIBOR Bid Loans, to make Offshore
Rate Loans, then, on notice thereof by the Bank to the Borrowers through the
Agent, any obligation of that Bank or Designated Bidder to make Offshore Rate
Loans (including in respect of any LIBOR Bid Loan as to which the Borrowers have
accepted such Bank's or Designated Bidder's Competitive Bid, but as to which the
Borrowing Date has not arrived) shall be suspended until the Bank notifies the
Agent and the Borrowers that the circumstances giving rise to such determination
no longer exist.
58
<PAGE> 64
(b) If it is unlawful to maintain any Offshore Rate Loan, the
Borrowers shall, upon receipt of notice of such fact and demand from such Bank
(with a copy to the Agent), prepay in full such Offshore Rate Loans of that Bank
then outstanding, together with interest accrued thereon and amounts required
under SECTION 4.4, either on the last day of the Interest Period thereof, if the
Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or
immediately, if the Bank may not lawfully continue to maintain such Offshore
Rate Loan. If a Borrower is required to so prepay any Offshore Rate Committed
Loan, then concurrently with such prepayment, such Borrower shall borrow from
the affected Bank, in the amount of such repayment, a Base Rate Committed Loan.
4.3. INCREASED COSTS AND REDUCTION OF RETURN.
(a) If due to either (i) the introduction of or any change
(other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the Offshore Rate) in or in the
interpretation of any law or regulation or (ii) the compliance by that Bank with
any guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Bank of agreeing to make or making, funding or maintaining any
Offshore Rate Committed Loans or participating in Letters of Credit, or, in the
case of the Issuing Bank, any increase in the cost to the Issuing Bank of
agreeing to issue, issuing or maintaining any Letter of Credit or of agreeing to
make or making, funding or maintaining any unpaid drawing under any Letter of
Credit, then the Borrowers shall be liable for, and shall from time to time,
upon demand (with a copy of such demand to be sent to the Agent), pay to the
Agent for the account of such Bank, additional amounts as are sufficient to
compensate such Bank for such increased costs.
(b) If (i) the introduction of any Capital Adequacy
Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change
in the interpretation or administration of any Capital Adequacy Regulation by
any central bank or other Governmental Authority charged with the interpretation
or administration thereof, or (iv) compliance by the Bank (or its Lending
Office) or any corporation controlling the Bank with any Capital Adequacy
Regulation, in each case (A) not currently scheduled to become effective and (B)
occurring after the Effective Date, affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration such Bank's or such
corporation's policies with respect to capital adequacy) determines that the
amount of such capital is increased as a consequence of its Commitments, loans,
credits or obligations under this Agreement, then, upon demand of such Bank
59
<PAGE> 65
to the Borrowers through the Agent, the Borrowers shall pay to the Bank, from
time to time as specified by the Bank, additional amounts sufficient to
compensate the Bank for such increase.
4.4. FUNDING LOSSES. The Borrowers shall reimburse each Bank and hold
each Bank harmless from any loss or expense which the Bank may sustain or incur
as a consequence of:
(a) the failure of the Borrowers to make on a timely
basis any payment of principal of any Offshore Rate Loan;
(b) the failure of the Borrowers to borrow, continue or
convert an Offshore Rate Committed Loan after the Borrowers have given (or is
deemed to have given) a Notice of Borrowing or a Notice of Conversion/
Continuation;
(c) the failure of the Borrowers to make any prepayment of any
Offshore Rate Committed Loan in accordance with any notice delivered under
SECTION 2.9;
(d) the prepayment (including pursuant to SECTION 2.9) or
other payment (including after acceleration thereof) of any Offshore Rate Loan
or Absolute Rate Bid Loan on a day that is not the last day of the relevant
Interest Period; or
(e) the automatic conversion under SECTION 2.4(a) of any
Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not
the last day of the relevant Interest Period; including any such loss or expense
arising from the liquidation or reemployment of funds obtained by it to maintain
its Offshore Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained. For purposes of calculating amounts payable by
the Borrowers to the Banks under this Section and under SECTION 4.3(a), each
Offshore Rate Committed Loan made by a Bank (and each related reserve, special
deposit or similar requirement) shall be conclusively deemed to have been funded
at the IBOR used in determining the Offshore Rate for such Offshore Rate Loan by
a matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
4.5. INABILITY TO DETERMINE RATES. If the Majority Banks and the
Agent determine that for any reason adequate and reasonable means do not exist
for determining the Offshore Rate for any requested Interest Period with respect
to a proposed Offshore Rate Loan or dollar deposits in the relevant amount and
for the relevant Interest Period are not available to BofA in the interbank
Eurodollar market, the Agent will promptly so notify the Borrowers and each
Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate
Loans hereunder shall be
60
<PAGE> 66
suspended until the Agent upon the instruction of the Majority Banks revokes
such notice in writing. Upon receipt of such notice, the Borrowers may revoke
any Notice of Borrowing or Notice of Conversion/Continuation then submitted by
them. If the Borrowers do not revoke such Notice, the Banks shall make, convert
or continue the Committed Loans, as proposed by a Borrower, in the amount
specified in the applicable notice submitted by such Borrower, but such
Committed Loans shall be made, converted or continued as Base Rate Committed
Loans instead of Offshore Rate Committed Loans.
4.6. CERTIFICATES OF BANKS. Any Bank or Designated Bidder claiming
reimbursement or compensation under this Article IV shall deliver to the
Borrowers (with a copy to the Agent) a certificate setting forth in reasonable
detail the amount payable to the Bank or Designated Bidder hereunder and such
certificate shall be conclusive and binding on the Borrowers in the absence of
manifest error.
4.7. SUBSTITUTION OF BANKS. Upon the receipt by the Borrowers from
any Bank (an "Affected Bank") of a claim for compensation under SECTION 4.1 or
SECTION 4.3 or in the event any Bank whose obligations to make Offshore Loans
have been suspended under SECTION 4.2, the Borrowers may: (i) request the
Affected Bank to use its reasonable efforts to obtain a replacement bank or
financial institution satisfactory to the Borrowers to acquire and assume all or
a ratable part of all of such Affected Bank's Loans and Commitment (a
"Replacement Bank"); (ii) request one more of the other Banks to acquire and
assume all or part of such Affected Bank's Loans and Commitment; or (iii)
designate a Replacement Bank. Any such designation of a Replacement Bank under
clause (i) or (iii) shall be subject to the prior written consent of the Agent
(which consent shall not be unreasonably withheld).
4.8. AFFECTED BANK'S OBLIGATION TO MITIGATE. Each Bank and
Designated Bidder agrees that, as promptly as practicable after it becomes aware
of the occurrence of an event or the existence of a condition that would cause
(a) a Borrower to be required to pay additional amounts to it under SECTION 4.1
(b) or (c) or (b) it to be illegal for such Bank or Designated Bidder to make or
maintain any Offshore Rate Loan, it will, to the extent not inconsistent with
such Bank's or Designated Bidder's internal policies, use its reasonable efforts
to make, fund or maintain the affected Loans of such Bank or Designated Bidder
through another Lending Office of such Bank or Designated Bidder if as a result
thereof the additional moneys which would otherwise be required to be paid in
respect of such Loans pursuant to SECTION 4.1(c) would be materially reduced or
the illegality or other adverse circumstances which would otherwise require
prepayment of such Loans pursuant to SECTION 4.2, and if, as such Bank or
61
<PAGE> 67
Designated Bidder determines, in its sole discretion, the making, funding or
maintaining of such Loans through such Lending Office would not, in the judgment
of such Bank or Designated Bidder, be disadvantageous to such Bank or Designated
Bidder. The Borrowers hereby agree to pay all reasonable expenses incurred by
any Bank or Designated Bidder in utilizing another Lending Office pursuant to
this SECTION 4.8.
4.9. PRESENTATION OF CLAIMS; SURVIVAL. Each Bank will promptly
notify the Company and the Agent of any event of which it has knowledge,
occurring after the Effective Date, which will entitle such Bank to compensation
pursuant to this Article IV (each, a "TRIGGER EVENT"). Notwithstanding any other
provision of this Article IV, no Bank shall be entitled to any compensation
pursuant to this Article in respect of any Trigger Event for any period of time
in excess of 6 months prior to such notice unless such Trigger Event is
retroactive and notice is given within 6 months of such retroactive Trigger
Event.
ARTICLE V
CONDITIONS PRECEDENT
5.1. CONDITIONS OF INITIAL CREDIT EXTENSION. The obligation of each
Bank to make its initial Credit Extension hereunder is subject to the condition
that the Agent have received on or before or concurrently with the Effective
Date, all of the following, in form and substance satisfactory to the Agent and
each Bank, and in sufficient copies for each Bank:
(a) CREDIT AGREEMENT AND NOTES. This Agreement and the Notes
(to the extent requested under SECTION 2.2) executed by each party thereto;
(b) RESOLUTIONS; INCUMBENCY.
(i) Copies of the resolutions of the board of directors of the
Company and each Obligor authorizing the transactions contemplated
hereby, certified as of the Effective Date by the Secretary or an
Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Company, and each Obligor certifying the names and true signatures
of the officers of the Company or such Obligor authorized to execute,
deliver and perform, as applicable, this Agreement, and all other Loan
Documents to be delivered by it hereunder;
62
<PAGE> 68
(c) ORGANIZATION DOCUMENTS; GOOD STANDING. Each of the
following documents:
(i) the articles or certificate of incorporation and the
bylaws of the Company and each Obligor as in effect on the Effective
Date, certified by the Secretary or Assistant Secretary of the Company
or such Obligor as of the Effective Date; and
(ii) a good standing certificate for the Company and each
Obligor from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation as of a recent
date;
(d) GUARANTIES. The Guaranty executed by each of the Obligors
and the Company Guaranty executed by the Company;
(e) PRIOR CREDIT AGREEMENTS. Evidence that all commitments to
lend under the Prior Credit Agreements have been terminated and that all
principal, interest, fees and other sums then due and payable under the Prior
Credit Agreements have been paid in full;
(f) MERGER AGREEMENT. A certificate signed by a Responsible
Officer of the Company, dated as of the Effective Date, stating that: (i) the
conditions precedent to the transactions contemplated by the Merger Agreement
have been satisfied without waiver or forbearance; (ii) the representations and
warranties of the Company and Catera set forth in the Merger Agreement are true
and correct immediately before the effective time of the merger (the "EFFECTIVE
TIME") contemplated by the Merger Agreement (the "MERGER"), with the same force
and effect as if made on and as of the Effective Time, except to the extent any
inaccuracies in any such representations or warranties, individually or in the
aggregate, do not materially impair the ability of the Company or Catera to
consummate the transactions contemplated by the Merger Agreement and would not
have a Material Adverse Effect (as defined in the Merger Agreement) on the
Company (provided that any representation or warranty made by the Company and
Catera in the Merger Agreement that is qualified by Material Adverse Effect
language shall be read as if such language were not present), and except that
the accuracy of representations and warranties that by their terms speak as of
the date of the Merger Agreement or some other date will be determined as of
such date; (iii) Manor Care has certified to the Company that its
representations and warranties set forth in the Merger Agreement are true and
correct immediately before the Effective Time, with the same force and effect as
if made on and as of the Effective Time, except to the extent any inaccuracies
in any such representations or warranties, individually or in the aggregate, do
not materially impair the ability of Manor Care to
63
<PAGE> 69
consummate the transactions contemplated by the Merger Agreement and would not
have a Material Adverse Effect on Manor Care (provided that any representation
or warranty made by Manor Care in the Merger Agreement that is qualified by
Material Adverse Effect language shall be read as if such language were not
present), and except that the accuracy of representations and warranties that by
their terms speak as of the date of the Merger Agreement or some other date will
be determined as of such date; (iv) the Merger Agreement has not been amended in
any material respect; and (v) the Company has filed all necessary merger
certificates in order to consummate the transactions contemplated by the Merger
Agreement;
(g) LITIGATION. Such evidence as the Agent shall reasonably
require that (i) there exists no litigation challenging or seeking to restrain
or prohibit the consummation of the transactions contemplated by the Merger
Agreement, the making of the Loans by the Banks or the performance of the
Obligations and (ii) there exists no judgment, order, injunction, or other
restraint prohibiting the consummation of the transactions contemplated by the
Merger Agreement, the making of the Loans by the Banks or the performance of the
Obligations;
(h) LEGAL OPINIONS. Opinions of Latham & Watkins, counsel to
the Company and its Subsidiaries and R. Jeffrey Bixler, general counsel of the
Company and addressed to the Agent and the Banks, substantially in the form of
EXHIBIT D;
(i) PAYMENT OF FEES. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Effective Date, together with Attorney Costs of BofA to the extent
invoiced prior to or on the Effective Date, plus such additional amounts of
Attorney Costs as shall constitute BofA's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and BofA); including any such costs, fees and expenses arising under
or referenced in SECTIONS 2.12 and 10.4;
(j) CERTIFICATE. A certificate signed by a Responsible Officer
of the Company, dated as of the Effective Date, stating that:
(i) the representations and warranties contained in Article VI
are true and correct on and as of such date, as though made on and as
of such date;
(ii) no Default or Event of Default exists or would result
from the Credit Extension; and
64
<PAGE> 70
(iii) there has occurred since December 31, 1997, no event or
circumstance that has resulted or could reasonably be expected to
result in a Materially Adverse Effect; and
(k) OTHER DOCUMENTS. Such other approvals, opinions, documents
or materials as the Agent or any Bank may request.
5.2. CONDITIONS TO ALL CREDIT EXTENSIONS. The obligation of each
Bank to make any Committed Loan to be made by it, the obligation of the Issuing
Bank to Issue any Letter of Credit (including the initial Letter of Credit) and
the obligation of any Bank or Designated Bidder to make any Bid Loan as to which
a Borrower has accepted the relevant Competitive Bid (including its initial
Loan), is subject to the satisfaction of the following conditions precedent on
the relevant Borrowing Date or Issuance Date:
(a) NOTICE OF BORROWING; APPLICATION. The Agent shall have
received a Notice of Borrowing, in the case of each Committed Loan, or in the
case of any Issuance of any Letter of Credit, the Issuing Bank and the Agent
shall have received an L/C Application or L/C Amendment Application, as required
under SECTION 3.2;
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in Article VI shall be true and correct in all
material respects on and as of such Borrowing Date or Issuance Date with the
same effect as if made on and as of such Borrowing Date or Issuance Date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date); and
(c) NO EXISTING DEFAULT. No Default or Event of Default shall
exist or shall result from such Borrowing or Issuance.
Each Notice of Borrowing, L/C Application or L/C Amendment Application and
Competitive Bid Request submitted by the Borrowers hereunder shall constitute a
representation and warranty by the Borrowers hereunder, as of the date of each
such notice or request and as of each Borrowing Date or Issuance Date, as
applicable, that the conditions in this SECTION 5.2 are satisfied.
65
<PAGE> 71
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Agent and each Bank
that:
6.1. ORGANIZATION, POWER, AUTHORITY, ETC. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the failure so to
qualify would be reasonably likely to have a Materially Adverse Effect, and has
full power and authority and holds all requisite governmental licenses, permits
and other approvals to own and hold under lease its property and to conduct its
business substantially as currently conducted by it where the failure to hold
such licenses, permits, and other approvals would be reasonably likely to have a
Materially Adverse Effect. Each other Obligor is a corporation duly incorporated
or partnership duly formed, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation (to the extent applicable
to partnerships in any such jurisdiction), is duly qualified to do business and
is in good standing as a foreign corporation or partnership in each jurisdiction
where the failure so to qualify would be reasonably likely to have a Materially
Adverse Effect, and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to own and hold under lease
its property and to conduct its business substantially as currently conducted by
it where the failure to hold such licenses, permits, and other approvals would
be reasonably likely to have a Materially Adverse Effect. Each of the Company
and each other Obligor has full power and authority to execute, deliver and
perform its Obligations under this Agreement, the Notes and each other Loan
Document to which it is or is to be a party, to obtain Credit Extensions
hereunder, and all other actions incidental thereto, as applicable.
6.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution and
delivery by the Company and each other Obligor of this Agreement, the Notes and
each other Loan Document executed or to be executed by it, the performance by
the Company and each other Obligor of its Obligations hereunder and thereunder,
all Credit Extensions obtained hereunder by the Borrowers, the execution,
delivery and performance by each other Obligor of each Loan Document executed or
to be executed by it, and all other actions incidental to any thereof have been
duly authorized by all necessary action, do not and will not conflict with,
result in any violation of, or constitute any default under, any provision of
any Organization Document or material Contractual Obligation of the Company or
such Obligor or any law or
66
<PAGE> 72
governmental regulation or court decree or order (and, in the case of any such
material Contractual Obligation or any such law, regulation, decree or order,
such conflict, violation or default would not be reasonably likely to have a
Materially Adverse Effect) and will not result in or require the creation or
imposition of any Lien on any of the Company's or such Obligor's properties
having an aggregate value in excess of $500,000 pursuant to the provisions of
any Contractual Obligation (other than under this Agreement).
6.3. GOVERNMENT APPROVAL, REGULATION, ETC. Except as set forth in
ITEM 6.3 ("Approvals") of the Disclosure Schedule, no authorization or approval
or other action by, and no notice to or filing with, any Governmental Authority
is required for the due execution, delivery or performance by the Company or any
other Obligor of this Agreement, the Notes or any other Loan Document to which
it is or is to be a party or the consummation of any other transactions
contemplated hereby or thereby, except for authorizations, approvals, actions,
notices or filings which have been duly obtained or made and are in full force
and effect. Neither the Company nor any other Obligor is (i) an "investment
company" within the meaning of the Investment Company Act of 1940 or (ii) a
"holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of 1935.
6.4. VALIDITY, ETC. This Agreement has been duly executed and
delivered by the Borrowers and constitutes the legal, valid and binding
obligation of the Borrowers enforceable in accordance with its terms; and each
Note and each other Loan Document to which the Borrowers or any other Obligor is
or is to be a party will, on the due execution and delivery thereof, constitute
the legal, valid and binding obligation of the Borrowers or such Obligor, as the
case may be, enforceable in accordance with its terms; except, in each case, as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
6.5. FINANCIAL INFORMATION.
(a) The audited consolidated balance sheet as of December 31,
1997 and the related consolidated statements of income, of shareholders equity
and of cash flow for the fiscal year then ended, of the Company and its
Subsidiaries, audited by Ernst & Young LLP have been prepared in accordance with
GAAP consistently applied (except as disclosed therein) throughout the period
involved, present fairly the financial position of the Company and such
Subsidiaries as of the date applicable and the results of their operations and
cash flows for the period then
67
<PAGE> 73
ended and show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the date
thereof, including liabilities for taxes, material commitments and Contingent
Obligations.
(b) The unaudited consolidated balance sheet as of June 30,
1998 and the related consolidated statements of income, of shareholders equity
and of cash flow for the fiscal quarter then ended of the Company and its
Subsidiaries have been prepared in accordance with GAAP consistently applied
(except as disclosed therein) throughout the period involved and present fairly
the financial position of the Company and its Subsidiaries as of the date
applicable and results their operations and cash flows for the period then
ended.
(c) The audited consolidated balance sheet as of May 31, 1998
and the related consolidated statements of income, of shareholders equity and of
cash flow for the fiscal year then ended, of Manor Care and its Subsidiaries,
audited by Arthur Anderson LLP have been prepared in accordance with GAAP
consistently applied (except as disclosed therein) throughout the period
involved, present fairly the financial position of Manor Care and such
Subsidiaries as of the date applicable and the results of their operations and
cash flows for the period then ended and show all material indebtedness and
other liabilities, direct or contingent, of Manor Care and its consolidated
Subsidiaries as of the date thereof, including liabilities for taxes, material
commitments and Contingent Obligations.
6.6. NO MATERIALLY ADVERSE EFFECT. Since December 31, 1997, as of
the Effective Date, no event or events have occurred which, individually or in
the aggregate, has had or would be reasonably likely to have a Materially
Adverse Effect.
6.7. LITIGATION, ETC. There is no pending or, to the best knowledge
of the Company, threatened litigation, action, proceeding, order, investigation
or claim, at law or in equity or before or by any governmental department,
commission, board, bureau, agency or instrumentality affecting the Company or
any of the other Obligors, or any of their respective properties, assets or
revenues which
(a) purports to affect or pertains to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) individually or in the aggregate would reasonably be
expected to result in or constitute a Materially Adverse Effect, except as
disclosed in ITEM 6.7 ("Litigation") of the Disclosure Schedule;
68
<PAGE> 74
and none of the Company and the other Obligors is subject, to the best knowledge
of the Company, to any arbitration proceedings under collective bargaining
agreements or otherwise or any governmental investigations or inquiries which
individually or in the aggregate have resulted or would reasonably be expected
to result in or constitute a Materially Adverse Effect.
6.8. REGULATIONS T, U AND X. Neither Borrower is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock, and less than 25%
of the assets of either Borrower, individually and on a consolidated basis with
its Subsidiaries, consists of margin stock. The proceeds of any Loans made
hereunder will not be used for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regula tions T, U or X. Terms for which meanings
are provided in F.R.S. Board Regulations T, U and X have such meanings when such
terms are used in this SECTION 6.8.
6.9. PENSION AND WELFARE PLANS. Except as specifically disclosed
in ITEM 6.9 of the Disclosure Statement:
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best knowledge
of the Company, nothing has occurred which would cause the loss of such
qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Materially Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has
69
<PAGE> 75
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has
engaged in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
6.10. SUBSIDIARIES. The Obligors have no Subsidiaries except those
listed on ITEM 6.10 ("Subsidiaries") of the Disclosure Schedule and those
Subsidiaries which are permitted to have been acquired after the Effective Date
in accordance with the terms hereof.
6.11. TAXES. Each of the Company and each other Obligor has filed
all Federal and all other material tax returns and reports required by law to
have been filed by it; all such tax returns are complete and accurate in all
material respects; and the Company and each other Obligor has paid or properly
accrued for or withheld (as applicable) all taxes and governmental charges
thereby shown to be owing or required to be withheld, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
6.12. ABSENCE OF DEFAULT. Neither the Company nor any other Obligor
is in default under any governmental regulation or court decree or order or
under any law if such default would be reasonably likely to have a Materially
Adverse Effect.
6.13. LABOR CONTROVERSIES. There are no labor controversies pending
or, to the best knowledge of the Company, threatened against the Company or any
other Obligor, which would be reasonably likely to have a Materially Adverse
Effect.
6.14. OWNERSHIP OF PROPERTIES. Each of the Company and each other
Obligor has good and marketable title to, or a valid leasehold interest in, all
of its properties and assets, real and personal, of any nature whatsoever, free
and clear of all Liens, except as permitted pursuant to SECTION 7.2.3 and, as of
the Effective Date, as disclosed in ITEM 7.2.2(l)/7.2.3(a) ("Existing
Indebtedness and Existing Liens") of the Disclosure Schedule and except for
defects to title which have not had and would not, individually or in the
aggregate, reasonably be expected to have a Materially Adverse Effect.
6.15. PATENTS, TRADEMARKS, ETC. Each of the Company and each other
Obligor owns and possesses all such patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights and copyrights as the Company considers necessary for the conduct of the
businesses of the Company and the other Obligors as now conducted without, to
70
<PAGE> 76
the best knowledge of the Company after due inquiry, any infringement upon
rights of other Persons, except as may be disclosed in ITEM 6.15 ("Patent and
Trademark Infringements") of the Disclosure Schedule.
6.16. ENVIRONMENTAL MATTERS. The Company conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and as
a result thereof the Company has reasonably concluded that, except as
specifically disclosed in ITEM 6.16 ("Environmental Matters") of the Disclosure
Schedule, such Environmental Laws and Environmental Claims could not,
individually or in the aggregate, reasonably be expected to have a Materially
Adverse Effect.
6.17. ACCURACY OF INFORMATION. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Company
or any other Obligor in writing to any Bank for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of the Company or any other Obligor in writing to the Agent or any Bank will be,
true and accurate in every material respect on the date as of which such
information is dated or certified.
6.18. YEAR 2000 REPRESENTATIONS. On the basis of a comprehensive
review and assessment of Company's systems and equipment and inquiry made of
Company's material suppliers, vendors and customers, the Company reasonably
believes that the "Year 2000 problem" (that is, the inability of computers, as
well as embedded microchips in non-computing devices, to perform properly
date-sensitive functions with respect to certain dates prior to and after
December 31, 1999), including costs of remediation, will not have a Materially
Adverse Effect. The Company has developed feasible contingency plans adequate to
ensure uninterrupted and unimpaired business operation in the event of failure
of its own or, to the extent within the Company's control, a third party's
systems or equipment due to the Year 2000 problem, including those of vendors,
customers, and suppliers, as well as a general failure of or interruption in its
communications and delivery infrastructure.
71
<PAGE> 77
6.19. HEALTH CARE REGULATORY MATTERS.
(a) Except as disclosed in ITEM 6.19 ("Regulatory Matters") of
the Disclosure Schedule and except to the extent that the failure to obtain or
maintain any of the items in clauses (i) through (iv) below would not be
material to the conduct of the Company's business, each Facility or the
appropriate Subsidiary, as the case may be, has:
(i) where required by Applicable Law, obtained all required
CONs for the construction or expansion of or investment in such
Facility;
(ii) obtained and maintains all Health Facility Licenses
necessary to operate such Facility as a long-term care facility;
(iii) obtained and maintains Medicaid Certification and
Medicare Certification with respect to such Facility;
(iv) entered into and maintains its Medicaid Provider
Agreement and its Medicare Provider Agreement with respect to such
Facility; and
(v) not received, to the knowledge of the Company, any
Hill-Burton Act funds nor has any obligations with respect to
Hill-Burton Act charity care.
(b) Except as disclosed in ITEM 6.19 ("Regulatory Matters") of
the Disclosure Schedule, all necessary steps have been or are being taken to
secure the renewal of any Health Facility License, Medicaid Provider Agreement
or Medicare Provider Agreement issued with respect to any Facility that is to
expire within 60 days after the date hereof and that is material to the conduct
of the Company's business, and there is no reasonable basis known to the Company
or its Subsidiaries that any such renewal will not be obtained.
(c) Except as disclosed in ITEM 6.19 ("Regulatory Matters") of
the Disclosure Schedule, there are no proceedings pending, or, to the best of
the Company's knowledge, threatened by any Governmental Authority seeking to
modify, revoke or suspend any Health Facility License, Medicaid Provider
Agreement, Medicare Provider Agreement, Medicare Certification or Medicaid
Certification with respect to any Facility, which would be reasonably likely to
have a Materially Adverse Effect. Since the date of the most recent Medicare
Certification and Medicaid Certification with respect to each Facility, none of
the Company or any Subsidiary has taken any action that would materially
72
<PAGE> 78
adversely affect such Certification or the Medicare Provider Agreement or
Medicaid Provider Agreement with respect to such Facility.
6.20. MERGER AGREEMENT.
(a) Consummation of the transactions contemplated by the
Merger Agreement by the Company and Manor Care has not and will not:
(i) contravene the terms of any of that Person's
Organization Documents;
(ii) result in a breach or contravention of, or the creation
of any Lien under, any document evidencing any material Contractual
Obligation to which such Person is a party or any order, injunction,
writ or decree of any Governmental Authority to which such Person or
its property is subject, except where the breach, continuation or
creation would neither materially impair the ability of Manor Care to
consummate the transactions contemplated by the Merger Agreement nor
have a Material Adverse Effect (as defined in the Merger Agreement) on
the Company or Manor Care; or
(iii) violate a Requirement of Law, except where the violation
would neither materially impair the ability of Manor Care to consummate
the transactions contemplated by the Merger Agreement nor have a
Material Adverse Effect (as defined in the Merger Agreement) on the
Company or Manor Care.
(b) The Merger Agreement constitutes the legal, valid and
binding obligations of the Company and, to the Company's knowledge, Manor Care,
enforceable against such Person in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
ARTICLE VII
COVENANTS
7.1. AFFIRMATIVE COVENANTS. The Company agrees with the Agent and
each Bank that, until all Commitments have terminated and all Obligations have
been paid and performed in full, the Company will perform the Obligations set
forth in this SECTION 7.1.
73
<PAGE> 79
7.1.1. FINANCIAL INFORMATION, ETC. The Company will furnish, or will
cause to be furnished, to each Bank and to the Agent copies of the following
financial statements, reports and information:
(a) promptly when available and in any event within 100 days
after the close of each fiscal year,
(i) a consolidated balance sheet at the close of such fiscal
year, and related consolidated statements of earnings, partners' or
stockholders' equity and cash flow for such fiscal year, of the Company
and its Subsidiaries, in each case (with comparable information at the
close of and for the prior fiscal year, as available), prepared in
accordance with GAAP consistently applied and audited without
Impermissible Qualification by a firm of independent, nationally
recognized certified public accountants,
(ii) a letter report of such firm of independent certified
public accountants at the close of such fiscal year to the effect that
nothing has come to their attention that has caused them to believe
that the Company is not in compliance with any of the terms, covenants,
provisions or conditions of SECTION 7.2.4, 7.2.5 or 7.2.9 insofar as
such terms, covenants, provisions or conditions relate to accounting
matters, and
(iii) a Compliance Certificate, including computation of the
financial covenants contained in SECTION 7.2.4, calculated as of the
close of such fiscal year;
(b) promptly when available and in any event within 50 days
after the close of the fiscal quarter ending September 30, 1998, a consolidated
balance sheet at the close of such fiscal quarter, and consolidated statements
of earnings and partners' or stockholders' equity for such fiscal quarter, and
consolidated statements of earnings, partners' or stockholders' equity and cash
flow for the period commencing at the close of the previous fiscal year and
ending with the close of such fiscal quarter, of the Company and its
Subsidiaries, in each case (with comparable information at the close of and for
the corresponding fiscal quarter of the prior fiscal year and for the
corresponding portion of such prior fiscal year, in each case, as such
comparable information is available) prepared in accordance with GAAP
consistently applied, certified by the principal accounting or financial
Responsible Officer of the Company,
74
<PAGE> 80
(c) promptly when available and in any event within 50 days
after the close of each fiscal quarter (other than the last fiscal quarter of a
fiscal year), beginning with the fiscal quarter ending March 31, 1999,
(i) a consolidated balance sheet at the close of such fiscal
quarter, and consolidated statements of earnings and partners' or
stockholders' equity for such fiscal quarter, and consolidated
statements of earnings, partners' or stockholders' equity and cash flow
for the period commencing at the close of the previous fiscal year and
ending with the close of such fiscal quarter, of the Company and its
Subsidiaries, in each case (with comparable information at the close of
and for the corresponding fiscal quarter of the prior fiscal year and
for the corresponding portion of such prior fiscal year, in each case,
as such comparable information is available) prepared in accordance
with GAAP consistently applied, certified by the principal accounting
or financial Responsible Officer of the Company, and
(ii) a Compliance Certificate, including computation of the
financial covenants contained in SECTION 7.2.4, calculated as of the
close of such fiscal quarter;
(d) promptly upon receipt thereof, copies of all management
letters and other detailed information (if any) prepared with respect to the
Company by any independent public accountants in connection with each annual or
interim audit (in the case of interim audits, if any) made by such independent
public accountants of the books of the Company or any Subsidiary;
(e) promptly upon any filing thereof by the Company or any
Subsidiary with the SEC or with any securities exchange on which any of their
respective securities are then listed, any annual, periodic or special report or
registration statement that is then generally available to the public;
(f) concurrently with the delivery of financial statements
pursuant to SECTIONS 7.1.1(a) and 7.1.1(c), a statement of the amount of
proceeds of outstanding Loans which have been advanced to, or for the benefit
of, the various Obligors during the prior fiscal quarter; and
(g) such other information with respect to the financial
condition of the Company or any Subsidiary as the Agent or any Bank may from
time to time reasonably request.
75
<PAGE> 81
Each of the financial statements referred to in SECTIONS 7.1.1(a), 7.1.1(b) and
7.1.1(C) will fairly present the financial position of the Company and its
Subsidiaries as of the dates and for the periods stated therein, subject, in the
case of unaudited financial statements, to changes resulting from normal
year-end audit adjustments (none of which would, alone or in the aggregate, have
a Materially Adverse Effect).
7.1.2. MAINTENANCE OF EXISTENCES, ETC. Except as expressly otherwise
permitted by SECTION 7.2.6 or 7.2.7, the Company will:
(a) cause to be done at all times all things necessary to
maintain and preserve the existences, rights (statutory and other) and
franchises (including licenses, authorizations and permits necessary to the
operation of its businesses) of the Company, the other Obligors and their
respective Subsidiaries, in the case of the Company as a corporation and in the
case of each other Obligor and each such Subsidiary as a partnership or
corporation or other business entity, as the case may be, unless the failure so
to do in any case could not reasonably be expected to have a Materially Adverse
Effect; and
(b) as of the Effective Date and thereafter, continue to own
and hold, directly or indirectly, free and clear of all Liens (except for the
Liens permitted by clauses (c), (e) and (f) of SECTION 7.2.3), all of the
outstanding shares of capital stock (excluding directors' qualifying shares, if
any) or other equity of each Subsidiary.
7.1.3. FOREIGN QUALIFICATION. The Company will, and will cause each
other Obligor and each Subsidiary of the Obligors to, cause to be done at all
times all things necessary to be duly qualified to do business and be in good
standing as a foreign corporation or partnership (to the extent applicable to
partnerships in any such jurisdiction) in each jurisdiction where the failure so
to qualify would reasonably be expected to have a Materially Adverse Effect.
7.1.4. PAYMENT OF TAXES, ETC. The Company will, and will cause each
other Obligor and each Subsidiary of the Obligors to, pay and discharge, as the
same may become due and payable, all Federal, state, local and foreign taxes,
assessments, fees and other governmental charges or levies against it or on any
of its property or the income or profits therefrom, in excess of $500,000 in the
aggregate; PROVIDED that the foregoing shall not require the Company or any
other Obligor or Subsidiary to pay or discharge any such tax, assessment, fee,
charge or levy so long as it shall be diligently contesting the validity thereof
in good faith by appropriate proceedings and shall have set aside on its
76
<PAGE> 82
books adequate reserves in accordance with GAAP with respect thereto.
7.1.5. INSURANCE. The Company will, and will cause each other Obligor
and each Subsidiary of the Obligors to, maintain, with reputable, financially
sound insurance companies, insurance with respect to its properties and business
against such casualties and contingencies and of such types and in such amounts
as is customary in accordance with prudent business practice in the case of
similar businesses in similar locations and will from time to time upon the
reasonable request of the Agent, furnish a certificate of a Responsible Officer
of the Company setting forth the nature and extent of all insurance maintained
by the Company, the other Obligors and their Subsidiaries in accordance with
this SECTION 7.1.5.
7.1.6. NOTICE OF DEFAULT, LITIGATION, ETC. The Company will give
prompt notice (but in no event later than ten days after any Responsible Officer
of the Company has or should reasonably have obtained knowledge thereof) (with a
description in reasonable detail of the nature and period of existence thereof
and of the actions which the Company has taken and proposes to take with respect
thereto) to the Agent for distribution to each Bank of:
(a) the occurrence of any Default;
(b) any litigation, arbitration or governmental investigation
or proceeding not previously disclosed by the Company to the Banks which has
been instituted or, to the knowledge of the Company, is threatened against, the
Company or any other Obligor or any of their Subsidiaries or to which any of its
properties, assets or revenues is subject which
(i) would be reasonably likely to have a
Materially Adverse Effect, or
(ii) relates to this Agreement or any other Loan Document;
(c) the occurrence of any other circumstance of which any of
the officers of the Company has knowledge and which has a reasonable likelihood
of resulting in a Materially Adverse Effect;
(d) any material adverse development which shall occur in any
litigation, arbitration or governmental investigation or proceeding previously
disclosed by the Company to the Banks; and
(e) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate:
77
<PAGE> 83
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability of
any Pension Plan;
(iii) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by the Company or any
ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability.
7.1.7. PERFORMANCE OF OBLIGATIONS. The Company will, and will cause
each other Obligor and each Subsidiary of the Obligors to, (a) perform promptly
and faithfully all of its Obligations under each Loan Document executed by it
and (b) comply with the provisions of all contracts or agreements to which it is
a party or by which it is bound, whether oral or written, express or implied,
and pay all obligations which it has incurred or may incur pursuant to any such
contract or agreement as such obligations become due, where the failure so to
comply or make such payment would, individually or in the aggregate with all
such other failures, have a Materially Adverse Effect.
7.1.8. BOOKS AND RECORDS. The Company will, and will cause each other
Obligor and each Subsidiary of the Obligors to, keep proper books and records
reflecting all of its business affairs and transactions so that its consolidated
financial statements are in accordance with GAAP and permit the Agent and the
Banks, on reasonable notice and at reasonable times and intervals during
ordinary business hours, to visit all of its offices, discuss its financial
matters with officers of any Obligor or any Subsidiary of the Obligors and its
independent public accountants, and examine and make abstracts from any of its
books or other corporate records. The Company shall pay any reasonable fees of
such independent public accountants incurred in connection with the exercise by
the Agent and the Banks of their rights pursuant to this SECTION 7.1.8.
7.1.9. COMPLIANCE WITH LAWS, ETC. The Company will, and will cause
each other Obligor and each Subsidiary of the Obligors to, comply with the
requirements of all Applicable Laws (including, without limitation,
Environmental Laws) noncompliance with which would reasonably be expected to
have a Materially Adverse Effect.
7.1.10. MANOR CARE OBLIGORS. The Company will cause each Manor Care
Obligor to execute and deliver to the Agent for the benefit of the Banks on or
before October 31, 1998:
78
<PAGE> 84
(i) the Manor Care Subsidiary Guarantee;
(ii) copies of resolutions, incumbency certificates
organizational documents and good standing certificates responsive to
the requirements of clauses (b) and (c) of SECTION 5.1. or such other
evidence reasonably satisfactory to the Agent; and
(iii) a legal opinion of R. Jeffrey Bixler, general counsel to
the Manor Care Obligors, in the form of EXHIBIT D or otherwise
satisfactory to the Agent.
In addition, the Company will use reasonable efforts to cause each Manor Care
Obligor to become a party to the Guaranty by executing and delivering to the
Agent for the benefit of the Banks an Assumption Agreement in the form of
Exhibit 1 to the Guaranty.
7.1.11. MAINTENANCE OF PROPERTY. The Company will, and will cause each
other Obligor and each Subsidiary of the Obligors to, at their joint and several
expense, maintain and keep its properties which are used or useful to its
business in good repair, working order and condition (except for ordinary wear
and tear), and from time to time make all necessary or desirable repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times.
7.1.12. ASSUMPTION BY NEW SUBSIDIARIES.
(a) As soon as practicable following the acquisition or
creation of any Subsidiary by the Company after the Effective Date which is not
already a party to the Guaranty (other than the Manor Care Obligors) and which
is not a Non-Obligor the Company shall immediately notify the Agent thereof and,
upon the request of the Agent or the Majority Banks, shall cause any such
Subsidiary to become a party to the Guaranty by executing an Assumption
Agreement in the form of Exhibit 1 to the Guaranty to the extent permissible
under Applicable Law. In addition, the Company shall cause such Subsidiary to
provide the Agent with such additional instruments or documents, including,
without limitation, opinions of counsel, certified resolutions, incumbency
certificates, third party consents and other evidences of authority, with
respect to such Subsidiary's ratification of, and assumption of all obligations
of an Obligor under, the Guaranty as the Agent shall reasonably request.
(b) If any Non-Obligor (other than those described in clause
(i) of the definition of "Non-Obligor") has a total asset value of greater than
$1,000,000 at any fiscal quarter end, the Company shall notify the Agent thereof
within 30 days of such
79
<PAGE> 85
fiscal quarter end and, upon the request of the Agent or the Majority Banks, the
Company shall cause any such Subsidiary to become a party to the Guaranty (or,
if such Subsidiary is a Subsidiary of Manor Care, the Manor Care Subsidiary
Guaranty) by executing an Assumption Agreement in the form of Exhibit 1 to such
instrument to the extent permissible under Applicable Law. In addition, the
Company shall cause such Subsidiary to provide the Agent with such additional
instruments or documents, including, without limitation, opinions of counsel,
certified resolutions, incumbency certificates, third party consents and other
evidences of authority, with respect to such Subsidiary's ratification of, and
assumption of all obligations of an Obligor under, the Guaranty as the Agent
shall reasonably request.
7.1.13. USE OF PROCEEDS. The Borrowers shall use the proceeds of the
Extensions of Credit (i) to refinance existing Indebtedness, (ii) to support
commercial paper, (iii) for working capital and (iv) for general corporate
purposes (including Acquisitions not prohibited hereunder) of the Company and
its Subsidiaries.
7.2. NEGATIVE COVENANTS. The Company agrees with the Agent and each
Bank that, until all Commitments have terminated and all Obligations have been
paid and performed in full, the Company will perform the Obligations set forth
in this SECTION 7.2.
7.2.1. BUSINESS ACTIVITIES. The Company will not, nor will it permit
any other Obligor or any Subsidiary of the Obligors to, engage in any business
activity other than the businesses carried on by the Company and the other
Obligors and their Subsidiaries prior to the date hereof and such other
businesses as may be incidental or related thereto and other businesses relating
to health care services.
7.2.2. INDEBTEDNESS. The Company will not permit any Subsidiary of
the Company to create, incur, assume or suffer to exist or otherwise become or
be liable in respect of any Indebtedness other than (without duplication):
(a) Indebtedness in respect of the Loans, the Letters of
Credit and other Obligations or refinancings thereof;
(b) Indebtedness outstanding under the 364 Day Credit
Agreement;
(c) Indebtedness in respect of taxes, assessments or
governmental charges to the extent that payment thereof shall not at the time be
required to be made in accordance with the pro visions of SECTION 7.1.4 or which
is being contested in good faith, by diligent proceedings, for which adequate
reserves in
80
<PAGE> 86
accordance with GAAP shall have been set aside and with respect to which no Lien
has attached;
(d) Indebtedness in respect of judgments or awards not
constituting an Event of Default under SECTION 8.1.8;
(e) Indebtedness for Borrowed Money secured by Liens permitted
by SECTION 7.2.3(b), PROVIDED that the aggregate outstanding principal amount of
Indebtedness incurred pursuant to this CLAUSE (e) shall at no time exceed
$50,000,000;
(f) refinancings, renewals, replacements or extensions of
Indebtedness permitted by CLAUSE (b) or (e) above or by CLAUSE (g),(h) OR (l)
below, in an amount not greater than the amount required to repay the
Indebtedness so refinanced, and otherwise conforming to the terms of such
clauses;
(g) Indebtedness secured by Liens permitted by SECTION
7.2.3(l);
(h) Indebtedness of Subsidiaries acquired after the date
hereof existing at the time of such acquisition or attaching to assets purchased
as part of the purchase of all or substantially all the assets of a Person or
any distinct business segment of a Person and not created in anticipation of
such acquisition, so long as after giving effect to such Indebtedness no Default
shall exist hereunder;
(i) Contingent Liabilities in respect of any obligation of the
Company or any other Obligor or any Subsidiary of the Obligors permitted by this
Agreement;
(j) Indebtedness in respect of interest rate risk management
agreements;
(k) Indebtedness to the Company or any other Subsidiary;
(l) Existing Indebtedness listed on ITEM 7.2.2(l) ("Existing
Indebtedness") of the Disclosure Schedule;
(m) Capitalized Leases of the Obligors that together with all
Indebtedness outstanding under CLAUSE (o) hereof and all Capitalized Lease
Liabilities outstanding (other than Capitalized Leases under CLAUSES (h) AND (l)
hereof) do not exceed $75,000,000 in the aggregate outstanding at any one time,
so long as after giving effect to such Capitalized Leases no Default shall exist
hereunder;
(n) Indebtedness represented by notes or letters of credit
issued in connection with insurance policies and in a form
81
<PAGE> 87
substantially similar to the notes or letters of credit set forth in ITEM
7.2.2(n) of the Disclosure Schedule issued in connection with existing insurance
policies of any Subsidiary; and
(o) Other Indebtedness that together with all Capitalized
Lease Liabilities outstanding under CLAUSE (m) hereof does not exceed
$75,000,000 in the aggregate outstanding at any one time, so long as after
giving effect to such Indebtedness no Default shall exist hereunder.
7.2.3. LIENS. The Company will not, nor will it permit any other
Obligor or any Subsidiary of the Obligors to, create, incur, assume or suffer to
exist any Lien upon any of its property, revenues or assets, whether now owned
or hereafter acquired, except (without duplication):
(a) Liens encumbering the assets of the Company or any of its
Subsidiaries which were granted and in effect prior to the Effective Date to
secure Existing Indebtedness as listed in ITEM 7.2.3(a) ("Existing Liens") of
the Disclosure Schedule;
(b) Liens (excluding Capitalized Leases) in respect of
property acquired or constructed or improved by any Obligor or any Subsidiary of
the Obligors for the account of such Obligor or such Subsidiary or in connection
with CON's held by any Obligor or any Subsidiary of the Obligors, to secure
Indebtedness for Borrowed Money assumed or incurred to finance all or any part
of the purchase price or cost of construction or improvement of such property,
but any such Lien shall cover only the property so acquired or constructed and
any improvements thereto (and any real property on which such property is
located, if such property is a building, improvement or fixture);
(c) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without penalty or
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books;
(d) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books;
(e) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of bids, tenders,
trade contracts (other than
82
<PAGE> 88
for Indebtedness) statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds or performance bonds;
(f) judgment Liens not constituting an Event of Default under
SECTION 8.1.8;
(g) easements, restrictions and other minor defects of title
which are not, in the aggregate, material and which do not, individually or in
the aggregate, have a Materially Adverse Effect;
(h) extensions, renewals or replacements of any Liens
permitted under CLAUSES (a) and (b), but only if the principal amount of the
Indebtedness secured by such Lien immediately prior to such extension, renewal
or replacement is not increased and the Lien is not extended to other property;
(i) Capitalized Leases of the Obligors, with Capitalized Lease
Liabilities that together with all Capitalized Lease Liabilities outstanding
(other than Capitalized Leases under clauses (a) and (j) hereof) do not exceed
$75,000,000 in the aggregate outstanding at any one time;
(j) Capitalized Leases of Subsidiaries acquired after the date
hereof existing at the time of the acquisition and not created in anticipation
of the acquisition;
(k) leases or subleases granted to others not interfering in
any material respect with the business of any Obligor or any Subsidiary of the
Obligors, and any interest or title of a lessor under any lease permitted by
this Agreement;
(l) purchase money Liens securing payables arising from the
purchase by any Obligor or any Subsidiary of the Obligors of any equipment or
goods in the ordinary course of business, PROVIDED that such payables do not
constitute Indebtedness for Borrowed Money;
(m) rights of set off incidental to Indebtedness permitted
hereunder;
(n) Liens securing Indebtedness permitted under SECTION
7.2.2(h) attaching only to the property so acquired and not created in
anticipation of such acquisition; and
(o) other Liens securing Indebtedness otherwise permitted
under this Agreement in an aggregate amount not to exceed $25,000,000.
83
<PAGE> 89
7.2.4. FINANCIAL CONDITION.
(a) DEBT TO CAPITALIZATION. The Debt to Capitalization Ratio
shall not exceed at any time 0.55 to 1.0.
(b) FIXED CHARGE COVERAGE. The Fixed Charge Coverage Ratio for
each fiscal quarter shall not be less than 2.0 to 1.0.
(c) LEVERAGE RATIO. The Leverage Ratio of the Company and its
Subsidiaries as at the end of any fiscal quarter shall not be greater than 3.5
to 1.0.
7.2.5. RESTRICTED PAYMENTS. The Company shall not (i) declare or make
any dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock, or (ii) purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding, except that the Company may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock or make cash payments for the redemption of
fractional shares;
(b) purchase, redeem or otherwise acquire shares of its common
stock or warrants or options to acquire any such shares with the proceeds
received from the substantially concurrent issue of new shares of its common
stock;
(c) subdivide its outstanding shares of common stock into a
larger number of shares of common stock, including, without limitation, by means
of a stock split; and
(d) purchase, redeem or otherwise acquire shares of its common
stock in connection with the administration of the Company's employee benefits
program; and
(e) declare or pay cash dividends to its stockholders and
purchase, redeem or otherwise acquire shares of its capital stock or warrants,
rights or options to acquire any such shares for cash;
PROVIDED, that the cumulative amount of such dividends, purchases, redemptions
and acquisitions after June 30, 1998 shall not exceed the sum of (i)
$300,000,000 PLUS (ii) 50% of net income of the Company and its Subsidiaries
arising after June 30, 1998 (excluding the Restructuring Charges), computed on a
cumulative consolidated basis; and PROVIDED FURTHER that, in no event may any
such payment, purchase, redemption or acquisition be made if immediately after
giving effect to any such proposed
84
<PAGE> 90
action, any Default or Event of Default would exist. The provisions of this
SECTION 7.2.5 shall not be breached by the payment of any dividend within 60
days after the declaration thereof if, at such date of declaration, the making
of such payment would not have been in violation of this Section.
7.2.6. CONSOLIDATION, MERGER, ETC. The Company will not, nor will it
permit any other Obligor to, liquidate or dissolve, consolidate with, or merge
into or with, any other Person, except (i) that any other Obligor may liquidate
or dissolve voluntarily into the Company, and any other Obligor may merge with
any Subsidiary and with and into the Company so long as the Company is the
surviving entity or with or into another Obligor and (ii) in connection with any
merger permitted by SECTION 7.2.12.
7.2.7. ASSET DISPOSITIONS, ETC. The Company will not, nor will it
permit any other Obligor or any Subsidiary of the Obligors to, sell, transfer,
lease or otherwise dispose of, or grant options, warrants or other rights with
respect to, any of its assets (including accounts receivable and capital stock
or other equity of Subsidiaries but excluding Company's capital stock) to any
Person, except for:
(a) orderly liquidations of Cash Equivalent Investments;
(b) sales of nutritional products, pharmaceuticals, and other
health care related products in the ordinary course of business;
(c) sales, transfers or other dispositions to the Company or
any Subsidiary of the Company;
(d) sales by the Company or its Subsidiaries of recently
constructed development facilities in accordance with historical practices;
(e) other dispositions not in excess of (i) in any fiscal
year, 15% of the Consolidated total assets of the Company and its Subsidiaries
as of the Effective Date or (ii) over the term of this Agreement, 25% of the
Consolidated total assets of the Company and its Subsidiaries as of the
Effective Date, so long as, in each case after giving effect to any such
disposition, the Company is in compliance with all provisions of this Agreement.
In connection with any proposed disposition permitted under this SECTION 7.2.7
of a Subsidiary that is an Obligor to a Person that is neither an Obligor nor a
Subsidiary of the Obligors, the Agent shall, upon request of the Company,
provide a release of the Guaranty or, if applicable, the Manor Care Subsidiary
Guarantee,
85
<PAGE> 91
with respect to such Subsidiary, such release to be effective upon such
permitted disposition of such Subsidiary. The Company shall provide such
certification or other evidence reasonably satisfactory to the Agent
demonstrating that such proposed disposition is permitted under this SECTION
7.2.7.
7.2.8. MODIFICATION OF CERTAIN INSTRUMENTS, ORGANIZATIONAL DOCUMENTS,
ETC. The Company will not, nor will it permit any other Obligor or any
Subsidiary of the Obligors to, consent to any amendment, supplement or other
modification of any of the terms or provisions contained in any of the Obligors'
or such Subsidiaries' Organizational Documents which would be materially adverse
to the Agent and the Banks.
7.2.9. TRANSACTIONS WITH AFFILIATES. The Company will not, nor will
it permit any other Obligor or any Subsidiary of the Obligors to, enter into, or
cause, suffer or permit to exist, any arrangement or contract with any of its
other Affiliates unless such arrangement is fair and equitable to the Company or
such other Obligor or such Subsidiary and is not of a sort which would not be
entered into by a prudent Person in the position of the Company or such other
Obligor or such Subsidiary with, or which is on terms which are less favorable
than are obtainable from, any Person which is not one of its Affiliates;
provided, however, that nothing in this SECTION 7.2.9 shall restrict (i)
compensation, advances or loans payable to directors or officers of the Obligors
in the ordinary course of business consistent with prior practices or (2)
transactions approved by a majority of the disinterested members of the Board of
Directors of Company or the applicable Subsidiary.
7.2.10. AGREEMENTS RESTRICTING LIENS AND DISTRIBUTIONS. The Company
will not, nor will it permit any other Obligor or any Subsidiary of the Obligors
to, enter into any agreement (other than a Loan Document) which (a) except with
respect to specific property encumbered to secure payment of Indebtedness
related to such property permitted under SECTIONS 7.2.2 and 7.2.3, imposes
restrictions greater in the aggregate than those under this Agreement upon the
creation or assumption of any Lien upon its properties, revenues or assets,
whether now owned or hereafter acquired, or (b), except as otherwise provided in
the Manor Care Indenture, restricts the making or payment of dividends or
distributions by any other Obligor or any Subsidiary of the Obligors to the
Company or in respect of Indebtedness of the Company.
7.2.11. ENVIRONMENTAL MATTERS. The Company will not, nor will it
permit any other Obligor or any Subsidiary of the Obligors to, violate any
Environmental Law if such violation would be reasonably likely to have a
Materially Adverse Effect and, without limiting the foregoing, the Company will
not, and
86
<PAGE> 92
will not permit any Person to, except in accordance with Applicable Law, dispose
of any Hazardous Material into, onto or from any real property owned or operated
by the Company or any other Obligor or any Subsidiary of the Obligors, nor allow
any Lien imposed pursuant to any law, regulation or order relating to Hazardous
Materials or the disposal thereof to remain on such real property, which
disposal or Lien would be reasonably likely to have a Materially Adverse Effect.
7.2.12. ACQUISITIONS. The Company will not, nor will it permit any of
its Subsidiaries to, make any Acquisition unless:
(i) immediately before and after giving effect to the
consummation of each Acquisition, no Default has occurred and is
continuing or will exist;
(ii) for each such Acquisition involving the purchase of a
majority of the stock of another party, the prior, effective written
consent or approval to such Acquisition of the board of directors or
equivalent governing body of the other party or parties has been
obtained; and
(iii) the aggregate value of the cash or other non-stock
consideration (including Indebtedness assumed by the Company or its
Subsidiaries in connection therewith) for all such Acquisitions (other
than those described in the following proviso) does not exceed
$150,000,000 in any fiscal year;
PROVIDED, HOWEVER, that notwithstanding the foregoing, any Subsidiary of the
Company may be merged or consolidated with or into the Company if the Company
shall be the continuing or surviving corporation or with or into any other
Subsidiary of the Company.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" shall mean any of
the events set forth in this SECTION 8.1.
8.1.1. NON-PAYMENT OF OBLIGATIONS. The Company or any other Obligor
shall default in the payment or prepayment when due (whether at stated maturity
or by acceleration, mandatory prepayment or otherwise) of any principal of, or
any interest in respect of, any Loan or any other amount due under any Loan
Document, and, in the case of interest or any other amount due, continuance of
such default for 3 Business Days or more.
87
<PAGE> 93
8.1.2. NON-PERFORMANCE OF CERTAIN COVENANTS. The Company shall
default in the due performance or observance of any of its obligations under
SECTION 7.1.6, 7.1.11, 7.2.2, 7.2.3, 7.2.4, 7.2.6, 7.2.7, 7.2.8 or 7.2.9 and (if
such default can be remedied within the grace period provided in this SECTION
8.1.2 by the Company) such default shall continue unremedied for a period of 5
days after the earlier of (x) notice thereof having been given to the Company by
the Agent or any Bank or (y) the date on which a Responsible Officer of the
Company had actual knowledge of such default.
8.1.3. NON-PERFORMANCE OF OTHER OBLIGATIONS. Any Obligor shall
default in the due performance and observance of any other agreement contained
herein or in any other Loan Document executed by it, and (if such default does
not otherwise constitute an Event of Default under this ARTICLE VIII and can be
remedied within the grace period provided in this SECTION 8.1.3 such Obligor)
such default shall continue unremedied for a period of 30 days after the earlier
of (x) notice thereof having been given to the Company by the Agent or any Bank
or (y) the date on which a Responsible Officer of the applicable Obligor had
actual knowledge of such default.
8.1.4. BANKRUPTCY, INSOLVENCY, ETC. The Company or a Material Group
of Subsidiaries shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Company or any
Material Group of Subsidiaries or any property of any thereof, or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Material Group of
Subsidiaries or for a substantial part of the property of any thereof, and such
trustee, receiver, sequestrator or other custodian shall not be discharged
within 60 days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Company or any Material Group of Subsidiaries and,
if such case or proceeding is not commenced by the Company or any Material Group
of Subsidiaries, such case or proceeding shall be consented to or acquiesced in
by the Company or any Material
88
<PAGE> 94
Group of Subsidiaries or shall result in the entry of an order for relief or
shall remain for 60 days undismissed; or
(e) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
8.1.5. BREACH OF WARRANTY. Any representation or warranty of the
Company hereunder or of the Company or any other Obligor in any other Loan
Document or any other writing furnished by or on behalf of the Company or any
other Obligor to the Agent or any Bank for the purposes of or in connection with
this Agreement or any such Loan Document is or shall be incorrect when made or
deemed made in any material respect.
8.1.6. CROSS DEFAULT. The Company or any Obligor (i) fails to make
any payment in respect of any Indebtedness for Borrowed Money having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $10,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (ii) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity.
8.1.7. ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$5,000,000; (ii) except as disclosed on ITEM 6.9 of the Disclosure Schedule, the
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $5,000,000; or (iii) the Company or any ERISA Affiliate shall fail
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$5,000,000.
89
<PAGE> 95
8.1.8. JUDGMENTS. Any undischarged, unstayed, unbonded final
judgments or orders for the payment of money in an aggregate amount in excess of
1% of Consolidated total assets (in each case, after giving effect to insurance,
if any, available with respect thereto) shall be rendered against the Company or
any Obligor which remain in effect for more than 60 days.
8.1.9. IMPERMISSIBLE CHANGE IN CONTROL. Any Impermissible Change in
Control shall occur.
8.1.10. GUARANTOR DEFAULTS. Any Obligor fails in any material respect
to perform or observe any term, covenant or agreement in the Guaranty or, if
applicable, the Manor Care Subsidiary Guaranty subject, in each case, to the
grace periods set forth in this Article VIII that would otherwise be applicable
to the Company; or the Guaranty or the Manor Care Subsidiary Guaranty is for any
reason partially (including with respect to future advances) or wholly revoked
or invalidated, or otherwise ceases to be in full force and effect, or any
Obligor or any other Person contests in any manner the validity or
enforceability thereof or denies that it has any further liability or obligation
thereunder.
8.1.11. LOSS OF LICENSES. Any Governmental Authority revokes or fails
to renew any material license, permit or franchise of the Company or any
Subsidiary, or the Company or any Subsidiary for any reason loses any material
license, permit or franchise, or the Company or any Subsidiary suffers the
imposition of any restraining order, escrow, suspension or impound of funds in
connection with any proceeding (judicial or administrative) with respect to any
material license, permit or franchise, in each case which would be reasonably
likely to have a Materially Adverse Effect.
8.2. REMEDIES. If any Event of Default occurs, the Agent
shall, at the request of, or may, with the consent of, the
Majority Banks,
(a) declare the commitment of each Bank to make Loans and any
obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available for drawing under any
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable, and declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and
90
<PAGE> 96
all other amounts owing or payable hereunder or under any other Loan Document to
be immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in clauses
(a) through (d) of SECTION 8.1.4, the obligation of each Bank to make Loans and
any obligation of the Issuing Bank to Issue Letters of Credit shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable without further act of the Agent, the Issuing Bank or any Bank.
8.3. RIGHTS NOT EXCLUSIVE. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
ARTICLE IX
THE AGENT
9.1. APPOINTMENT AND AUTHORIZATION.
(a) Each Bank hereby irrevocably (subject to SECTION 9.9)
appoints, designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
(b) 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 until such time and except for so long as the Agent may agree at the
request of the Majority Banks
91
<PAGE> 97
to act for such Issuing Bank with respect thereto; PROVIDED, HOWEVER, that the
Issuing Bank shall have all of the benefits and immunities (i) provided to the
Agent in this Article IX 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 application and agreements for letters of credit
pertaining to the Letters of Credit as fully as if the term "Agent", as used in
this Article IX, included the Issuing Bank with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with respect to
the Issuing Bank.
9.2. DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.3. LIABILITY OF AGENT. None of the Agent-Related Persons shall
(i) be liable to the Banks for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Company or
any Subsidiary or Affiliate of the Company, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Company or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent- Related Person shall be under any obligation to any Bank
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
9.4. RELIANCE BY AGENT.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and
92
<PAGE> 98
upon advice and statements of legal counsel (including counsel to the
Borrowers), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Majority
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in SECTION 5.1, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
9.5. NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Borrowers referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its receipt
of any such notice. The Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Majority Banks in
accordance with Article VIII; PROVIDED, HOWEVER, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
9.6. CREDIT DECISION. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and
93
<PAGE> 99
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Company and its Subsidiaries hereunder. Each Bank also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Banks by the Agent, the Agent
shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Company which may come
into the possession of any of the Agent-Related Persons.
9.7. INDEMNIFICATION OF AGENT. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrowers and without limiting the obligation of the Borrowers to do so), pro
rata, from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER,
that no Bank shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Bank shall reimburse the Agent upon demand for its ratable share of any
costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrowers. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
9.8. AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory,
94
<PAGE> 100
underwriting or other business with the Company and its Subsidiaries and
Affiliates as though BofA were not the Agent or the Issuing Bank hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent or the Issuing Bank, and the terms "Bank" and
"Banks" include BofA in its individual capacity.
9.9. SUCCESSOR AGENT. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon 60 days' notice to the Banks and the
Company. If the Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks which successor
agent shall be approved by the Company (which approval shall not be unreasonably
withheld or delayed). If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks and the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article IX and
SECTIONS 10.4 and 10.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Majority Banks appoint a successor agent as provided for above. Notwithstanding
the foregoing, however, BofA may not be removed as the Agent at the request of
the Majority Banks unless BofA shall also simultaneously be replaced as "Issuing
Bank" hereunder pursuant to documentation in form and substance reasonably
satisfactory to BofA.
9.10. WITHHOLDING TAX.
(a) If any Non-U.S. Bank claims exemption from, or a reduction
of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Non-U.S.
Bank agrees with and in favor of the
95
<PAGE> 101
Borrowers and the Agent, to deliver to the Borrowers and the Agent:
(i) if such Non-U.S. Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 or any successor form, before
the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement or such other time as
may be required by any change in law if so requested by the Borrowers;
(ii) if such Non-U.S. Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Non-U.S. Bank, two properly completed and executed copies of IRS Form
4224 or any successor form before the payment of any interest is due in
the first taxable year of such Non-U.S. Bank and in each succeeding
taxable year of such Non-U.S. Bank during which interest may be paid
under this Agreement or such other time as may be required by any
change in law if so requested by the Borrowers, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Non-U.S. Bank agrees to promptly notify the Borrowers and the Agent of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Non-U.S. Bank claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing IRS Form 1001
and such Non-U.S. Bank sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of the Borrowers to such Non-U.S. Bank,
such Non- U.S. Bank agrees to notify the Borrowers and the Agent of the
percentage amount in which it is no longer the beneficial owner of Obligations
of the Borrowers to such Non-U.S. Bank. To the extent of such percentage amount,
the Borrowers and the Agent will treat such IRS Form 1001 as no longer valid.
(c) If any Non-U.S. Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrowers to such Non-U.S. Bank, such Non-U.S. Bank agrees to undertake sole
96
<PAGE> 102
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Non-U.S. Bank is entitled to a reduction in the
applicable withholding tax, the Borrowers and the Agent may withhold from any
interest payment to such Non-U.S. Bank an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) of this Section are not delivered to
the Borrowers and the Agent, then the Agent may withhold from any interest
payment to such Non-U.S. Bank not providing such forms or other documentation an
amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Non-U.S.
Bank (because the appropriate form was not delivered, was not properly executed,
or because such Non-U.S. Bank failed to notify the Borrowers or the Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Non-U.S. Bank shall
indemnify the Borrowers and the Agent fully for all amounts paid, directly or
indirectly, by the Borrowers and the Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Borrowers and the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Non-U.S. Banks under this subsection shall survive the payment of all
Obligations and the resignation or replacement of the Agent.
9.11. DOCUMENTATION AGENTS AND SYNDICATION AGENT. None of the Banks
identified on the facing page or signature pages of this Agreement as a
"documentation agent" or "syndication agent" shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Banks as such. Without limiting the foregoing, none of
the Banks so identified as a "documentation agent" or "syndication agent" shall
have or be deemed to have any fiduciary relationship with any Bank. Each Bank
acknowledges that it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
ARTICLE X
MISCELLANEOUS
97
<PAGE> 103
10.1. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Borrowers therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Banks (or by the Agent
at the written request of the Majority Banks) and the Borrowers and acknowledged
by the Agent, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks and the Borrowers and acknowledged by the Agent, do any
of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to SECTION 8.2);
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan (except that payment of the default rate of interest under
SECTION 2.11(c) may be waived by Majority Banks), or (subject to clause (ii)
below) any fees or other amounts payable hereunder or under any other Loan
Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder;
(e) amend this Section, or SECTION 2.16, or any provision
herein providing for consent or other action by all Banks; or
(f) except as provided in SECTION 7.2.7 or in accordance with
their respective terms, terminate the Guaranty or the Manor Care Subsidiary
Guaranty or release a Material Group of Subsidiaries from their obligations
under the Guaranty or the Manor Care Subsidiary Guaranty;
and, PROVIDED FURTHER, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
10.2. NOTICES.
98
<PAGE> 104
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, PROVIDED that any matter transmitted by the Borrowers by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 10.2, and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices on SCHEDULE
10.2; or, as directed to the Borrowers or the Agent, to such other address as
shall be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be designated by
such party in a written notice to the Borrowers and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until actually
received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Borrowers. The Agent and the Banks shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Borrowers to give such notice and the Agent and the Banks shall not have any
liability to the Borrowers or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Borrowers to repay the Loans shall not be affected
in any way or to any extent by any failure by the Agent and the Banks to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Agent and the Banks of a confirmation which is at variance with the terms
understood by the Agent and the Banks to be contained in the telephonic or
facsimile notice.
10.3. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
10.4. COSTS AND EXPENSES. The Company shall:
99
<PAGE> 105
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) within
five Business Days after demand (subject to SECTION 5.1(g)) for all reasonable
costs and expenses incurred by BofA (including in its capacity as Agent) in
connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by BofA (including in its capacity as Agent)
with respect thereto; and
(b) pay or reimburse the Agent, the Lead Arranger and each
Bank within five Business Days after demand (subject to SECTION 5.1(g)) for all
costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
10.5. COMPANY INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Borrowers shall indemnify and hold the
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the Loans or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES");
PROVIDED, that the Borrowers shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting from the
gross negligence or willful misconduct of such
100
<PAGE> 106
Indemnified Person. The agreements in this Section shall survive
payment of all other Obligations.
10.6. PAYMENTS SET ASIDE. To the extent that the Borrowers makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
10.7. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrowers may not assign or
transfer any of their rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
10.8. ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) Any Bank may, with the written consent of the Company at
all times other than during the existence of an Event of Default and the Agent,
which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no written consent of
the Company or the Agent shall be required in connection with any assignment and
delegation by a Bank to another Bank or to an Eligible Assignee that is an
Affiliate of such Bank) (each an "ASSIGNEE") all, or any ratable part of all, of
the Loans, the Commitments and the other rights and obligations of such Bank
hereunder, in a minimum amount of $10,000,000 or, if less, the entire amount of
such Bank's Commitment; PROVIDED, HOWEVER, that the Company and the Agent may
continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee, shall have been given to the Company and the Agent by
such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered
to the Company and the Agent an Assignment and Acceptance in the form of EXHIBIT
I ("ASSIGNMENT AND ACCEPTANCE") together with any Note or Notes subject to such
assignment and (iii) the assignor Bank or
101
<PAGE> 107
Assignee has paid to the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance and payment
of the processing fee, (and provided that it consents to such assignment in
accordance with SECTION 10.8(a)), the Company shall execute and deliver to the
Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and,
if the assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held by
such Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank or Designated Bidder may at any time sell to one
or more commercial banks or other Persons not Affiliates of the Company (a
"PARTICIPANT") participating interests in any Loans, the Commitment of that Bank
and the other interests of that Bank or Designated Bidder (the "ORIGINATOR")
hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that (i) the
Originator's obligations under this Agreement shall remain unchanged, (ii) the
Originator shall remain solely responsible for the performance of such
obligations, (iii) the Company and the Agent shall continue to deal solely and
directly with the Originator in connection with the Originator's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
102
<PAGE> 108
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to SECTION 10.1. In the case of any such
participation, the Participant shall be entitled to the benefit of SECTIONS 4.1,
4.3 and 10.5 as though it were also a Bank or Designated Bidder (as the case may
be) hereunder, and if amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank or Designated Bidder (as the case
may be) under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Bank or Designated Bidder may at any time create a security interest in, or
pledge, all or any portion of its rights under and interest in this Agreement
and the Notes held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CAR ss.203.14, and such
Federal Reserve Bank may enforce such pledge or security interest in any manner
permitted under applicable law.
10.9. DESIGNATED BIDDERS. Any Bank may designate one Designated
Bidder to have a right to offer and make Bid Loans pursuant to SECTION 2.6;
PROVIDED, HOWEVER, that (i) no such Bank may make more than one such
designation, (ii) each such Bank making any such designation shall retain the
right to make Bid Loans, and (iii) the parties to each such designation shall
execute and deliver to the Agent a Designation Agreement. Upon its receipt of an
appropriately completed Designation Agreement executed by a designating Bank and
a designee representing that it is a Designated Bidder, the Agent will accept
such Designation Agreement and give prompt notice thereof to the Company,
whereupon such designation of such Designated Bidder shall become effective and
shall become a party to this Agreement as a "Designated Bidder."
10.10. CONFIDENTIALITY. Each Bank and Designated Bidder agrees to
take and to cause its Affiliates to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information identified
as "confidential" or "secret" by the Company and provided to it by the Company
or any Subsidiary, or by the Agent on such Company's or Subsidiary's behalf,
under this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection with
other business now or hereafter existing or contemplated with the Company or any
Subsidiary; except to the extent such information (i) was or becomes generally
available to the public other than
103
<PAGE> 109
as a result of disclosure by the Bank or Designated Bidder, or (ii) was or
becomes available on a non- confidential basis from a source other than the
Company, provided that such source is not bound by a confidentiality agreement
with the Company known to the Bank or Designated Bidder; PROVIDED, HOWEVER, that
any Bank or Designated Bidder may disclose such information (A) at the request
or pursuant to any requirement of any Governmental Authority to which the Bank
or Designated Bidder is subject or in connection with an examination of such
Bank or Designated Bidder by any such authority; (B) pursuant to subpoena or
other court process; (C) subject to appropriate confidentiality protections,
when required to do so in accordance with the provisions of any applicable
Requirement of Law; (D) subject to appropriate confidentiality protections, to
the extent reasonably required in connection with any litigation or proceeding
to which the Agent, any Bank, Designated Bidder or their respective Affiliates
may be party; (E) to the extent reasonably required in connection with the
exercise of any remedy hereunder or under any other Loan Document; (F) to such
Bank's or Designated Bidder's independent auditors and other professional
advisors; (G) to any Participant or Assignee, actual or potential, provided that
such Person agrees in writing to keep such information confidential to the same
extent required of the Banks hereunder; (H) as to any Bank or Designated Bidder
or its Affiliate, as expressly permitted under the terms of any other document
or agreement regarding confidentiality to which the Company or any Subsidiary is
party or is deemed party with such Bank or Designated Bidder or such Affiliate;
and (I) to its Affiliates subject to confidentiality and only for use in
connection herewith.
10.11. SET-OFF. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank and Designated Bidder is authorized at any time and from
time to time, without prior notice to the Borrowers, any such notice being
waived by the Borrowers to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time owing by, such
Bank or Designated Bidder to or for the credit or the account of the Borrowers
against any and all Obligations owing to such Bank or Designated Bidder, now or
hereafter existing, irrespective of whether or not the Agent or such Bank or
Designated Bidder shall have made demand under this Agreement or any Loan
Document and although such Obligations may be contingent or unmatured. Each Bank
and Designated Bidder agrees promptly to notify the Borrowers and the Agent
after any such set-off and application made by such Bank or Designated Bidder;
PROVIDED, HOWEVER, that the failure to give such notice shall not affect the
validity of such set-off and application.
104
<PAGE> 110
10.12. NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Bank and
Designated Bidder shall notify the Agent in writing of any changes in the
address to which notices to the Bank and Designated Bidder should be directed,
of addresses of any Lending Office, of payment instructions in respect of all
payments to be made to it hereunder and of such other administrative information
as the Agent shall reasonably request.
10.13. COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.14. SEVERABILITY. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
10.15. NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrowers, the Banks, the
Designated Bidders, the Agent and the Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
10.16. GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE BANKS AND THE BORROWER
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, THE AGENT,
THE DESIGNATED BIDDERS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. THE BORROWERS, THE AGENT, THE DESIGNATED BIDDERS AND THE BANKS
EACH WAIVE PERSONAL SERVICE OF
105
<PAGE> 111
ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
10.17. WAIVER OF JURY TRIAL. THE BORROWERS, THE BANKS, THE DESIGNATED
BIDDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON,
PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS,
OR OTHERWISE. THE BORROWERS, THE BANKS, THE DESIGNATED BIDDERS AND THE AGENT
EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.18. ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Borrowers,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
106
<PAGE> 112
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
HCR MANOR CARE, INC.
By:
--------------------------
Title:
----------------------
MANOR CARE, INC.
By:
--------------------------
Title:
----------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
--------------------------
Title:
----------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By:
--------------------------
Title:
----------------------
107
<PAGE> 113
SCHEDULE 2.1
COMMITMENTS AND PRO RATA SHARES
-------------------------------
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
<S> <C> <C>
Bank of America National
Trust and Savings
Association $165,625,000 33.125%
The Toronto - 62,500,000 12.500%
Dominion Bank
The Chase 62,500,000 12.500%
Manhattan Bank
Deutsche Bank AG 46,875,000 9.375%
The Huntington 31,250,000 6.250%
National Bank
Bank of Montreal 18,750,000 3.750%
The Bank of New 18,750,000 3.750%
York
NBD Bank 18,750,000 3.750%
The First National 18,750,000 3.750%
Bank of Maryland
National City Bank 18,750,000 3.750%
Sun Trust Bank, 18,750,000 3.750%
Central Florida,
National
Association
Wachovia Bank, 18,750,000 3.750%
N.A
TOTAL $500,000,000 100%
</TABLE>
<PAGE> 114
EXHIBIT A
NOTICE OF COMMITTED BORROWING
-----------------------------
Date: ____________, [199_/200_]
To: Bank of America National Trust and Savings Association
as Agent for the Banks parties to the Credit Agreement
dated as of September 25, 1998 (as extended, renewed,
amended or restated from time to time, the "CREDIT
------
AGREEMENT") among HCR Manor Care, Inc., Manor Care,
---------
Inc., certain Banks which are signatories thereto and
Bank of America National Trust and Savings Association,
as Agent
Ladies and Gentlemen:
The undersigned, [HCR Manor Care, Inc./Manor Care, Inc.] (the
"COMPANY"), refers to the Credit Agreement, the terms defined therein being used
herein as therein defined, and hereby gives you notice irrevocably, pursuant to
Section 2.3 of the Credit Agreement, of the Committed Borrowing specified below:
1. The Business Day of the proposed Committed Borrowing is
_______________, [199_/200_].
2. The aggregate amount of the proposed Committed Borrowing is
$____________.
3. The Committed Borrowing is to be comprised of $__________
of [Base Rate] [Offshore Rate] Loans.
4. The duration of the Interest Period of the Offshore Rate
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 Company
contained in Article VI 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);
<PAGE> 115
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Committed Borrowing; and
(c) The proposed Committed Borrowing will not cause the
aggregate principal amount of all outstanding Committed Loans PLUS the
aggregate principal amount of all outstanding Bid Loans PLUS the
aggregate amount available for drawing under all outstanding Letters of
Credit PLUS the aggregate principal amount of all outstanding L/C
Borrowings to exceed the combined Commitments of the Banks.
[HCR MANOR CARE, INC./MANOR
CARE, INC.]
By:
---------------------------
Title:
------------------------
<PAGE> 116
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
---------------------------------
Date: _____________, [199_/200_]
To: Bank of America National Trust and Savings Association,
as Agent for the Banks parties to the Credit Agreement
dated as of September 25, 1998 (as extended, renewed,
amended or restated from time to time, the "CREDIT
AGREEMENT") among HCR Manor Care, Inc., Manor Care,
Inc., certain Banks which are signatories thereto and
Bank of America National Trust and Savings Association,
as Agent
Ladies and Gentlemen:
The undersigned, [HCR Manor Care, Inc./Manor Care, Inc.] (the
"COMPANY"), refers to the Credit Agreement, the terms defined therein being used
herein as therein defined, and hereby gives you notice irrevocably, pursuant to
Section 2.4 of the Credit Agreement, of the [conversion] [continuation] of the
Committed Loans specified herein, that:
1. The Conversion/Continuation Date is
___________, [199_/200_].
2. The aggregate amount of the Committed Loans to be
[converted] [continued] is $____________.
3. The Committed Loans are to be [converted into] [continued
as] [Offshore Rate] [Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period for
the Committed Loans included in the [conversion] [continuation] shall
be ____ months.
[HCR MANOR CARE, INC./MANOR
CARE, INC.]
By:
---------------------------
Title:
------------------------
<PAGE> 117
EXHIBIT C
COMPLIANCE CERTIFICATE
----------------------
To: Bank of America National Trust and Savings Association for the Banks
parties to the Credit Agreement dated as of September 25, 1998 (as
extended, renewed, amended or restated from time to time, the "CREDIT
AGREEMENT") among HCR Manor Care, Inc., Manor Care, Inc., certain Banks
which are signatories thereto and Bank of America National Trust and
Savings Association, as Agent
Ladies and Gentlemen:
This Compliance Certificate is delivered to you pursuant to Section
7.1.1 of the Credit Agreement. Unless the context clearly indicates to the
contrary, capitalized terms used herein which are defined in the Credit
Agreement shall have the meanings which the Credit Agreement assigns to such
terms.
The Company hereby certifies and warrants to the Agent, for the benefit
of the Agent and the Banks, that the following is true and correct calculation
of the ratios and financial conditions contained in Section 7.2.4 of the Credit
Agreement for the computation date shown on the attachments hereto (the
"COMPUTATION DATE"):
(a) The Debt to Capitalization Ratio on the Computation Date
was ___ to 1.0, as calculated on ATTACHMENT I hereto. The maximum Debt
to Capitalization Ratio permitted by Section 7.2.4(a) for such date is
0.55 to
1.0.
(b) The Fixed Charge Coverage Ratio for the period ending on
the Computation Date, with respect to the last day of the last fiscal
quarter, was __ to 1.0, as calculated on ATTACHMENT II hereto. The
minimum Fixed Charge Coverage Ratio required by Section 7.2.4(b) for
such period is 2.0 to
1.0.
(c) The Leverage Ratio for the period ending on the
Computation Date, with respect to the last day of the last fiscal
quarter, was ___ to 1.0, as calculated on ATTACHMENT III hereto. The
maximum Leverage Ratio permitted by Section 7.2.4(c) for such period is
3.5 to 1.0.
<PAGE> 118
IN WITNESS WHEREOF, the Company has caused this Compliance Certificate
to be executed and delivered by its Responsible Officer this ___ day of
______________, [19__/200__].
HCR MANOR CARE, INC.
By:
-------------------------------
Name Printed:
---------------------
Its:
------------------------------
Address: One SeaGate
23rd Floor
Toledo, Ohio 43604-2616
<PAGE> 119
Attachment I
(to Compliance Certificate
dated _________, [19__/200__])
Debt To Capitalization Ratio (Section 7.2.4(A))
- ----------------------------
Computation Date: _______________, [19__/200__]
Item Measurement
- ---- -----------
1. Consolidated Indebtedness for
Borrowed Money of the Company
and its Subsidiaries $
-------------
2. Consolidated Net Worth of the
Company and its Subsidiaries $
-------------
3. Sum of ITEM 1 and ITEM 2
(Consolidated Capitalization) $
-------------
4. ITEM 1 divided by ITEM 3 (DEBT
TO CAPITALIZATION RATIO as of
Computation Date) $
-------------
5. Maximum ratio permitted by
Section 7.2.4(a) as of
Computation Date 0.55 TO 1.0
-------------
<PAGE> 120
Attachment II
(to Compliance Certificate
dated _________, [19__/200__])
Fixed Charge Coverage Ratio (Section 7.2.4(b))
- ---------------------------
Computation Date: _______________, [19__/200__]
(end of the ______ fiscal quarter
of the ____ fiscal year)
Item Measurement
- ---- -----------
1. Consolidated EBITDA (calculated
for the four fiscal quarter period
then ended and adjusted on a pro
forma basis for any acquisitions or
investments as if such acquisition or
investment took place on the first
day of said four fiscal quarter
period) $
--------------
2. Lease and Rental Expense of the
Company and its Subsidiaries $
--------------
3. Sum of ITEM 1 and ITEM 2 $
--------------
4. Consolidated Interest Expense $
--------------
5. Scheduled principal payments $
--------------
6. Lease and Rental Expense of the $
Company and its Subsidiaries
--------------
7. Sum of ITEM 4, ITEM 5, and
ITEM 6 $
--------------
8. ITEM 3 divided by ITEM 7 (FIXED
CHARGE COVERAGE RATIO as of
Computation Date) $
--------------
9. Minimum ratio permitted by
Section 7.2.4(b) as of the
Computation Date $ 2.0:1.0
--------------
<PAGE> 121
Attachment III
(to Compliance Certificate
dated _________, [19__/200__])
Leverage Ratio (Section 7.2.4(c))
Computation Date: _______________, [19__/200__]
(end of the ______ fiscal quarter
of the ____ fiscal year)
Item Measurement
- ---- -----------
1. Consolidated Indebtedness for
Borrowed Money of the Company
and its Subsidiaries $
-------------
2. Consolidated EBITDA
(calculated for the four
fiscal quarter period then
ended and adjusted on a pro
forma basis for any
acquisitions or investments as
if such acquisition or
investment took place on the
first day of said four fiscal
quarter period) $
-------------
3. ITEM 1 divided by ITEM 2
(LEVERAGE RATIO as of
Computation Date) $
-------------
4. Maximum ratio permitted by
Section 7.2.4(c) as of the
Computation Date $ 3.5 TO 1.0
-------------
<PAGE> 122
EXHIBIT E
GUARANTY
--------
THIS GUARANTY (this "GUARANTY") dated as of September 25, 1998 is
executed by the undersigned (collectively hereinafter referred to as the
"GUARANTORS" and individually as a "GUARANTOR") in favor of Bank of America
National Trust and Savings Association, as Agent (as hereinafter defined in the
first recital below).
RECITALS
--------
WHEREAS, HCR Manor Care, Inc. (the "COMPANY"), Manor Care, Inc. ("MANOR
CARE"), certain lenders (the "BANKS"), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, individually and as administrative agent
for the Banks (in such capacity, the "AGENT"), have entered into that certain
Credit Agreement dated as of even date herewith (as amended or modified and in
effect, hereinafter referred to as the "CREDIT AGREEMENT") pursuant to which the
Agent and the Banks may from time to time extend credit to the Borrowers (each
capitalized term used but not defined herein shall have the meaning assigned
thereto in the Credit Agreement);
WHEREAS, as partial consideration for the Banks and the Agent entering
into the Credit Agreement, each of the undersigned agrees to execute and deliver
this Guaranty to the Agent for the benefit of the Agent and the Banks; and
WHEREAS, the ability of the Borrowers to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the Guarantors are a part,
NOW, THEREFORE, in order to induce the Banks and the Agent to enter
into the Credit Agreement, each Guarantor hereby covenants as follows:
SECTION 5. GUARANTY.
a. Subject to SECTION 1(b), each Guarantor hereby jointly and severally
and unconditionally guarantees the performance and the full and prompt payment
when due, whether by acceleration or otherwise, and at all times thereafter, of
all Obligations of the Borrowers, including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C
Section 502(b) and Section 506(b)(all such
<PAGE> 123
Obligations being hereinafter collectively called the "GUARANTEED LIABILITIES").
b. The liability of each of the Guarantors under this Guaranty shall
not exceed the maximum amount of liability that such Guarantor can hereby incur
without rendering this Guaranty void or voidable under Applicable Law relating
to fraudulent conveyance or fraudulent transfers, and not for any greater
amount. For purposes of determining such liability of each of the Guarantors,
due consideration shall be given to the direct and indirect benefits received by
each of the Guarantors as a result of the Credit Extension under the Credit
Agreement.
c. Subject to clause (b) above, the liability under the Guaranty of
each Guarantor shall not be less than the outstanding amount of Loans which have
been advanced to such Guarantor as reflected from time to time in the statements
required by Section 7.1.1(g) of the Credit Agreement.
d. This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect as to each
other Guarantor notwithstanding the dissolution of any Guarantor or that at any
time or from time to time all Guaranteed Liabilities may have been paid in full
so long as any Commitment under the Credit Agreement remains outstanding.
SECTION 6. DISGORGED PAYMENTS. Each Guarantor further agrees that, if
at any time all or any part of any payment theretofore applied by the Agent or
the Banks to any of the Guaranteed Liabilities is or must be rescinded or
returned by the Agent or the Banks for any reason whatsoever (including the
insolvency, bankruptcy or reorganization of the Company or any Guarantor), such
Guaranteed Liabilities shall, for the purposes of this Guaranty, to the extent
that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Agent or the
Banks, and this Guaranty shall continue to be effective or be reinstated, as the
case may be, as to such Guaranteed Liabilities, all as though such application
by the Agent or the Banks had not been made.
SECTION 7. COVENANTS. Each Guarantor agrees with the Agent and each
Bank that, until all Commitments have been terminated and all Obligations have
been paid and performed in full, each Guarantor will perform all Obligations
applicable to such Guarantor set forth in Article VII of the Credit Agreement.
SECTION 8. CERTAIN PERMITTED ACTIONS. To the extent permitted by law or
the Loan Documents, each of the Agent and any Bank may, from time to time,
whether before or after any discontinuance of this Guaranty, at its sole
discretion and
<PAGE> 124
without notice to any Guarantor, take any or all of the following actions
without impairing its rights arising hereunder: (a) retain or obtain a lien upon
or a security interest in any property to secure any of the Guaranteed
Liabilities, (b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to such Guarantors' obligations, with respect
to any of the Guaranteed Liabilities, (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Guaranteed Liabilities, or release or compromise any obligation of any
Obligor under any Loan Document or any obligation of any nature of any other
obligor with respect to any of the Guaranteed Liabilities, (d) release or fail
to perfect its lien upon or security interest in, or impair, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Guaranteed Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to
any such property, and (e) resort to any Guarantor for payment of any of the
Guaranteed Liabilities, whether or not the Agent or the Banks (i) shall have
resorted to any property securing any of the Guaranteed Liabilities or (ii)
shall have proceeded against any other obligor primarily or secondarily
obligated with respect to any of the Guaranteed Liabilities (all of the actions
referred to in preceding CLAUSES (i) and (ii) being hereby expressly waived by
each Guarantor to the fullest extent permitted by Applicable Law).
SECTION 9. APPLICATION OF FUNDS. The Agent may apply any payments
hereunder to the payment of expenses which the Agent incurs in connection with
the enforcement of this Guaranty, including reasonable attorneys' fees and legal
expenses. The Agent may apply any balance of such payments hereunder toward the
payment of such of the Guaranteed Liabilities, and in such order of application,
as the Agent may, in its sole discretion, elect from time to time.
SECTION 10. LIMIT ON SUBROGATION; WAIVERS.
a. Except as provided in clause (b) below, no payment made by or for
the account of any Guarantor pursuant to this Guaranty shall entitle any
Guarantor by subrogation or otherwise to any payment by any Borrower or from or
out of any property of any Borrower, and no Guarantor shall exercise any right
or remedy against any Borrower or any property of any Borrower by reason of any
performance by such Guarantor of this Guaranty, all of which rights and remedies
are hereby waived by such Guarantor to the fullest extent permitted by
Applicable Law.
<PAGE> 125
b. In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under this
Guaranty, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets (as
hereinafter defined) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Guaranteed Liabilities or any other Guarantor's obligations with respect to
this Guaranty. "ADJUSTED NET ASSETS" of any Guarantor at any date means the
lesser of (a) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities (including, without
limitation, contingent liabilities, but excluding liabilities of such Guarantor
under this Guaranty) of such Guarantor at such date, and (b) the amount by which
the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all contingent liabilities, but
excluding liabilities of such Guarantor under this Guaranty) as they become
absolute and matured.
c. To the extent permitted by Applicable Law, each Guarantor hereby
expressly waives (i) notice of the acceptance by the Agent or the Banks of this
Guaranty, (ii) notice of the existence or creation or non-payment of all or any
of the Guaranteed Liabilities, (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever, (iv) all diligence in collection or
protection of or realization upon the Guaranteed Liabilities or any security for
or guaranty of any of the foregoing and (v) all other rights and defenses
(including, without limitation, all suretyship rights and defenses) the
assertion of which would in any way diminish the liability of such Guarantor
hereunder.
SECTION 11. TRANSFER OF OBLIGATIONS. Subject to Section 10.8 of the
Credit Agreement, the Agent and the Banks may, from time to time, without notice
to any Guarantor, assign or transfer, or cause to be assigned or transferred,
any or all of the Guaranteed Liabilities or any interest therein and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Guaranteed Liabilities shall be and remain Guaranteed
Liabilities for the purposes of this Guaranty, and each and every immediate and
successive assignee or transferee of any of the Guaranteed Liabilities or of any
interest therein shall, to the extent of the interest of such assignee or
transferee in the Guaranteed Liabilities, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the Agent or
a Bank.
<PAGE> 126
SECTION 12. NO CONDITIONS TO EFFECTIVENESS. No claim or defense by any
Person as to the invalidity or unenforceability of any obligation under the Loan
Documents shall affect or impair the obligations of the Guarantors under this
Guaranty. The obligations of the Guarantors under this Guaranty shall be abso-
lute and unconditional irrespective of any circumstance whatsoever which might
constitute a legal or equitable discharge or defense of any Borrower. Each
Guarantor hereby acknowledges that there are no conditions to the effectiveness
of this Guaranty.
SECTION 13. WARRANTIES. Each Guarantor hereby warrants and represents
to the Agent and the Banks that (i) it now has and expects to continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of the Company, and the Agent and the Banks shall not
have any duty or responsibility to provide such Guarantor with any credit or
other information concerning the affairs, financial condition or business of the
Company which may come into such Person's possession; (ii) the execution,
delivery and performance of this Guaranty by such Guarantor are within its
corporate or partnership powers and do not (a) contravene any law, rule or
regulation presently in effect which affects or binds it or any of its
properties, or (b) conflict with or result in a material breach of any guaranty
or loan or credit agreement or any other agreement or instrument to which it is
a party in respect of indebtedness for money borrowed; and (iii) any and all
information heretofore or hereafter provided by such Guarantor to the Agent and
the Banks hereunder and certified by a Responsible Officer of such Guarantor is
and shall be true and accurate in all material respects as of the date
furnished.
SECTION 14. MODIFICATION OF GUARANTY. This Guaranty shall not be
amended, supplemented or otherwise modified without the written consent of the
Agent and the Majority Banks and, as to any Guarantor, such Guarantor. Except as
otherwise provided in the Credit Agreement, this Guaranty shall not be released
or terminated as to any Guarantor without the written consent of all Banks.
SECTION 15. NOTICES.
a. All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, PROVIDED that any matter transmitted by the Guarantors by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 10.2 of the Credit Agreement, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number, in the case of
the Agent and the Banks, specified for notices on SCHEDULE 10.2 of the Credit
Agreement
<PAGE> 127
and in the case of the Guarantors, specified on the signature pages hereof; or,
as directed to the Guarantors or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Guarantors and the Agent;
b. All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
c. Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Guarantors. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Guarantors to give such notice and the Agent and the Banks shall not have any
liability to the Guarantors or other Person on account of any action taken or
not taken by the Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligations of the Guarantors under this Guaranty shall
not be affected in any way or to any extent by any failure by the Agent and the
Banks to receive written confirmation of any telephonic or facsimile notice or
the receipt by the Agent and the Banks of a confirmation which is at variance
with the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
SECTION 16. GOVERNING LAW AND JURISDICTION. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE
BANKS AND THE GUARANTORS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY,
EACH OF THE GUARANTORS, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
OF THE GUARANTORS, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTORS, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR
<PAGE> 128
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 17. WAIVER OF JURY TRIAL. THE GUARANTORS, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTORS, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
SECTION 18. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 19. LOAN DOCUMENT. This Guaranty is a Loan Document.
<PAGE> 129
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
Manor Care, Inc.
Ancillary Services Management, Inc.
Birchwood Manor, Inc.
Blue Ridge Rehabilitation Services, Inc.
Cantebury Village, Inc.
Diversified Rehabilitation Services, Inc.
Donahoe Manor, Inc.
East Michigan Care Corporation
EYE-Q Network, Inc.
Georgian Bloomfield, Inc.
Greenview Manor, Inc.
HCR Acquisition Corporation
HCR Home Health Care and Hospice, Inc.
HCR Information Corporation
HCR Physician Management Services, Inc.
HCR Rehabilitation Corp.
HCR Therapy Services, Inc.
HCRA of Texas, Inc.
HCRC Inc.
Health Care and Retirement Corporation
of America
Heartland CarePartners, Inc.
Heartland Home Care, Inc.
Heartland Home Health Care Services, Inc.
Heartland Hospice Services, Inc.
Heartland Management Services, Inc.
Heartland Pain and Rehabilitation
Center, Inc.
Heartland Rehabilitation Services of
North Florida, Inc.
Heartland Rehabilitation Services, Inc.
Heartland Services Corp.
Herbert Laskin, RPT - John McKenzie, RPT
Physical Therapy Professional
Associates, Inc.
HGCC of Allentown, Inc.
Ionia Manor, Inc.
Kensington Manor, Inc.
Knollview Manor, Inc.
Lincoln Health Care, Inc.
Marina View Manor, Inc.
Medi-Speech Service, Inc.
Mid-Shore Physical Therapy
Associates, Inc.
MileStone Health Systems, Inc.
MileStone Healthcare, Inc.
MileStone Rehabilitations Services, Inc.
<PAGE> 130
MileStone Therapy Services, Inc.
MRC Rehabilitation, Inc.
NuVista Refractive Surgery and Laser
Center, Inc.
Perrysburg Physical Therapy, Inc.
Physical Occupational and Speech
Therapy, Inc.
Rehabilitation Administrative Corporation
Rehabilitation Associates, Inc.
Rehabilitation Services of Roanoke, Inc.
Reinbolt and Burkam, Inc.
Richards Healthcare, Inc.
Ridgeview Manor, Inc.
RVA Management Services, Inc.
Springhill Manor, Inc.
Sun Valley Manor, Inc.
Therapy Associates, Inc.
Three Rivers Manor, Inc.
Vision Management Services, Inc.
Washtenaw Hills Manor, Inc.
Whitehall Manor, Inc.
By:
------------------------------------
Name Printed:
--------------------------
Its:
----------------------------------
Address: One Seagate
Toledo, Ohio 43604-2616
Fax No. 419-252-5571
Telephone: 419-252-5500
<PAGE> 131
EXHIBIT 1
to the Guaranty
Guaranty Assumption Agreement
-----------------------------
WHEREAS, HCR Manor Care, Inc., a Delaware corporation (the "COMPANY")
and Manor Care, Inc., a Delaware corporation ("MANOR CARE") entered into the
Credit Agreement dated as of September 30, 1998 (as the same may at any time be
amended or modified and in effect, the "CREDIT AGREEMENT") with various Banks
(as defined in the Credit Agreement), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, as administrative agent for the Banks
(in such capacity, the "AGENT");
WHEREAS, certain affiliates and subsidiaries of the Company executed
and delivered the Guaranty dated as of September 25, 1998 (as the same may at
any time be amended or modified and in effect, the "GUARANTY") in favor of the
Agent and the Banks in respect of the Borrowers;
WHEREAS, the undersigned corporations and partnerships (herein
collectively called the "NEW SUBSIDIARIES" and individually called a "NEW
SUBSIDIARY") have become Subsidiaries (as defined in the Credit Agreement) of
the Borrowers;
WHEREAS, the ability of the Company to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the New Subsidiaries will be a part; and
WHEREAS, to induce the Agent and the Banks to enter into the Credit
Agreement, the Company agreed to cause the New Subsidiaries to enter into this
Agreement;
NOW, THEREFORE, in order to fulfill the requirements of the Credit
Agreement, and for other good and valuable consideration, receipt of which is
hereby acknowledged, each of the New Subsidiaries agrees as follows:
1. Unless otherwise specified herein, all capitalized terms used but
not otherwise defined herein have the meanings assigned to such terms in the
Credit Agreement.
2. Each New Subsidiary hereby unconditionally assumes and agrees to
pay, perform and discharge all of the obligations as a Guarantor under the
Guaranty; and each New Subsidiary agrees that it will, for all purposes of the
Guaranty, be deemed to be a Guarantor. From and after the date hereof, all
references in the
<PAGE> 132
Credit Agreement to the Obligors or an Obligor shall be deemed to include
reference to the New Subsidiaries.
3. Each of the New Subsidiaries hereby makes, for the benefit of the
Agent and the Banks, all of the representations and warranties made by a
Guarantor in the Guaranty, which representations and warranties are true and
correct in all material respects as of the date hereof.
4. Anything herein to the contrary notwithstanding, all of the Obligors
shall at all times remain liable under the Credit Agreement and the Guaranty to
pay, perform and discharge all of their obligations thereunder to the same
extent as if this Agreement had not been executed.
5. The obligations of each New Subsidiary hereunder and under the
Guaranty are independent of any obligations of the other Obligors, and a
separate action or actions may be brought and prosecuted against each New
Subsidiary whether or not such action is brought against the other Obligors or
whether the other Obligors are joined in such action or actions.
6. This Agreement is governed by and construed under the internal laws
of the State of New York without regard to principles of conflicts of law.
IN WITNESS WHEREOF, each of the New Subsidiaries has caused this
Agreement to be authorized by its duly authorized officer as of ____________,
__________________.
[NEW SUBSIDIARY]
By:
---------------------------
Name Printed:
--------------
Its:
----------------------
Address:
-------------------------------
-------------------------------
-------------------------------
<PAGE> 133
EXHIBIT F
INVITATION FOR COMPETITIVE BIDS
-------------------------------
Via Facsimile
To the Banks Listed on Schedule A attached hereto:
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of
September 25, 1998 (as amended from time to time, the "CREDIT AGREEMENT"), among
HCR Manor Care, Inc. (the "COMPANY"), Manor Care, Inc. ("MANOR CARE"), the Banks
party thereto, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Agent for the Banks (the "AGENT"). Capitalized terms used herein have the
meanings specified in the Credit Agreement.
Pursuant to subsection 2.6(b) of the Credit Agreement, you are hereby
invited to submit offers to make Bid Loans to [the Company/Manor Care] based on
the following specifications:
1. Borrowing date: _______________, [199_/200_];
2. Aggregate amount requested by [the Company/Manor Care]:
$___________________;
3. [LIBOR Bid Loans] [Absolute Rate Bid Loans]; and
4. Interest Period[s]: ____________________,
[________________] and [________________].
All Competitive Bids must be in the form of Exhibit H to the Credit
Agreement and must be received by the Agent no later than 6:30 a.m. (San
Francisco time) on ___________, [199_/200_].
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
------------------------------
Title:
----------------------------
<PAGE> 134
Schedule A
List of Banks
Bank of America National Trust
and Savings Association, as a Bank
Facsimile: (___) ___-____
[Bank]
Facsimile: (___) ___-____
[Bank]
Facsimile: (___) ___-____
[Bank]
Facsimile: (___) ___-____
[Bank]
Facsimile: (___) ___-____
<PAGE> 135
EXHIBIT G
COMPETITIVE BID REQUEST
-----------------------
________________, [199_/200_]
Bank of America National Trust
and Savings Association, as Agent
Agency Administrative Services, #5596
1850 Gateway Boulevard, Fifth Floor
Concord, CA 94520
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of September 25,
1998 (as amended from time to time, the "CREDIT AGREEMENT"), by and among HCR
Manor Care, Inc. (the "COMPANY"), Manor Care, Inc. ("MANOR CARE"), the Banks
party thereto, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Agent for the Banks (the "AGENT"). Capitalized terms used herein have the
meanings specified in the Credit Agreement.
This is a Competitive Bid Request for Bid Loans pursuant to Section 2.6
of the Credit Agreement as follows:
(i) The Business Day of the proposed Bid Borrowing is
______________, [199_/200_].
(ii) The aggregate amount of the proposed Bid Borrowing is
$___________________.
(iii) The proposed Bid Borrowing to be made pursuant to
Section 2.6 shall be comprised of [LIBOR] [Absolute Rate] Bid Loans.
(iv) The Interest Period[s] for the Bid Loans comprised in the
Borrowing shall be _______________, [_________________] and
[___________________].
[HCR MANOR CARE, INC./MANOR
CARE, INC.]
By:
------------------------------
Title:
---------------------------
<PAGE> 136
EXHIBIT H
FORM OF COMPETITIVE BID
-----------------------
________________, [199_/200_]
Bank of America National Trust
and Savings Association, as Agent
Agency Administrative Services, #5596
1850 Gateway Boulevard, Fifth Floor
Concord, CA 94520
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of September 25,
1998 (as amended from time to time, the "CREDIT AGREEMENT"), by and among HCR
Manor Care, Inc. (the "COMPANY"), Manor Care, Inc. ("MANOR CARE"), the Banks
party thereto, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Agent for the Banks (the "AGENT"). Capitalized terms used herein have the
meanings specified in the Credit Agreement.
In response to the Competitive Bid Request of [the Company/Manor Care]
dated _____________, [199_/200_] and in accordance with subsection 2.6(c)(ii) of
the Credit Agreement, the undersigned Bank offers to make [a] Bid Loan[s]
thereunder in the following principal amount[s] at the following interest rates
for the following Interest Period[s]:
Date of Borrowing: ________________, [199_/200_]
Aggregate Maximum Bid Amount: $__________________
Principal Amount $_________
Principal Amount $_________
Principal Amount $_________
Interest: [Absolute Rate __%, __%, __%]
Interest: [Absolute Rate __%, __%, __%]
Interest: [Absolute Rate __%, __%, __%]
or [LIBOR Margin +/- __%, +/- __%, +/- __%]
[LIBOR Margin +/- __%, +/- __%, +/- __%]
[LIBOR Margin +/- __%, +/- __%, +/- __%]
Interest Period __________
<PAGE> 137
Interest Period __________
Interest Period __________
[NAME OF BANK]
By:
--------------------------------
Title:
----------------------------
<PAGE> 138
EXHIBIT I
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
---------------------------------------------
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "ASSIGNMENT AND
ACCEPTANCE") dated as of _______________, [199__/200__] is made between
_____________________ (the "ASSIGNOR") and ____________________ (the
"ASSIGNEE").
RECITALS
--------
WHEREAS, the Assignor is party to that certain Credit Agreement dated
as of September 25, 1998 (as amended, amended and restated, modified,
supplemented or renewed, the "CREDIT AGREEMENT") among HCR Manor Care, Inc., a
Delaware corporation (the "COMPANY"), Manor Care, Inc., the several financial
institutions from time to time party thereto (including the Assignor, the
"BANKS"), and Bank of America National Trust and Savings Association, as letter
of credit issuing bank ("ISSUING BANK") and as administrative agent for the
Banks (the "AGENT"). Any terms defined in the Credit Agreement and not defined
in this Assignment and Acceptance are used herein as defined in the Credit
Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Loans (the "COMMITTED LOANS") to [the Company/Manor Care] in
an aggregate amount not to exceed $___________ (the "COMMITMENT");
WHEREAS, [the Assignor has made Committed Loans in the aggregate
principal amount of $_________ to [the Company/Manor Care] [no Committed Loans
are outstanding under the Credit Agreement];
WHEREAS, [the Assignor has acquired a participation in the Issuing
Bank's liability under Letters of Credit in an aggregate principal amount of
$___________ (the "L/C OBLIGATIONS")] [no Letters of Credit are outstanding
under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, [together with a corresponding portion of each of its
outstanding Committed Loans and L/C Obligations,] in an amount equal to
$________ (the "ASSIGNED AMOUNT") on the terms and subject to the conditions set
forth herein and the Assignee wishes to accept assignment of such
<PAGE> 139
rights and to assume such obligations from the Assignor on such
terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. ASSIGNMENT AND ACCEPTANCE.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) ____% (the "ASSIGNEE'S PERCENTAGE
SHARE") of (A) the Commitment [and the Committed Loans and the L/C Obligations]
of the Assignor and (B) all related rights, benefits, obligations, liabilities
and indemnities of the Assignor under and in connection with the Credit
Agreement and the Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor
by Assignee of outstanding principal of, accrued interest on, and fees with
respect to, Committed Loans and L/C Obligations assigned.]
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee 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. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; PROVIDED, HOWEVER, the Assignor shall not relinquish its rights under
Sections 4.1, 4.3 and 10.5 of the Credit Agreement to the extent such rights
relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignee's Commitment will be
$__________.
<PAGE> 140
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignor's Commitment will be
$__________.
2. PAYMENTS.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all
Committed Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the
Agent a processing fee in the amount specified in Section 10.8(a) of the Credit
Agreement.
3. REALLOCATION OF PAYMENTS.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment, Committed Loans and L/C Obligations shall be for
the account of the Assignor. Any interest, fees and other payment accrued on and
after the Effective Date with respect to the Assigned Amount shall be for the
account of the Assignee. Each of the Assignor and the Assignee agrees that it
will hold in trust for the other party any interest, fees and other amounts
which it may receive to which the other party is entitled pursuant to the
preceding sentence and pay to the other party any such amounts which it may
receive promptly upon receipt.
4. INDEPENDENT CREDIT DECISION.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 7.1.1 of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent 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 and legal decisions in taking or not taking
action under the Credit Agreement.
5. EFFECTIVE DATE; NOTICES.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be ______________, [199_/200_]
(the "EFFECTIVE DATE"); PROVIDED that
<PAGE> 141
the following conditions precedent have been satisfied on or before the
Effective Date:
(i) this Assignment and Acceptance shall be
executed and delivered by the Assignor and the Assignee;
(iii) the consent of the Company, the Issuing Bank
and the Agent required for an effective assignment of the Assigned Amount by the
Assignor to the Assignee under Section 10.8 of the Credit Agreement shall have
been duly obtained and shall be in full force and effect as of the Effective
date;
(iii) the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Assignment and Acceptance;
(iv) the processing fee referred to in Section
2(b) hereof and in Section 10.8(a) of the Credit Agreement shall have been paid
to the Agent; and
(v) the Assignor shall have assigned and the
Assignee shall have assumed a percentage equal to the Assignee's Percentage
Share of the rights and obligations of the Assignor under the Credit Agreement
(if such agreement exists).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company, the Issuing Bank and the
Agent for acknowledgment by the Agent, a Notice of Assignment substantially in
the form attached hereto as SCHEDULE 1.
[6. AGENT. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the Assignor
to take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement.
(b) The Assignee shall assume no duties or obligations held by
the Assignor in its capacity as Agent under the Credit Agreement.]
7. WITHHOLDING TAX.
The Assignee (a) represents and warrants to the Bank, the Agent and the
Company that under applicable law and treaties no tax will be required to be
withheld by the Bank with respect to any payments to be made to the Assignee
hereunder, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
the Company prior to the time that the Agent or Company is
<PAGE> 142
required to make any payment of principal, interest or fees hereunder, duplicate
executed originals of either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 (wherein the Assignee claims entitlement to
the benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide
new Forms 4224 or 1001 upon the expiration of any previously delivered form or
comparable statements in accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by the Assignee, and (c) agrees
to comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
8. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor represents and warrants that (i) 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 Lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its execution, delivery and performance of this Assignment and Acceptance,
and apart from any agreements or undertaking or filings required by the Credit
Agreement, no further action by, or notice to, or filing with, any Person is
required of it for such execution, delivery or performance; and (iv) this
Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor 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. The Assignor makes no representation or warranty in connection with,
and assumes no responsibility with respect to, the solvency, financial condition
or statements of the Company, or the performance or observance by the Company,
of any of its respective obligations under the Credit Agreement or any other
instrument or document furnished in connection therewith.
<PAGE> 143
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is an
Eligible Assignee.
9. FURTHER ASSURANCES.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. MISCELLANEOUS.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Assignment and Acceptance.
<PAGE> 144
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Assignor and
the Assignee each irrevocably submits to the non-exclusive jurisdiction of any
State or Federal court sitting in New York over any suit, action or proceeding
arising out of or relating to this Assignment and Acceptance and irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court. Each party to this
Assignment and Acceptance hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]
<PAGE> 145
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
----------------------------
Title:
-------------------------
By:
----------------------------
Title:
-------------------------
Address:
[ASSIGNEE]
By:
----------------------------
Title:
-------------------------
By:
----------------------------
Title:
-------------------------
Address:
<PAGE> 146
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
_______________, 19__
Bank of America National Trust
and Savings Association, as Agent
Health Care Finance #9173
555 South Flower Street, 11th Floor
Los Angeles, CA 90071
HCR Manor Care, Inc.
[address]
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of September 25, 1998 (as
amended, as amended and restated, modified, supplemented or renewed from time to
time the "CREDIT AGREEMENT") among HCR Manor Care, Inc. (the "COMPANY"), Manor
Care, Inc., the Banks referred to therein and Bank of America National Trust and
Savings Association, as letter of credit issuing bank ("ISSUING BANK") and as
administrative agent for the Banks (the "AGENT"). Terms defined in the Credit
Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by ________________ (the "ASSIGNOR") to _______________ (the
"ASSIGNEE") of ___% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor[,] [and] all
outstanding Loans made by the Assignor [and the Assignor's participation in the
Letters of Credit]) pursuant to the Assignment and Acceptance Agreement attached
hereto (the "ASSIGNMENT AND ACCEPTANCE"). Before giving effect to such
assignment the Assignor's Commitment is $___________, the aggregate amount of
its outstanding Loans is $__________, and its participation in L/C Obligations
is $___________.
2. The Assignee agrees that, upon receiving the consent of the Agent,
the Issuing Bank and the Company to such assignment, the Assignee will be bound
by the terms of the Credit Agreement as fully and to the same extent as if the
Assignee were the Bank originally holding such interest in the Credit Agreement.
<PAGE> 147
3. The following administrative details apply to the Assignee:
(A) Notice Address:
Assignee name: ____________________________
Address: _________________________________
_________________________________
_________________________________
Attention: ________________________________
Telephone: (___) __________________________
Telecopier: (___)__________________________
Telex (Answerback): _______________________
(B) Payment Instructions:
Account No.: ____________________________
At: ____________________________
____________________________
____________________________
Reference: ____________________________
Attention: ____________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
----------------------------
Title:
-------------------------
By:
----------------------------
Title:
-------------------------
<PAGE> 148
[NAME OF ASSIGNEE]
By:
----------------------------
Title:
-------------------------
By:
----------------------------
Title:
-------------------------
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
HCR MANOR CARE, INC.
By:
---------------------------
Title:
------------------------
By:
---------------------------
Title:
------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
---------------------------
Title:
------------------------
<PAGE> 149
EXHIBIT J
GUARANTY
--------
THIS GUARANTY (this "GUARANTY") dated as of ____________, 1998 is
executed by the undersigned (collectively hereinafter referred to as the
"GUARANTORS" and individually as a "GUARANTOR") in favor of Bank of America
National Trust and Savings Association, as Agent (as hereinafter defined in the
first recital below).
RECITALS
--------
WHEREAS, HCR Manor Care, Inc. (the "COMPANY"), Manor Care, Inc. ("MANOR
CARE"), certain lenders (the "BANKS"), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, individually and as administrative agent
for the Banks (in such capacity, the "AGENT"), have entered into that certain
Credit Agreement dated as of even date herewith (as amended or modified and in
effect, hereinafter referred to as the "CREDIT AGREEMENT") pursuant to which the
Agent and the Banks may from time to time extend credit to the Borrowers (each
capitalized term used but not defined herein shall have the meaning assigned
thereto in the Credit Agreement);
WHEREAS, as partial consideration for the Banks and the Agent entering
into the Credit Agreement, each of the undersigned agrees to execute and deliver
this Guaranty to the Agent for the benefit of the Agent and the Banks; and
WHEREAS, the ability of the Borrowers to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the Guarantors are a part,
NOW, THEREFORE, in order to induce the Banks and the Agent to enter
into the Credit Agreement, each Guarantor hereby covenants as follows:
SECTION 20. GUARANTY.
a. Subject to SECTION 1(b), each Guarantor hereby jointly and severally
and unconditionally guarantees the performance and the full and prompt payment
when due, whether by acceleration or otherwise, and at all times thereafter, of
all Obligations of Manor Care under the Credit Agreement and the Notes,
including all such amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. Section 362(a), and the operation of Sections 502(b) and 506(b) of the
United States Bankruptcy Code, 11 U.S.C
<PAGE> 150
Section 502(b) and Section 506(b)(all such Obligations being hereinafter
collectively called the "GUARANTEED LIABILITIES").
b. The liability of each of the Guarantors under this Guaranty shall
not exceed the maximum amount of liability that such Guarantor can hereby incur
without rendering this Guaranty void or voidable under Applicable Law relating
to fraudulent conveyance or fraudulent transfers, and not for any greater
amount. For purposes of determining such liability of each of the Guarantors,
due consideration shall be given to the direct and indirect benefits received by
each of the Guarantors as a result of the Credit Extension under the Credit
Agreement.
c. Subject to clause (b) above, the liability under the Guaranty of
each Guarantor shall not be less than the outstanding amount of Loans which have
been advanced to such Guarantor as reflected from time to time in the statements
required by Section 7.1.1(g) of the Credit Agreement.
d. This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect as to each
other Guarantor notwithstanding the dissolution of any Guarantor or that at any
time or from time to time all Guaranteed Liabilities may have been paid in full
so long as any Commitment under the Credit Agreement remains outstanding.
SECTION 21. DISGORGED PAYMENTS. Each Guarantor further agrees that, if at
any time all or any part of any payment theretofore applied by the Agent or the
Banks to any of the Guaranteed Liabilities is or must be rescinded or returned
by the Agent or the Banks for any reason whatsoever (including the insolvency,
bankruptcy or reorganization of Manor Care or any Guarantor), such Guaranteed
Liabilities shall, for the purposes of this Guaranty, to the extent that such
payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by the Agent or the Banks, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Guaranteed Liabilities, all as though such application by the Agent or
the Banks had not been made.
SECTION 22. COVENANTS. Each Guarantor agrees with the Agent and each
Bank that, until all Commitments have been terminated and all Obligations have
been paid and performed in full, each Guarantor will perform all Obligations
applicable to such Guarantor set forth in Article VII of the Credit Agreement.
SECTION 23. CERTAIN PERMITTED ACTIONS. To the extent permitted by law
or the Loan Documents, each of the Agent and any Bank may, from time to time,
whether before or after any discontinuance of this Guaranty, at its sole
discretion and
<PAGE> 151
without notice to any Guarantor, take any or all of the following actions
without impairing its rights arising hereunder: (a) retain or obtain a lien upon
or a security interest in any property to secure any of the Guaranteed
Liabilities, (b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to such Guarantors' obligations, with respect
to any of the Guaranteed Liabilities, (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Guaranteed Liabilities, or release or compromise any obligation of any
Obligor under any Loan Document or any obligation of any nature of any other
obligor with respect to any of the Guaranteed Liabilities, (d) release or fail
to perfect its lien upon or security interest in, or impair, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Guaranteed Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to
any such property, and (e) resort to any Guarantor for payment of any of the
Guaranteed Liabilities, whether or not the Agent or the Banks (i) shall have
resorted to any property securing any of the Guaranteed Liabilities or (ii)
shall have proceeded against any other obligor primarily or secondarily
obligated with respect to any of the Guaranteed Liabilities (all of the actions
referred to in preceding CLAUSES (i) and (ii) being hereby expressly waived by
each Guarantor to the fullest extent permitted by Applicable Law).
SECTION 24. APPLICATION OF FUNDS. The Agent may apply any payments
hereunder to the payment of expenses which the Agent incurs in connection with
the enforcement of this Guaranty, including reasonable attorneys' fees and legal
expenses. The Agent may apply any balance of such payments hereunder toward the
payment of such of the Guaranteed Liabilities, and in such order of application,
as the Agent may, in its sole discretion, elect from time to time.
SECTION 25. LIMIT ON SUBROGATION; WAIVERS.
a. Except as provided in clause (b) below, no payment made by or for
the account of any Guarantor pursuant to this Guaranty shall entitle any
Guarantor by subrogation or otherwise to any payment by Manor Care or from or
out of any property of Manor Care, and no Guarantor shall exercise any right or
remedy against Manor Care or any property of Manor Care by reason of any
performance by such Guarantor of this Guaranty, all of which rights and remedies
are hereby waived by such Guarantor to the fullest extent permitted by
Applicable Law.
<PAGE> 152
b. In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under this
Guaranty, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets (as
hereinafter defined) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Guaranteed Liabilities or any other Guarantor's obligations with respect to
this Guaranty. "ADJUSTED NET ASSETS" of any Guarantor at any date means the
lesser of (a) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities (including, without
limitation, contingent liabilities, but excluding liabilities of such Guarantor
under this Guaranty) of such Guarantor at such date, and (b) the amount by which
the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all contingent liabilities, but
excluding liabilities of such Guarantor under this Guaranty) as they become
absolute and matured.
c. To the extent permitted by Applicable Law, each Guarantor hereby
expressly waives (i) notice of the acceptance by the Agent or the Banks of this
Guaranty, (ii) notice of the existence or creation or non-payment of all or any
of the Guaranteed Liabilities, (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever, (iv) all diligence in collection or
protection of or realization upon the Guaranteed Liabilities or any security for
or guaranty of any of the foregoing and (v) all other rights and defenses
(including, without limitation, all suretyship rights and defenses) the
assertion of which would in any way diminish the liability of such Guarantor
hereunder.
SECTION 26. TRANSFER OF OBLIGATIONS. Subject to Section 10.8 of the
Credit Agreement, the Agent and the Banks may, from time to time, without notice
to any Guarantor, assign or transfer, or cause to be assigned or transferred,
any or all of the Guaranteed Liabilities or any interest therein and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Guaranteed Liabilities shall be and remain Guaranteed
Liabilities for the purposes of this Guaranty, and each and every immediate and
successive assignee or transferee of any of the Guaranteed Liabilities or of any
interest therein shall, to the extent of the interest of such assignee or
transferee in the Guaranteed Liabilities, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the Agent or
a Bank.
<PAGE> 153
SECTION 27. NO CONDITIONS TO EFFECTIVENESS. No claim or defense by any
Person as to the invalidity or unenforceability of any obligation under the Loan
Documents shall affect or impair the obligations of the Guarantors under this
Guaranty. The obligations of the Guarantors under this Guaranty shall be abso-
lute and unconditional irrespective of any circumstance whatsoever which might
constitute a legal or equitable discharge or defense of Manor Care. Each
Guarantor hereby acknowledges that there are no conditions to the effectiveness
of this Guaranty.
SECTION 28. WARRANTIES. Each Guarantor hereby warrants and represents
to the Agent and the Banks that (i) it now has and expects to continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of Manor Care, and the Agent and the Banks shall not have
any duty or responsibility to provide such Guarantor with any credit or other
information concerning the affairs, financial condition or business of Manor
Care which may come into such Person's possession; (ii) the execution, delivery
and performance of this Guaranty by such Guarantor are within its corporate or
partnership powers and do not (a) contravene any law, rule or regulation
presently in effect which affects or binds it or any of its properties, or (b)
conflict with or result in a material breach of any guaranty or loan or credit
agreement or any other agreement or instrument to which it is a party in respect
of indebtedness for money borrowed; and (iii) any and all information heretofore
or hereafter provided by such Guarantor to the Agent and the Banks hereunder and
certified by a Responsible Officer of such Guarantor is and shall be true and
accurate in all material respects as of the date furnished.
SECTION 29. MODIFICATION OF GUARANTY. This Guaranty shall not be
amended, supplemented or otherwise modified without the written consent of the
Agent and the Majority Banks and, as to any Guarantor, such Guarantor. Except as
otherwise provided in the Credit Agreement, this Guaranty shall not be released
or terminated as to any Guarantor without the written consent of all Banks.
SECTION 30. NOTICES.
a. All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, PROVIDED that any matter transmitted by the Guarantors by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 10.2 of the Credit Agreement, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number, in the case of
the Agent and the Banks, specified for notices on SCHEDULE 10.2 of the Credit
Agreement
<PAGE> 154
and in the case of the Guarantors, specified on the signature pages hereof; or,
as directed to the Guarantors or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Guarantors and the Agent;
b. All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
c. Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Guarantors. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Guarantors to give such notice and the Agent and the Banks shall not have any
liability to the Guarantors or other Person on account of any action taken or
not taken by the Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligations of the Guarantors under this Guaranty shall
not be affected in any way or to any extent by any failure by the Agent and the
Banks to receive written confirmation of any telephonic or facsimile notice or
the receipt by the Agent and the Banks of a confirmation which is at variance
with the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
SECTION 31. GOVERNING LAW AND JURISDICTION. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE
BANKS AND THE GUARANTORS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY,
EACH OF THE GUARANTORS, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
OF THE GUARANTORS, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTORS, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR
<PAGE> 155
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 32. WAIVER OF JURY TRIAL. THE GUARANTORS, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTORS, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
SECTION 33. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 34. LOAN DOCUMENT. This Guaranty is a Loan Document.
<PAGE> 156
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
[Manor Care Obligors]
By:
------------------------------------
Name Printed:
-------------------------
Its:
------------------------------------
Address: One Seagate
Toledo, Ohio 43604-2616
Fax No. 419-252-5571
Telephone: 419-252-5500
<PAGE> 157
EXHIBIT 1
to the Guaranty
Guaranty Assumption Agreement
-----------------------------
WHEREAS, HCR Manor Care, Inc., a Delaware corporation (the "COMPANY")
and Manor Care, Inc., a Delaware corporation ("MANOR CARE") entered into the
Credit Agreement dated as of September 30, 1998 (as the same may at any time be
amended or modified and in effect, the "CREDIT AGREEMENT") with various Banks
(as defined in the Credit Agreement), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, as administrative agent for the Banks
(in such capacity, the "AGENT");
WHEREAS, certain affiliates and subsidiaries of Manor Care executed and
delivered the Guaranty dated as of ____________, 1998 (as the same may at any
time be amended or modified and in effect, the "GUARANTY") in favor of the Agent
and the Banks in respect of Manor Care;
WHEREAS, the undersigned corporations and partnerships (herein
collectively called the "NEW SUBSIDIARIES" and individually called a "NEW
SUBSIDIARY") have become Subsidiaries (as defined in the Credit Agreement) of
Manor Care;
WHEREAS, the ability of Manor Care to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the New Subsidiaries will be a part; and
WHEREAS, to induce the Agent and the Banks to enter into the Credit
Agreement, Manor Care agreed to cause the New Subsidiaries to enter into this
Agreement;
NOW, THEREFORE, in order to fulfill the requirements of the Credit
Agreement, and for other good and valuable consideration, receipt of which is
hereby acknowledged, each of the New Subsidiaries agrees as follows:
1. Unless otherwise specified herein, all capitalized terms used but
not otherwise defined herein have the meanings assigned to such terms in the
Credit Agreement.
2. Each New Subsidiary hereby unconditionally assumes and agrees to
pay, perform and discharge all of the obligations as a Guarantor under the
Guaranty; and each New Subsidiary agrees that it will, for all purposes of the
Guaranty, be deemed to be a Guarantor. From and after the date hereof, all
references in the
<PAGE> 158
Credit Agreement to the Obligors or an Obligor shall be deemed to include
reference to the New Subsidiaries.
3. Each of the New Subsidiaries hereby makes, for the benefit of the
Agent and the Banks, all of the representations and warranties made by a
Guarantor in the Guaranty, which representations and warranties are true and
correct in all material respects as of the date hereof.
4. Anything herein to the contrary notwithstanding, all of the Obligors
shall at all times remain liable under the Credit Agreement and the Guaranty to
pay, perform and discharge all of their obligations thereunder to the same
extent as if this Agreement had not been executed.
5. The obligations of each New Subsidiary hereunder and under the
Guaranty are independent of any obligations of the other Obligors, and a
separate action or actions may be brought and prosecuted against each New
Subsidiary whether or not such action is brought against the other Obligors or
whether the other Obligors are joined in such action or actions.
6. This Agreement is governed by and construed under the internal laws
of the State of New York without regard to principles of conflicts of law.
IN WITNESS WHEREOF, each of the New Subsidiaries has caused this
Agreement to be authorized by its duly authorized officer as of ______,__.
[NEW SUBSIDIARY]
By:
-----------------------------------
Name Printed:
---------------------
Its:
-----------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE> 159
EXHIBIT K
DESIGNATION AGREEMENT
---------------------
Dated ______________, 19__
Reference is made to the Credit Agreement dated as of September 25, 1998 (the
"Credit Agreement") among HCR MANOR CARE, INC., a Delaware corporation (the
Company"), Manor Care, Inc., the Banks (as defined in the Credit Agreement) and
Bank of America National Trust and Savings Association, as Agent for the Banks
(the "Agent"). Terms defined in the Credit Agreement are used herein with the
same meaning.
_________________ (the "Designator") and ___________________ the
("Designee") agree as follows:
1. The Designator hereby designates the Designee, and the Designee hereby
accepts such designation, to have a right to make Bid Loans pursuant to
Section 2.6 of the Credit Agreement.
2. The Designator makes no representation or warranty and
assumes no responsibility with respect to (i) 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 (ii) the financial
condition of the Company or the performance or observance by
any Borrower of any of its obligations under the Credit
Agreement or any other instrument or document furnished
pursuant thereto.
3. The Designee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial
statements referred to in Section [7.1] thereof and such
other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into
this Designation Agreement; (ii) agrees that it will,
independently and without reliance upon the Agent, the
Designator 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) confirms
that it is an entity qualified to be a Designated Bidder;
(iv) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the terms
<PAGE> 160
thereof, together with such powers as are reasonably incidental
thereto; (v) 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 Designated Bidder; and (vi)
specifies as its Lending Office with respect to Bid Loans (and address
for notices) the offices set forth beneath its name on the signature
page hereof.
4. Following the execution of this Designation Agreement by the Designator
and its Designee, it will be delivered to the Agent for acceptance by
the Agent. The effective date of this Designation Agreement shall be
the date of acceptance thereof by the Agent, unless otherwise specified
on the signature page hereto (the "Effective Date").
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, the Designee shall be a party to the Credit Agreement as a
"Designated Bidder" with a right to make Bid Loans as Bank pursuant to
Section 2.6 of the Credit Agreement and the rights and obligations of a
Designated Bidder related thereto.
6. This Designation Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Designation Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
Effective Date: ________________, 19 __
[NAME OF DESIGNATOR]
By:
-----------------------------
Title:
[NAME OF DESIGNEE]
By:
-----------------------------
Title:
Lending Office (and
address for notices)
[Address]
2
<PAGE> 161
Accepted this ___ day
of ____________, 19__
[NAME OF AGENT]
By: ___________________
Title:
- -------------------
* This date should be no earlier than the date of acceptance
by the Agent.
3
<PAGE> 162
EXHIBIT L
GUARANTY
--------
THIS GUARANTY (this "GUARANTY") dated as of September 25, 1998 is
executed by the undersigned (the "GUARANTOR") in favor of Bank of America
National Trust and Savings Association, as Agent (as hereinafter defined in the
first recital below).
RECITALS
--------
WHEREAS, the Guarantor, Manor Care, Inc. ("MANOR CARE"), certain
lenders (the "BANKS"), The Chase Manhattan Bank, as syndication agent, TD
Securities (USA) Inc., as documentation agent and Bank of America National Trust
and Savings Association, individually and as administrative agent for the Banks
(in such capacity, the "AGENT"), have entered into that certain Credit Agreement
dated as of even date herewith (as amended or modified and in effect,
hereinafter referred to as the "CREDIT AGREEMENT") pursuant to which the Agent
and the Banks may from time to time extend credit to the Borrowers (each
capitalized term used but not defined herein shall have the meaning assigned
thereto in the Credit Agreement);
WHEREAS, as partial consideration for the Banks and the Agent entering
into the Credit Agreement, the undersigned agrees to execute and deliver this
Guaranty to the Agent for the benefit of the Agent and the Banks; and
WHEREAS, the ability of Manor Care to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the Guarantor is a part,
NOW, THEREFORE, in order to induce the Banks and the Agent to enter
into the Credit Agreement, the Guarantor hereby covenants as follows:
SECTION 35. GUARANTY.
a. Subject to SECTION 1(b), the Guarantor hereby unconditionally
guarantees the performance and the full and prompt payment when due, whether by
acceleration or otherwise, and at all times thereafter, of all Obligations of
Manor Care, including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b)
and 506(b) of the United States Bankruptcy Code, 11 U.S.C Section 502(b) and
Section 506(b)(all such Obligations being hereinafter collectively called the
"GUARANTEED LIABILITIES").
4
<PAGE> 163
b. The liability of the Guarantor under this Guaranty shall not exceed
the maximum amount of liability that such Guarantor can hereby incur without
rendering this Guaranty void or voidable under Applicable Law relating to
fraudulent conveyance or fraudulent transfers, and not for any greater amount.
For purposes of determining such liability of the Guarantor, due consideration
shall be given to the direct and indirect benefits received by the Guarantor as
a result of the Credit Extensions under the Credit Agreement.
c. This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect as to the
Guarantor notwithstanding the dissolution of any other guarantor or that at any
time or from time to time all Guaranteed Liabilities may have been paid in full
so long as any Commitment under the Credit Agreement remains outstanding.
SECTION 36. DISGORGED PAYMENTS. The Guarantor further agrees that, if
at any time all or any part of any payment theretofore applied by the Agent or
the Banks to any of the Guaranteed Liabilities is or must be rescinded or
returned by the Agent or the Banks for any reason whatsoever (including the
insolvency, bankruptcy or reorganization of Manor Care or the Guarantor), such
Guaranteed Liabilities shall, for the purposes of this Guaranty, to the extent
that such payment is or must be rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Agent or the
Banks, and this Guaranty shall continue to be effective or be reinstated, as the
case may be, as to such Guaranteed Liabilities, all as though such application
by the Agent or the Banks had not been made.
SECTION 37. [Intentionally omitted]
SECTION 38. CERTAIN PERMITTED ACTIONS. To the extent permitted by law
or the Loan Documents, each of the Agent and any Bank may, from time to time,
whether before or after any discontinuance of this Guaranty, at its sole
discretion and without notice to the Guarantor, take any or all of the following
actions without impairing its rights arising hereunder: (a) retain or obtain a
lien upon or a security interest in any property to secure any of the Guaranteed
Liabilities, (b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to such Guarantor's obligations, with respect
to any of the Guaranteed Liabilities, (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Guaranteed Liabilities, or release or compromise any obligation of any
Obligor under any Loan Document or any obligation of any nature of any other
obligor with respect to any of the Guaranteed Liabilities, (d)
5
<PAGE> 164
release or fail to perfect its lien upon or security interest in, or impair,
surrender, release or permit any substitution or exchange for, all or any part
of any property securing any of the Guaranteed Liabilities, or extend or renew
for one or more periods (whether or not longer than the original period) or
release, compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property, and (e) resort to the Guarantor for
payment of any of the Guaranteed Liabilities, whether or not the Agent or the
Banks (i) shall have resorted to any property securing any of the Guaranteed
Liabilities or (ii) shall have proceeded against any other obligor primarily or
secondarily obligated with respect to any of the Guaranteed Liabilities (all of
the actions referred to in preceding CLAUSES (I) and (II) being hereby expressly
waived by the Guarantor to the fullest extent permitted by Applicable Law).
SECTION 39. APPLICATION OF FUNDS. The Agent may apply any payments
hereunder to the payment of expenses which the Agent incurs in connection with
the enforcement of this Guaranty, including reasonable attorneys' fees and legal
expenses. The Agent may apply any balance of such payments hereunder toward the
payment of such of the Guaranteed Liabilities, and in such order of application,
as the Agent may, in its sole discretion, elect from time to time.
SECTION 40. LIMIT ON SUBROGATION; WAIVERS.
a. No payment made by or for the account of the Guarantor pursuant to
this Guaranty shall entitle the Guarantor by subrogation or otherwise to any
payment by Manor Care or from or out of any property of Manor Care, and the
Guarantor shall not exercise any right or remedy against any Borrower or any
property of Manor Care by reason of any performance by the Guarantor of this
Guaranty, all of which rights and remedies are hereby waived by the Guarantor to
the fullest extent permitted by Applicable Law.
b. To the extent permitted by Applicable Law, the Guarantor hereby
expressly waives (i) notice of the acceptance by the Agent or the Banks of this
Guaranty, (ii) notice of the existence or creation or non-payment of all or any
of the Guaranteed Liabilities, (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever, (iv) all diligence in collection or
protection of or realization upon the Guaranteed Liabilities or any security for
or guaranty of any of the foregoing and (v) all other rights and defenses
(including, without limitation, all suretyship rights and defenses) the
assertion of which would in any way diminish the liability of the Guarantor
hereunder.
6
<PAGE> 165
SECTION 41. TRANSFER OF OBLIGATIONS. Subject to Section 10.8 of the
Credit Agreement, the Agent and the Banks may, from time to time, without notice
to the Guarantor, assign or transfer, or cause to be assigned or transferred,
any or all of the Guaranteed Liabilities or any interest therein and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Guaranteed Liabilities shall be and remain Guaranteed
Liabilities for the purposes of this Guaranty, and each and every immediate and
successive assignee or transferee of any of the Guaranteed Liabilities or of any
interest therein shall, to the extent of the interest of such assignee or
transferee in the Guaranteed Liabilities, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the Agent or
a Bank.
SECTION 42. NO CONDITIONS TO EFFECTIVENESS. No claim or defense by any
Person as to the invalidity or unenforceability of any obligation under the Loan
Documents shall affect or impair the obligations of the Guarantor under this
Guaranty. The obligations of the Guarantor under this Guaranty shall be abso-
lute and unconditional irrespective of any circumstance whatsoever which might
constitute a legal or equitable discharge or defense of Manor Care. The
Guarantor hereby acknowledges that there are no conditions to the effectiveness
of this Guaranty.
SECTION 43. WARRANTIES. The Guarantor hereby warrants and represents to
the Agent and the Banks that (i) it now has and expects to continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of Manor Care, and the Agent and the Banks shall not have
any duty or responsibility to provide the Guarantor with any credit or other
information concerning the affairs, financial condition or business of Manor
Care which may come into such Person's possession; (ii) the execution, delivery
and performance of this Guaranty by the Guarantor are within its corporate or
partnership powers and do not (a) contravene any law, rule or regulation
presently in effect which affects or binds it or any of its properties, or (b)
conflict with or result in a material breach of any guaranty or loan or credit
agreement or any other agreement or instrument to which it is a party in respect
of indebtedness for money borrowed; and (iii) any and all information heretofore
or hereafter provided by the Guarantor to the Agent and the Banks hereunder and
certified by a Responsible Officer of the Guarantor is and shall be true and
accurate in all material respects as of the date furnished.
SECTION 44. MODIFICATION OF GUARANTY. This Guaranty shall not be
amended, supplemented or otherwise modified without the written consent of the
Agent and the Majority Banks and the Guarantor. Except as otherwise provided in
the Credit Agreement,
7
<PAGE> 166
this Guaranty shall not be released or terminated as to the Guarantor without
the written consent of all Banks.
SECTION 45. NOTICES.
a. All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, PROVIDED that any matter transmitted by the Guarantor by facsimile
(i) shall be immediately confirmed by a telephone call to the recipient at the
number specified on SCHEDULE 10.2 of the Credit Agreement, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered, to the address or facsimile number, in the case of the Agent and
the Banks, specified for notices on SCHEDULE 10.2 of the Credit Agreement and in
the case of the Guarantor, specified on the signature pages hereof; or, as
directed to the Guarantor or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Guarantor and the Agent;
b. All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
c. Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Guarantor. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Guarantor to give such notice and the Agent and the Banks shall not have any
liability to the Guarantor or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligations of the Guarantor under this Guaranty shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
SECTION 46. GOVERNING LAW AND JURISDICTION. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE
BANKS AND THE GUARANTOR SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
8
<PAGE> 167
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY,
THE GUARANTOR, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE GUARANTOR,
THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTOR, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 47. WAIVER OF JURY TRIAL. THE GUARANTOR, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
SECTION 48. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 49. LOAN DOCUMENT. This Guaranty is a Loan Document.
9
<PAGE> 168
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
executed by its officer thereunder duly authorized as of the day and year first
above written.
HCR MANOR CARE, INC.
By:
------------------------------------
Name Printed:
--------------------------
Its:
------------------------------------
Address: One Seagate
Toledo, Ohio 43604-2616
Fax No. 419-252-5571
Telephone: 419-252-5500
10
<PAGE> 1
Exhibit 4.1
364 DAY
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 25, 1998
AMONG
HCR MANOR CARE, INC.,
MANOR CARE, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT,
THE CHASE MANHATTAN BANK,
AS SYNDICATION AGENT,
TD SECURITIES (USA) INC.,
AS DOCUMENTATION AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANCAMERICA SECURITIES, INC.,
AS LEAD ARRANGER
AND
CHASE SECURITIES INC.
AND
TD SECURITIES (USA) INC.,
AS CO-ARRANGERS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS..............................................................................................1
1.1. CERTAIN DEFINED TERMS....................................................................1
1.3. ACCOUNTING PRINCIPLES...................................................................26
ARTICLE II THE CREDITS.............................................................................26
2.1. AMOUNTS AND TERMS OF COMMITMENTS........................................................26
2.2. LOAN ACCOUNTS...........................................................................26
2.3. PROCEDURE FOR COMMITTED BORROWING.......................................................27
2.4. CONVERSION AND CONTINUATION ELECTIONS FOR COMMITTED
BORROWINGS..............................................................................28
2.5. VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS
2.6. OPTIONAL AND MANDATORY PREPAYMENTS; MANDATORY
COMMITMENT REDUCTIONS...................................................................30
2.7. REPAYMENT...............................................................................30
2.8. INTEREST................................................................................30
2.9. FEES....................................................................................31
2.10. COMPUTATION OF FEES AND INTEREST........................................................32
2.11. PAYMENTS BY THE BORROWERS...............................................................32
2.12. PAYMENTS BY THE BANKS TO THE AGENT......................................................33
2.13. SHARING OF PAYMENTS, ETC................................................................33
2.14. EXTENSION OF REVOLVING TERMINATION DATE.................................................34
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY..................................................35
3.1. TAXES...................................................................................35
3.2. ILLEGALITY..............................................................................36
3.3. INCREASED COSTS AND REDUCTION OF RETURN.................................................37
3.4. FUNDING LOSSES..........................................................................37
3.5. INABILITY TO DETERMINE RATES............................................................38
3.6. CERTIFICATES OF BANKS...................................................................39
3.7. SUBSTITUTION OF BANKS...................................................................39
3.8. AFFECTED BANK'S OBLIGATION TO MITIGATE..................................................39
3.9. PRESENTATION OF CLAIMS; SURVIVAL........................................................39
ARTICLE IV CONDITIONS PRECEDENT....................................................................40
4.1. CONDITIONS OF INITIAL CREDIT EXTENSION..................................................40
(a) CREDIT AGREEMENT AND NOTES...........................................40
(b) RESOLUTIONS; INCUMBENCY..............................................40
(c) ORGANIZATION DOCUMENTS; GOOD
STANDING.............................................................40
(d) GUARANTIES...........................................................41
(e) PRIOR CREDIT AGREEMENTS..............................................41
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
-----------------
CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(f) MERGER AGREEMENT.....................................................41
(g) LITIGATION...........................................................42
(h) LEGAL OPINIONS.......................................................42
(i) PAYMENT OF FEES......................................................42
(j) CERTIFICATE..........................................................42
(k) OTHER DOCUMENTS......................................................42
4.2. CONDITIONS TO ALL CREDIT EXTENSIONS...............................................................43
(a) NOTICE OF BORROWING; APPLICATION.....................................43
(b) CONTINUATION OF REPRESENTATIONS AND
WARRANTIES...........................................................43
(c) NO EXISTING DEFAULT..................................................43
ARTICLE V REPRESENTATIONS AND WARRANTIES..........................................................43
5.1. ORGANIZATION, POWER, AUTHORITY, ETC.....................................................43
5.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC...............................................44
5.3. GOVERNMENT APPROVAL, REGULATION, ETC....................................................44
5.4. VALIDITY, ETC...........................................................................45
5.5. FINANCIAL INFORMATION...................................................................45
5.6. NO MATERIALLY ADVERSE EFFECT............................................................46
5.7. LITIGATION, ETC.........................................................................46
5.8. REGULATIONS T, U AND X..................................................................46
5.9. PENSION AND WELFARE PLANS...............................................................46
5.10. SUBSIDIARIES............................................................................47
5.11. TAXES...................................................................................47
5.12. ABSENCE OF DEFAULT......................................................................48
5.13. LABOR CONTROVERSIES.....................................................................48
5.14. OWNERSHIP OF PROPERTIES.................................................................48
5.15. PATENTS, TRADEMARKS, ETC................................................................48
5.16. ENVIRONMENTAL MATTERS...................................................................48
5.17. ACCURACY OF INFORMATION.................................................................48
5.18. YEAR 2000 REPRESENTATIONS...............................................................49
5.19. HEALTH CARE REGULATORY MATTERS..........................................................49
5.20. MERGER AGREEMENT........................................................................50
ARTICLE VI COVENANTS...............................................................................51
6.1. AFFIRMATIVE COVENANTS...................................................................51
6.1.1. Financial Information, etc..............................................................51
6.1.2. MAINTENANCE OF EXISTENCES, ETC.......................................53
6.1.3. FOREIGN QUALIFICATION............................................................54
6.1.4. PAYMENT OF TAXES, ETC............................................................54
6.1.5. INSURANCE .....................................................................54
6.1.6. NOTICE OF DEFAULT, LITIGATION, ETC..............................................54
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
-----------------
CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.1.7. PERFORMANCE OF OBLIGATIONS......................................................55
6.1.8. BOOKS AND RECORDS...............................................................55
6.1.9. COMPLIANCE WITH LAWS, ETC.......................................................56
6.1.10. MANOR CARE OBLIGORS..................................................56
6.1.11. MAINTENANCE OF PROPERTY........................................................56
6.1.12. ASSUMPTION BY NEW SUBSIDIARIES.................................................57
6.1.13. USE OF PROCEEDS................................................................57
6.2. NEGATIVE COVENANTS................................................................................57
6.2.1. BUSINESS ACTIVITIES.............................................................57
6.2.2. INDEBTEDNESS....................................................................58
6.2.3. LIENS .....................................................................59
6.2.4. FINANCIAL CONDITION.............................................................61
6.2.5. RESTRICTED PAYMENTS.............................................................61
6.2.6. CONSOLIDATION, MERGER, ETC......................................................62
6.2.7. ASSET DISPOSITIONS, ETC.........................................................62
6.2.8. MODIFICATION OF CERTAIN INSTRUMENTS,
ORGANIZATIONAL DOCUMENTS, ETC........................................63
6.2.9. TRANSACTIONS WITH AFFILIATES....................................................63
6.2.10. AGREEMENTS RESTRICTING LIENS AND
DISTRIBUTIONS........................................................64
6.2.11. ENVIRONMENTAL MATTERS..........................................................64
6.2.12. ACQUISITIONS............................................................................64
ARTICLE VII EVENTS OF DEFAULT.......................................................................65
7.1. EVENTS OF DEFAULT.......................................................................65
7.1.1. NON-PAYMENT OF OBLIGATIONS......................................................65
7.1.2. NON-PERFORMANCE OF CERTAIN COVENANTS............................................65
7.1.3. NON-PERFORMANCE OF OTHER OBLIGATIONS............................................65
7.1.4. BANKRUPTCY, INSOLVENCY, ETC.....................................................65
7.1.5. BREACH OF WARRANTY..............................................................66
7.1.6. CROSS DEFAULT....................................................................66
7.1.7. ERISA. .....................................................................67
7.1.8. JUDGMENTS .....................................................................67
7.1.9. IMPERMISSIBLE CHANGE IN CONTROL.................................................67
7.1.10. GUARANTOR DEFAULTS.............................................................67
7.1.11. LOSS OF LICENSES...............................................................67
7.2. REMEDIES.............................................................68
7.3. RIGHTS NOT EXCLUSIVE..............................................................68
ARTICLE VIII THE AGENT...............................................................................68
8.1. APPOINTMENT AND AUTHORIZATION...........................................................68
8.2. DELEGATION OF DUTIES....................................................................69
</TABLE>
iii
<PAGE> 5
TABLE OF CONTENTS
-----------------
CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
8.3. LIABILITY OF AGENT......................................................................69
8.4. RELIANCE BY AGENT.......................................................................69
8.5. NOTICE OF DEFAULT.......................................................................70
8.6. CREDIT DECISION.........................................................................70
8.7. INDEMNIFICATION OF AGENT................................................................71
8.8. AGENT IN INDIVIDUAL CAPACITY............................................................71
8.9. SUCCESSOR AGENT.........................................................................72
8.10. WITHHOLDING TAX.........................................................................72
8.11. DOCUMENTATION AGENTS AND SYNDICATION AGENT..............................................74
ARTICLE IX
MISCELLANEOUS...........................................................................................74
9.1. AMENDMENTS AND WAIVERS..................................................................74
9.2. NOTICES.................................................................................75
9.3. NO WAIVER; CUMULATIVE REMEDIES..........................................................76
9.4. COSTS AND EXPENSES......................................................................76
9.5. COMPANY INDEMNIFICATION.................................................................77
9.6. PAYMENTS SET ASIDE......................................................................77
9.7. SUCCESSORS AND ASSIGNS..................................................................78
9.8. ASSIGNMENTS, PARTICIPATIONS, ETC........................................................78
9.9. CONFIDENTIALITY.........................................................................80
9.10. SET-OFF.................................................................................81
9.11. NOTIFICATION OF ADDRESSES, LENDING OFFICES,
ETC. ...................................................................................81
9.12. COUNTERPARTS............................................................................81
9.13. SEVERABILITY............................................................................81
9.14. NO THIRD PARTIES BENEFITED..............................................................81
9.15. GOVERNING LAW AND JURISDICTION..........................................................81
9.16. WAIVER OF JURY TRIAL....................................................................82
9.17. ENTIRE AGREEMENT........................................................................82
</TABLE>
iv
<PAGE> 6
364 DAY CREDIT AGREEMENT
This 364 DAY CREDIT AGREEMENT is entered into as of September 25, 1998,
among HCR MANOR CARE, Inc., a Delaware corporation formerly known as Health Care
and Retirement Corporation (the "COMPANY"), MANOR CARE, INC., a Delaware
corporation ("MANOR CARE"; Manor Care and the Company are collectively called
the "BORROWERS" and are each individually called a "BORROWER"), the several
financial institutions from time to time party to this Agreement (collectively,
the "BANKS"; individually, a "BANK"), Bank of America National Trust and Savings
Association, as administrative agent for the Banks, The Chase Manhattan Bank, as
syndication agent and TD Securities (USA) Inc., as documentation agent.
WHEREAS, the Banks have agreed to make available to the Borrowers a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1. CERTAIN DEFINED TERMS. The following terms have the
following meanings:
"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 line or segment of 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 (i) the Company or the
Subsidiary is the surviving entity or (ii) after giving effect to such
merger or consolidation, such other Person has become a Subsidiary of
the Company.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the
1
<PAGE> 7
power to direct or cause the direction of the management and policies
of the other Person, whether through the ownership of voting
securities, membership interests, by contract, or otherwise; PROVIDED,
HOWEVER, the existence of a management contract by the Company or one
of its Affiliates to manage another entity shall not be deemed to be
control.
"AGENT" means BofA in its capacity as administrative agent for
the Banks hereunder, and any successor agent arising under SECTION 8.9.
"AGENT-RELATED PERSONS" means BofA and any successor agent
arising under SECTION 8.9, together with their respective Affiliates
(including, in the case of BofA, the Lead Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"AGENT'S PAYMENT OFFICE" means the address for payments set
forth on SCHEDULE 9.2 or such other address as the Agent may from time
to time specify.
"AGREEMENT" means this 364 Day Credit Agreement.
"APPLICABLE FACILITY FEE RATE" means a rate per annum
determined by reference to the Leverage Ratio as follows:
Applicable
Level Leverage Ratio Facility Fee Rate
- ----- -------------- -----------------
Level 1 * 1.50 0.100%
Level 2 ** = 1.50 but * 2.00 0.125%
Level 3 ** = 2.00 but * 2.50 0.150%
Level 4 ** = 2.50 but * 3.00 0.175%
Level 5 ** = 3.00 0.225%
* Less than
** Greater than or equal to
From the Effective Date until the delivery of the first Compliance
Certificate, the Applicable Facility Fee Rate shall be Level 2.
Thereafter, the Applicable Facility Fee Rate shall be effective from
and including the date on which the Agent receives a Compliance
Certificate to but excluding the date on which the Agent receives the
next Compliance Certificate; PROVIDED, HOWEVER, that if the Agent does
not receive a Compliance Certificate by the date required by SECTION
5.1, the Applicable Facility Fee Rate shall, effective as of such date,
be Level 5 to but excluding the date the Agent receives such Compliance
Certificate.
2
<PAGE> 8
"APPLICABLE LAW" with respect to any Person or matter means
any law, rule, statute, regulation, order, decree or other requirement
having the force of law relating to such Person or matter and, where
applicable, any official interpretation thereof by any Person having
jurisdiction with respect thereto or charged with the administration or
interpretation thereof.
"APPLICABLE MARGIN" means in the case of Base Rate Committed
Loans, zero, and in the case of Offshore Rate Committed Loans, a rate
per annum determined by reference to the Leverage Ratio as follows:
Applicable
Offshore
Level Leverage Ratio Rate Margin
- ----- -------------- -----------
Level 1 * 1.50 +0.175%
Level 2 ** = 1.50 but * 2.00 +0.225%
Level 3 ** = 2.00 but * 2.50 +0.300%
Level 4 ** = 2.50 but * 3.00 +0.375%
Level 5 ** = 3.00 +0.525%
* Less than
** Greater than or equal to
From the Effective Date until the delivery of the first Compliance
Certificate, the Applicable Margin shall be Level 2. Thereafter, the
Applicable Margin shall be effective from and including the date on
which the Agent receives a Compliance Certificate to but excluding the
date on which the Agent receives the next Compliance Certificate;
PROVIDED, HOWEVER, that if the Agent does not receive a Compliance
Certificate by the date required by SECTION 5.1, the Applicable Margin
shall, effective as of such date, be Level 5 to but excluding the date
the Agent receives such Compliance Certificate.
"ASSIGNEE" has the meaning specified in SECTION 9.8(A).
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the
non-duplicative allocated cost of internal legal services and all
disbursements of internal counsel.
"BANK" has the meaning specified in the introductory
clause hereto. References to the "Banks" shall include
BofA.
3
<PAGE> 9
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. Section 101, et seq.).
"BASE RATE" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.) Any change in
the reference rate announced by BofA shall take effect at the opening
of business on the day specified in the public announcement of such
change.
"BASE RATE COMMITTED LOAN" means a Committed Loan that bears
interest based on the Base Rate.
"BOFA" means Bank of America National Trust and Savings
Association, a national banking association.
"BORROWERS" has the meaning specified in the
introductory clause hereto.
"BORROWING" means a borrowing hereunder consisting of Loans of
the same Type made to a Borrower on the same day by the Banks under
Article II, and, other than in the case of Base Rate Committed Loans,
having the same Interest Period.
"BORROWING DATE" means any date on which a Borrowing occurs
under SECTION 2.3.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, San Francisco or
Toledo, Ohio are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means such a
day on which dealings are carried on in the applicable offshore dollar
interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
4
<PAGE> 10
"CAPITALIZED LEASE" means any lease of property which as
determined in accordance with GAAP should be capitalized on the balance
sheet of any Person.
"CAPITALIZED LEASE LIABILITIES" of any Person means all
monetary obligations of such Person under any leasing or similar
arrangement which, in accordance with GAAP, are or would be classified
as capitalized leases on a balance sheet for such Person.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States
Government;
(b) commercial paper, maturing not more than one year from the
date of issue, which is issued by
(i) a corporation (except an Affiliate of the
Company) organized under the laws of any State of the United
States of America or of the District of Columbia and rated at
least A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Service, Inc., at the time of investment, or
(ii) any Bank (or its holding company);
(c) any certificate of deposit or bankers' acceptance or
eurodollar time deposit, maturing not more than one year after the date
of issue, which is issued by either
(i) a financial institution that is a member of the
Federal Reserve System and has a combined capital and surplus
and undivided profits of not less than $100,000,000, or
(ii) any Bank; or
(e) any repurchase agreement with a term of one year or less
which
(i) is entered into with
(A) any Bank, or
(B) any other commercial banking institution
of the stature referred to in CLAUSE (c)(i),
5
<PAGE> 11
(ii) is secured by a fully perfected Lien in any
obligation of the type described in any of CLAUSES (a) through
(c), and
(iii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the
repurchase obligation of such Bank (or other commercial
banking institution) thereunder; or
(f) investments in money market funds that invest solely in
Cash Equivalent Investments described in CLAUSES (a) through (d).
"CATERA" means Catera Acquisition Corp., a wholly-owned
Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"COMMITMENT", as to each Bank, has the meaning specified in
SECTION 2.1.
"COMMITTED BORROWING" means a Borrowing hereunder consisting
of Committed Loans made on the same day by the Banks ratably according
to their respective Pro Rata Shares and, in the case of Offshore Rate
Committed Loans, having the same Interest Periods.
"COMMITTED LOAN" means a Loan by a Bank to a Borrower under
SECTION 2.1, and may be an Offshore Rate Committed Loan or a Base Rate
Committed Loan (each, a "Type" of Committed Loan).
"COMMITTED LOAN NOTE" means a note, delivered pursuant to
SECTION 2.2, that evidences a Bank's Committed Loans.
"COMPANY" has the meaning specified in the introductory clause
hereto.
"COMPANY GUARANTY" means a guaranty, substantially in the form
of EXHIBIT L, by the Company in favor of the Agent for its benefit and
ratable benefit of the Banks.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C.
"CON" means a certificate of need or other license or permit
issued by a state health facilities planning board or similar agency or
body required for the
6
<PAGE> 12
construction, expansion, or investment in a health facility.
"CONSOLIDATED" means when used with reference to any financial
term the aggregate for each Person and its Subsidiaries of the amounts
signified by such term for all such Persons determined on a
consolidated basis in accordance with GAAP including principles of
consolidation, and, in the case of the Company and its Subsidiaries,
consistent with those applied in the preparation of the consolidated
financial statements referred to in SECTION 5.5(a).
"CONSOLIDATED CAPITALIZATION" means the sum of (x)
Consolidated Indebtedness for Borrowed Money of the Company and its
Subsidiaries and (y) Consolidated Net Worth of the Company and its
Subsidiaries.
"CONSOLIDATED EBITDA" means, for any period, the Company's and
its Subsidiaries' earnings before Consolidated Interest Expense, taxes,
depreciation, amortization, extraordinary items of gain and all
Specified Losses.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period,
for the Company and its Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), all interest in
respect of Indebtedness for Borrowed Money accrued or capitalized
during such period (whether or not actually paid during such period),
excluding amortization of fees related to this Agreement and the
$500,000,000 Credit Agreement.
"CONSOLIDATED NET WORTH" means, at any time, the sum of the
following amounts with respect to the Company and its Subsidiaries on a
Consolidated basis set forth in the Consolidated balance sheet of the
Company, prepared in accordance with GAAP: (A) the par or stated value
of all outstanding capital stock LESS the amount of treasury stock
separately classified; (B) capital surplus; and (C) retained earnings
(without deduction for Specified Losses).
"CONTINGENT LIABILITY" means any agreement, undertaking or
arrangement by which any Person (a) guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to
supply funds to, or otherwise to invest in, a debtor, or otherwise to
assure a creditor against loss) the debt, obligation or other liability
of any
7
<PAGE> 13
other Person (other than by endorsements of instruments in the course
of collection), or (b) guarantees the payment of dividends or other
distributions upon the shares of any other Person, or (c) undertakes or
agrees (contingently or otherwise) (i) to purchase, repurchase, or
otherwise acquire any Indebtedness, obligation or liability of any
other Person or any security therefor, or (ii) to provide funds for the
payment or discharge thereof (whether in form of loans, advances, stock
purchases, capital contributions or otherwise), or (iii) to maintain
solvency, assets, level of income, or other financial condition of any
other Person, or (iv) to make payment on behalf of any other Person
other than for value received. The amount of any Person's obligation
under any Contingent Liability shall (subject to any limitation set
forth therein) be deemed to be the outstanding principal amount (or
maximum permitted principal amount, if larger) of the debt, obligation
or other liability guaranteed or supported thereby.
"CONTRACTUAL OBLIGATION" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"CONVERSION/CONTINUATION DATE" means any date on which, under
SECTION 2.4, a Borrower (a) converts Committed Loans of one Type to
another Type, or (b) continues as Committed Loans of the same Type, but
with a new Interest Period, Committed Loans having Interest Periods
expiring on such date.
"CREDIT EXTENSION" means and includes the making of any
Loans hereunder.
"DEBT TO CAPITALIZATION RATIO" means the aggregate outstanding
principal amount of Consolidated Indebtedness for Borrowed Money of the
Company and its Subsidiaries at the time of determination divided by
the Consolidated Capitalization of the Company and its Subsidiaries at
the time of determination.
"DEFAULT" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
8
<PAGE> 14
"DISCLOSURE SCHEDULE" means the Disclosure
Schedule attached hereto as SCHEDULE 1.
"DOLLARS", "DOLLARS" and "$" each mean lawful money of
the United States.
"EFFECTIVE DATE" means the date on which all conditions
precedent set forth in SECTION 4.1 are satisfied or waived (or, in the
case of SECTION 4.1(i), waived by the Person entitled to receive such
payment).
"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the "OECD"),
or a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch or agency located in the United States; (c)
a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (iii) a Person of which a
Bank is a Subsidiary; or (d) any insurance company, mutual fund or
other financial institution or fund which has been approved in writing
by the Company and the Agent as an Eligible Assignee for purposes of
this Agreement, PROVIDED that in each such case such approval shall not
be unreasonably withheld, and PROVIDED, FURTHER that the term "Eligible
Assignee" shall exclude healthcare competitors of the Company or any
Subsidiary and healthcare REITS.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
9
<PAGE> 15
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA EVENT" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA, upon
the Company or any ERISA Affiliate.
"EURODOLLAR RESERVE PERCENTAGE" has the meaning specified in
the definition of "Offshore Rate".
"EVENT OF DEFAULT" means any of the events or circumstances
specified in SECTION 7.1.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934,
and regulations promulgated thereunder.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and
its Subsidiaries existing on the Effective Date.
"FACILITY" means any nursing home or other health care
facility (including any facility operating an assisted living unit)
operated by the Company or a Subsidiary of the Company.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
10
<PAGE> 16
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"FEE LETTER" has the meaning specified in SECTION 2.9(a).
"$500,000,000 CREDIT AGREEMENT" means that certain Credit
Agreement of even date herewith among, INTER ALIA, the Borrowers, the
Banks and the Agent.
"FIXED CHARGE COVERAGE RATIO" means the ratio of (a) the sum
of (i) Consolidated EBITDA plus (ii) lease and rental expense of the
Company and its Subsidiaries, in each case for the period of
determination, to (b) the sum of (i) Consolidated Interest Expense,
(ii) scheduled payments of principal on Consolidated Indebtedness for
Borrowed Money of the Company and its Subsidiaries having a final
maturity of one or more than one year from the date of origin thereof
(or which is renewable or extendible at the option of the obligor for a
period or periods more than one year from the date of origin) other
than credit extensions under this Agreement and the $500,000,000 Credit
Agreement for the period of determination and (iii) lease and rental
expense of the Company and its Subsidiaries, in each case for the
period of determination.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"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 stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
11
<PAGE> 17
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"GUARANTY" means a guaranty, substantially in the form of
EXHIBIT E, by the Subsidiaries (other than Non- Obligors) of the
Company in favor of the Agent for its benefit and the ratable benefit
of the Banks.
"HAZARDOUS MATERIAL" means and includes at any time (a) any
friable asbestos (or asbestos which becomes friable), PCBs or dioxins
or insulation or other material composed of or containing friable
asbestos (or asbestos which becomes friable), PCBs or dioxins and (b)
any petroleum or any fraction thereof and any hazardous or toxic waste,
substance or material defined as such in (or for purposes of) CERCLA,
any applicable so-called "superfund" or "superlien" law, or any other
Applicable Law regulating or pertaining to any such waste, substance or
material, as then or at any time thereafter in effect.
"HCFA" means the Health Care Financing Administration of HHS
and any Person succeeding to the functions thereof.
"HEALTH FACILITY LICENSE" means a license or permit to provide
skilled and/or intermediate care nursing services, operate an assisted
living unit or otherwise operate a Facility, including any permit under
Medicare Regulations, Medicaid Regulations or
applicable state laws.
"HHS" means the Department of Health and Human Services and
any Person succeeding to the functions thereof.
"HILL-BURTON ACT" means, collectively, the Hill- Burton Act
established by Title VI and XVI of the Public Health Service Act, the
Health Manpower Program established by Title VII of the Public Health
Service Act or other grant, loan, subsidy or assistance program
of a Governmental Authority.
12
<PAGE> 18
"IHH" means In Home Health, Inc., a Minnesota corporation.
"IMPERMISSIBLE CHANGE IN CONTROL" means the occurrence of any
of the following, in each case without the prior written consent of the
Majority Banks:
(a) at any time, any Person or group of Persons (within the
meaning of Rule 13d-5 promulgated by the SEC under the Securities
Exchange Act of 1934) (other than underwriters holding pending
distribution) owns beneficially (within the meaning of Rule 13d-3
promulgated by the SEC under the Securities Exchange Act of 1934), 51%
or more of the issued and outstanding shares of capital stock of the
Company having ordinary voting power for the election of directors of
the Company; or
(b) at any time, a majority of the seats (other than vacant
seats) on the Company's board of directors shall be occupied by persons
who were neither (i) recommended by the Company's management in
connection with an annual meeting of the Company's stockholders, nor
(ii) appointed by directors who were recommended as described in the
foregoing CLAUSE (b)(i).
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of any Person, any qualification or exception to
such opinion or certification which:
(a) is of a "going concern" or similar nature;
(b) relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause the Obligors to be in default of any of its
obligations under SECTION 6.2.4.
"INDEBTEDNESS" of any Person means, without
duplication:
(a) all obligations of such Person for borrowed money
(including all notes payable and drafts accepted representing
extensions of credit) and all obligations
13
<PAGE> 19
evidenced by bonds, debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all obligations as lessee under leases which have been or
should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities; and
(d) whether or not so included as liabilities in accordance
with GAAP
(i) all obligations of such Person to pay the
deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse, and
(ii) all Contingent Liabilities of such Person (but
not to exceed the net worth of such Person) in respect of any
Indebtedness of any Person.
"INDEBTEDNESS FOR BORROWED MONEY" with respect to any Person
means, without duplication, any obligation of such Person for borrowed
money, but in any event shall include (i) any obligation incurred for
all or any part of the purchase price of property or other assets or
for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities
and incurred in respect of property purchased in the ordinary course of
business, (ii) the face amount of all letters of credit issued for the
account of such Person (other than (x) documentary letters of credit
including commercial and trade letters of credit) issued to secure
payment obligations in respect of goods and services in the ordinary
course of business and (y) letters of credit and surety bonds with
respect to obligations of such Person that are fully accounted for as
liabilities in the financial records of such Person) and all drafts
drawn thereunder, (iii) obligations of the type described in CLAUSES
(i), (ii), (iv), or (v) (whether or not such Person has assumed or
become liable for the payment of such obligation)
14
<PAGE> 20
secured by Liens, (iv) the amount of all Capitalized Lease Liabilities,
and (v) all Contingent Liabilities of such Person (but not to exceed
the net worth of such Person) with respect to Indebtedness for Borrowed
Money described in the foregoing CLAUSES (i) through (iv); PROVIDED,
HOWEVER, that Indebtedness for Borrowed Money shall not include
Indebtedness fully secured by the cash surrender value of life
insurance policies.
"INDEMNIFIED LIABILITIES" has the meaning specified in
SECTION 9.5.
"INDEMNIFIED PERSON" has the meaning specified in
SECTION 9.5.
"INSOLVENCY PROCEEDING" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"INTEREST PAYMENT DATE" means, as to any Loan other than a
Base Rate Committed Loan, the last day of each Interest Period
applicable to such Loan and, as to any Base Rate Committed Loan, the
last Business Day of each calendar quarter, PROVIDED, HOWEVER, that if
any Interest Period for an Offshore Rate Committed Loan exceeds three
months, the date that falls three months after the beginning of such
Interest Period and three months after each Interest Payment Date
thereafter is also an Interest Payment Date.
"INTEREST PERIOD" means, as to any Offshore Rate Committed
Loan, the period commencing on the Borrowing Date of such Loan, or on
the Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Committed Loan, and ending on the date
(i) one, two, three or six months thereafter (and any period of nine or
twelve months to the extent that the Agent reasonably determines that
funding therefor is available to the Banks) and, in addition, (ii) for
the period from the Effective Date through October 31, 1998 only, seven
days thereafter as selected by a Borrower in its Notice of Borrowing or
Notice of Conversion/Continuation, as the case may be;
provided that:
15
<PAGE> 21
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"LEAD ARRANGER" means BancAmerica Securities, Inc., a
Delaware corporation.
"LENDING OFFICE" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on SCHEDULE
9.2, or such other office or offices as such Bank may from time to time
notify the Company and the Agent.
"LEVERAGE RATIO" means the ratio of (i) Consolidated
Indebtedness for Borrowed Money of the Company and its Subsidiaries to
(ii) Consolidated EBITDA. The amount determined under clause (ii) shall
be calculated for the four fiscal quarter period then ending and
adjusted on a pro forma basis for any acquisitions or investments as if
such acquisition or investment took place on the first day of said four
fiscal quarter period.
"LIEN" means any security interest, mortgage, deed of trust,
pledge, hypothecation, collateral assignment, charge or deposit
arrangement, encumbrance or lien (statutory or other) of any kind or
nature whatsoever in respect of any property (including those created
by, arising under or evidenced by any conditional sale or other title
retention
16
<PAGE> 22
agreement, the interest of a lessor under a Capitalized Lease, any
financing lease having substantially the same economic effect as any of
the foregoing, or the filing of any financing statement naming the
owner of the asset to which such lien relates as debtor, under the
Uniform Commercial Code or any comparable law) but not including the
interest of a lessor under an operating lease (whether or not a
protective UCC filing is made).
"LOAN" means an extension of credit by a Bank to a
Borrower under Article II.
"LOAN DOCUMENTS" means this Agreement, any Notes, the Fee
Letter, the Guaranty, the Company Guaranty, the Manor Care Subsidiary
Guaranty and all other documents delivered to the Agent or any Bank in
connection herewith and expressly identified as a "Loan Document".
"MAJORITY BANKS" means (a) at any time prior to the Revolving
Termination Date, or after the Revolving Termination Date if no Loans
are then outstanding, Banks then holding more than 50% of the
Commitments, and (b) otherwise, Banks then holding more than 50% of the
then aggregate unpaid principal amount of the Loans.
"MANOR CARE" has the meaning specified in the introductory
clause hereto.
"MANOR CARE INDENTURE" means that certain Indenture dated as
of June 4, 1996 between Manor Care and Wilmington Trust Company, as
Trustee, as amended, modified or supplemented from time to time.
"MANOR CARE OBLIGORS" means the Subsidiaries of Manor Care
listed on Part II of SCHEDULE 6.10 excluding those Subsidiaries
described in clauses (i)(a), (i)(b) and (ii) of the definition of the
term "Non-Obligors".
"MANOR CARE SUBSIDIARY GUARANTY" means a guaranty,
substantially in the form of EXHIBIT J, by the Manor Care Obligors in
favor of the Agent for its benefit and the ratable benefit of the
Banks.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
"MATERIAL GROUP OF SUBSIDIARIES" means any Subsidiary or
Subsidiaries having 5% or more of the Consolidated assets of the
Company and its Subsidiaries.
17
<PAGE> 23
"MATERIALLY ADVERSE EFFECT" means (a) a material adverse
change in, or a material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole; or (b) a material impairment of the
ability of the Borrowers to perform any of their payment or other
material obligations under any Loan Document to which they are a party.
"MEDICAID CERTIFICATION" means certification by a state agency
that the health facility fully complies with all the requirements for
participation in the Medicaid Regulations.
"MEDICAID PROVIDER AGREEMENT" means an agreement entered into
between a state agency or other such entity administering the Medicaid
program and a health facility under which the agency agrees to pay for
services provided by the health facility to qualified Medicaid
beneficiaries in accordance with the terms of the agreement and
Medicaid Regulations.
"MEDICAID REGULATIONS" means, collectively, (i) all federal
statutes (whether set forth in Title XIX of the Social Security Act or
elsewhere) affecting the medical assistance program established by
Title XIX of the Social Security Act (42 U.S.C. ss.ss. 1396, ET SEQ.);
(ii) all applicable provisions of all federal rules, regulations,
manuals, orders and administrative, reimbursement and other guidelines
of all Governmental Authorities (whether or not having the force of
law) promulgated pursuant to or in connection with the statutes
described in clause (i) above; (iii) all state statutes and plans for
medical assistance enacted in connection with the statutes and
provisions described in clauses (i) and (ii) above; and (iv) all
applicable provisions of all rules, regulations, manuals, orders and
administrative, reimbursement and other guidelines of all Governmental
Authorities (whether or not having the force of law) promulgated
pursuant to or in connection with any of the foregoing.
"MEDICARE CERTIFICATION" means certification by HCFA or a
state agency or entity under contract with HCFA that the health
facility complies with all the requirements for participation set forth
in the Medicare Regulations.
"MEDICARE PROVIDER AGREEMENT" means an agreement entered into
between HCFA or a state agency under contract with HCFA and a health
facility under which
18
<PAGE> 24
HCFA agrees to pay for services provided by the health facility to
qualified Medicare beneficiaries in accordance with the terms of the
agreement and Medicare Regulations.
"MEDICARE REGULATIONS" means, collectively, all federal
statutes (whether set forth in Title XVIII of the Social Security Act
or elsewhere) affecting the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42
U.S.C. Sections 1395, ET SEQ.), together with all applicable provisions
of all rules, regulations, manuals, orders and administrative,
reimbursement and other guidelines of all Governmental Authorities
including HHS, HCFA, the Office of the Inspector General of HHS, or any
Person succeeding to the functions of any of the foregoing (whether or
not having the force of law).
"MERGER AGREEMENT" means that certain Amended and Restated
Agreement and Plan of Merger dated as of June 10, 1998 among Health
Care and Retirement Corporation, Manor Care and Catera, as amended by
that certain First Amendment to the Amended and Restated Agreement and
Plan of Merger by and among Manor Care, Health Care and Retirement
Corporation and Catera, dated as of June 10, 1998.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"NON-OBLIGOR" means (i) (a) any Subsidiary identified as a
Non-Obligor on ITEM 6.10 of the Disclosure Schedule; PROVIDED, however
that any Subsidiary identified thereon as dormant shall cease to be a
Non-Obligor at such time as it ceases to be dormant; and PROVIDED
FURTHER that any Subsidiary identified thereon as a Subsidiary having
minority shareholders or other joint venturers or partners shall cease
to be a Non-Obligor at such time as it is wholly-owned by the Company
or its Subsidiaries, (b) any Subsidiary incorporated under the laws of
any jurisdiction other than the United States and (c), until they shall
have executed the Manor Care Subsidiary Guaranty, the Manor Care
Obligors and (ii) any Subsidiary of any Obligor created after the
Effective Date that is designated as such by such
19
<PAGE> 25
Obligor by written notice to the Agent within 30 days of its formation
or acquisition, PROVIDED that such Subsidiary has an asset value not
exceeding $1,000,000, and PROVIDED FURTHER that the total Consolidated
asset value of all Non-Obligors, excluding those Non-Obligors described
in clause (i) above, shall not exceed $25,000,000 at any time.
"NON-U.S. BANK" means any Bank that is not a citizen or
resident of the United States of America, a corporation, partnership or
other entity created or organized in or under the laws of the United
States of America (or any jurisdiction thereof), or any estate or trust
that is subject to United States federal income taxation regardless of
its source of income.
"NOTES" means the Committed Loan Notes, to the extent
requested by any Bank pursuant to SECTION 2.2.
"NOTICE OF BORROWING" means a notice in substantially
the form of EXHIBIT A.
"NOTICE OF CONVERSION/CONTINUATION" means a notice in
substantially the form of EXHIBIT B.
"OBLIGATIONS" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document,
owing by the Borrowers to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing
or hereafter arising.
"OBLIGOR" means the Company and each Subsidiary of the Company
other than the Non-Obligors and any Subsidiaries created or acquired
after the Effective Date as to which no request has been made for such
Subsidiaries to become party to the Guaranty pursuant to SECTION
6.1.12.
"OFFSHORE RATE" means, for any Interest Period, with respect
to Offshore Rate Committed Loans comprising part of the same Borrowing,
the rate of interest per annum determined by the Agent as follows:
Offshore Rate = IBOR
---------------------
1.00 - Eurodollar Reserve Percentage
Where,
20
<PAGE> 26
"EURODOLLAR RESERVE PERCENTAGE" means for any day for any
Interest Period the maximum reserve percentage (expressed as a decimal,
rounded upward to the next 1/100th of 1%) in effect on such day
(whether or not applicable to any Bank) under regulations issued from
time to time by the FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred
to as "Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined by the
Agent to be the arithmetic mean (rounded upward, if necessary, to the
nearest 1/16th of 1%) of the rates of interest per annum at which
dollar deposits in the approximate amount of the amount of the Loan to
be made or continued as, or converted into, an Offshore Rate Loan and
having a maturity comparable to such Interest Period would be offered
by BofA to major banks in the interbank market at their request at
approximately 11:00 a.m. (New York time) two Business Days prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
"OFFSHORE RATE COMMITTED LOAN" means any Committed Loan that
bears interest based on the Offshore Rate.
"OFFSHORE RATE LOAN" means any Offshore Rate Committed
Loan.
"ORGANIZATION DOCUMENTS" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"OTHER TAXES" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"PARTICIPANT" has the meaning specified in SECTION 9.8(d).
21
<PAGE> 27
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"PENSION PLAN" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"PERSON" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"PLAN" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"PRIOR CREDIT AGREEMENTS" means that certain Amended and
Restated Credit Agreement dated as of August 2, 1994, as amended,
among, INTER ALIA, the Company and BofA, as agent, and that certain
Amended and Restated Competitive Advance and Multi-Currency Revolving
Credit Facility Agreement dated as of September 6, 1996, among, INTER
ALIA, Manor Care and The Chase Manhattan Bank, as agent.
"PRO RATA SHARE" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"REPORTABLE EVENT" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"REQUIREMENT OF LAW" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
22
<PAGE> 28
"RESPONSIBLE OFFICER" means the chief executive officer or the
president of a Borrower, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants or Credit Extensions, the chief financial officer,
comptroller or the treasurer of a Borrower, or any other officer having
substantially the same authority and responsibility.
"RESTRUCTURING CHARGES" means up to $350,000,000 of charges
and extraordinary losses taken by the Company and its Subsidiaries
prior to March 31, 1999 in connection with the Manor Care merger.
"REVOLVING LOAN" has the meaning specified in SECTION 2.1.
"REVOLVING TERMINATION DATE" means the earlier to occur of:
(a) September 24, 1999; or such later date to which
the Revolving Termination Date is extended pursuant to SECTION
2.14; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"SPECIFIED LOSSES" means the Restructuring Charges, the
$13,500,000 of charges taken by Manor Care in the quarter ending May
31, 1998 and up to $25,000,000 of extraordinary losses of the Company
and its Subsidiaries in each fiscal year commencing January 1, 1999.
"SUBSIDIARY" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company; PROVIDED, HOWEVER, that during the period prior to the date
that IHH becomes a wholly owned subsidiary of the Company, IHH shall be
deemed not to be a "Subsidiary" for purposes of this Agreement;
PROVIDED
23
<PAGE> 29
FURTHER, HOWEVER, that notwithstanding the foregoing, at any time that
IHH is considered a consolidated subsidiary of the Company for
financial accounting purposes, IHH shall be considered a Subsidiary for
determining compliance with the covenants in SECTIONS 6.1.1 and 6.2.4.
"TAXES" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, (i) in the case of each Bank and the Agent,
such taxes (including income taxes or branch profits taxes)as are
imposed on or measured by each Bank's net income and franchise taxes
imposed by the jurisdiction (or any political subdivision thereof)
under the laws of which such Bank or the Agent, as the case may be, is
organized or maintains a lending office; (ii) in the case of each Bank
and the Agent, such taxes (including income taxes or branch profits
taxes) imposed on or measured by each Bank's net income and franchise
taxes imposed as a result of a present or former connection between
such Bank or the Agent and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising
solely from such Bank or the Agent having executed, delivered or
performed its obligations or received a payment under, or enforced,
this Agreement or any other Loan Document); (iii) in the case of each
Bank and the Agent, any taxes, levies, imposts, duties, charges, fees,
deductions or withholdings that are in effect and that would apply to a
payment to such Bank or the Agent, as applicable, as of the Effective
Date; and (iv) if any Person acquires any interest in this Agreement
pursuant to the provisions hereof, including, without limitation, a
participation (whether or not by operation of law) or a Non- U.S. Bank
or the Agent in that event, being referred to as a "TAX TRANSFEREE"),
any taxes, levies, imposts, duties, deductions or withholdings in
excess of amounts treated as Taxes under this definition in the hands
of the Person from whom such interest was acquired or prior to any
change in the office in which the Loans were made, accounted for or
booked.
"TYPE" has the meaning specified in the definition of
"Committed Loan."
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
24
<PAGE> 30
"UNITED STATES" and "U.S." each means the United States
of America.
1.2. OTHER INTERPRETIVE PROVISIONS.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii)In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.
25
<PAGE> 31
1.3. ACCOUNTING PRINCIPLES.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP. In the event a change in GAAP causes a change in the
results of calculation of the financial covenants, standards or terms found in
this Agreement, the Borrowers, the Agent and the Banks agree to negotiate in
good faith adjustments to the provisions of this Agreement to reflect such
change with the desired result that the criteria for evaluating the Borrowers'
financial condition shall be the same after such change as if such change had
not been made, it being understood that any such adjustments are subject to the
consent of the Majority Banks.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1. AMOUNTS AND TERMS OF COMMITMENTS. Each Bank severally agrees, on
the terms and conditions set forth herein, to make loans to the Borrowers (each
such loan, a "REVOLVING LOAN") from time to time on any Business Day during the
period from the Effective Date to the Revolving Termination Date, in an
aggregate amount not to exceed at any time outstanding the amount set forth on
SCHEDULE 2.1 (such amount as the same may be reduced under SECTION 2.5 or as a
result of one or more assignments under SECTION 9.8, the Bank's "COMMITMENT");
PROVIDED, HOWEVER, that, after giving effect to any Committed Borrowing of
Revolving Loans, the aggregate principal amount of all outstanding Revolving
Loans outstanding at such time, shall not at any time exceed the combined
Commitments; and PROVIDED FURTHER, that, after giving effect to such Committed
Borrowing of Revolving Loans, the aggregate principal amount of all outstanding
Revolving Loans of any Bank at such time shall not at any time exceed such
Bank's Commitment. Within the limits of each Bank's Commitment, and subject to
the other terms and conditions hereof, the Borrowers may borrow under this
SECTION 2.1, prepay under SECTION 2.6 and reborrow under this SECTION 2.1.
2.2. LOAN ACCOUNTS.
(a) The Loans made by each Bank shall be evidenced by one or
more accounts or records maintained by such Bank in the ordinary course of
business. The accounts or records maintained
26
<PAGE> 32
by the Agent and each Bank shall, in the absence of manifest or demonstrable
error, be presumptive evidence of the amount of the Loans made by the Banks to
the Borrowers, and the interest and payments thereon. Any failure so to record
or any error in doing so shall not, however, limit or otherwise affect the
obligation of the Borrowers hereunder to pay any amount owing with respect to
the Loans.
(b) Upon the request of any Bank made through the Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Bank shall endorse on the schedules annexed
to its Note(s) the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Borrowers with respect thereto.
Each such Bank is irrevocably authorized by the Borrowers to endorse its Note(s)
and each Bank's record shall be conclusive absent manifest or demonstrable
error; provided, however, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Borrowers hereunder or under any such Note to such
Bank.
2.3. PROCEDURE FOR COMMITTED BORROWING.
(a) Each Committed Borrowing shall be made upon a Borrower's
irrevocable telephonic notice delivered to the Agent (which notice must be
received by the Agent prior to (i) 8:00 a.m. (San Francisco time) two Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans,
and (ii) 10:00 a.m. (San Francisco time) on the requested Borrowing Date, in the
case of Base Rate Committed Loans, and which notice shall be promptly confirmed
by a written Notice of Borrowing transmitted by facsimile, in each case
specifying:
(i) the amount of the Committed Borrowing, which shall be in
an aggregate minimum amount of $3,000,000 or any multiple of $1,000,000
in excess thereof;
(ii) the requested Borrowing Date, which shall be a Business
Day;
(iii) the Type of Loans comprising the Committed Borrowing;
and
(iv) the duration of the Interest Period applicable to such
Committed Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any Committed
Borrowing comprised of Offshore Rate Loans, such Interest Period shall
be one month.
27
<PAGE> 33
(b) The Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of
each Committed Borrowing available to the Agent for the account of the
applicable Borrower at the Agent's Payment Office by 11:00 a.m. (San Francisco
time) on the Borrowing Date requested by such Borrower in funds immediately
available to the Agent. The proceeds of all such Committed Loans will then be
made available to the applicable Borrower by the Agent by wire transfer in
accordance with written instructions provided to the Agent by such Borrower of
like funds as received by the Agent.
(d) After giving effect to any Committed Borrowing, unless the
Agent shall otherwise consent, there may not be more than 15 different Interest
Periods in effect in respect of all Committed Loans then outstanding.
2.4. CONVERSION AND CONTINUATION ELECTIONS FOR COMMITTED
BORROWINGS.
(a) A Borrower may, upon irrevocable telephonic notice in the
form of EXHIBIT B to the Agent in accordance with SECTION 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate
Committed Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Committed Loans, to convert
any such Committed Loans (or any part thereof in an amount not less
than $3,000,000, or that is in an integral multiple of $1,000,000 in
excess thereof) into Committed Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Committed Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
$3,000,000, or that is in an integral multiple of $1,000,000 in excess
thereof);
PROVIDED, that if at any time the aggregate amount of Offshore Rate Committed
Loans in respect of any Committed Borrowing is reduced, by payment, prepayment,
or conversion of part thereof to be less than $3,000,000, such Offshore Rate
Committed Loans shall automatically convert into Base Rate Committed Loans, and
on and after such date the right of such Borrower to continue such Committed
Loans as, and convert such Committed Loans into, Offshore Rate Committed Loans
shall terminate.
28
<PAGE> 34
(b) A Borrower shall deliver telephonic notice to be received
by the Agent not later than (i) 8:00 a.m.(San Francisco time) at least two
Business Days in advance of the Conversion/ Continuation Date, if the Committed
Loans are to be converted into or continued as Offshore Rate Committed Loans,
and (ii) 10:00 a.m. (San Francisco time) on the Conversion/Continuation Date, if
the Loans are to be converted into Base Rate Committed Loans, and which notice
shall be promptly confirmed by a written Notice of Conversion/Continuation
transmitted by facsimile, in each case specifying:
(i) the proposed Conversion/Continuation Date;
(ii) the aggregate amount of Committed Loans to be converted
or continued;
(iii) the Type of Committed Loans resulting from the proposed
conversion or continuation; and
(iv) other than in the case of conversions into Base Rate
Committed Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Committed Loans, a Borrower has failed to select timely a new
Interest Period to be applicable to such Offshore Rate Committed Loans, or if
any Event of Default then exists, such Borrower shall be deemed to have elected
to convert such Offshore Rate Committed Loans into Base Rate Committed Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of
a Notice of Conversion/ Continuation, or, if no timely notice is provided by a
Borrower, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Committed Loans
with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the
existence of an Event of Default, the Borrowers may not elect to have a
Committed Loan converted into or continued as an Offshore Rate Committed Loan.
(f) After giving effect to any conversion or continuation of
Committed Loans, unless the Agent shall otherwise consent, there may not be more
than 15 different Interest Periods in effect in respect of all Committed Loans.
29
<PAGE> 35
2.5. VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The
Borrowers may, upon not less than three Business Days' prior notice to the
Agent, terminate the Commitments, or permanently reduce the Commitments by an
aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in excess
thereof; unless, after giving effect thereto and to any prepayments of Committed
Loans made on the effective date thereof, the then-outstanding principal amount
of the Loans would exceed the amount of the combined Commitments then in effect.
Once reduced in accordance with this Section, the Commitments may not be
increased. Any reduction of the Commitments shall be applied to each Bank
according to its Pro Rata Share.
2.6. OPTIONAL AND MANDATORY PREPAYMENTS; MANDATORY COMMITMENT
REDUCTIONS. Subject to SECTION 3.4, the Borrowers may, at any time or from time
to time, upon not less than one Business Day's irrevocable notice to the Agent,
ratably prepay Committed Loans in whole or in part, in minimum amounts of
$3,000,000 or any multiple of $1,000,000 in excess thereof. Such notice of
prepayment shall specify the date and amount of such prepayment and the Type(s)
of Committed Loans to be prepaid. The Agent will promptly notify each Bank of
its receipt of any such notice, and of such Bank's Pro Rata Share of such
prepayment. If such notice is given by the Borrowers, the Borrowers shall make
such prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of Base
Rate Committed Loans) accrued interest to each such date on the amount prepaid
and any amounts required pursuant to SECTION 3.4.
2.7. REPAYMENT. The Borrowers shall repay to the Banks on the
Revolving Termination Date the aggregate principal amount of Revolving Loans
outstanding on such date.
2.8. INTEREST.
(a) Each Committed Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate or the Base Rate, as the case may be (and subject to
the Borrowers' right to convert to other Types of Loans under SECTION 2.4), plus
the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. During the existence of any Event of Default, interest
shall be paid on demand of the Agent at the request or with the consent of the
Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any
Event of Default exists or after acceleration, the
30
<PAGE> 36
Borrowers shall pay interest (after as well as before entry of judgment thereon
to the extent permitted by law) on the principal amount of all outstanding
Obligations, at a rate per annum which is determined by adding 2% per annum to
the Applicable Margin then in effect for such Loans and, in the case of
Obligations not subject to an Applicable Margin, at a rate per annum equal to
the Base Rate plus 2%; PROVIDED, HOWEVER, that, on and after the expiration of
any Interest Period applicable to any Offshore Rate Loan outstanding on the date
of occurrence of such Event of Default or acceleration, the principal amount of
such Loan shall, during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base Rate plus 2%.
2.9. FEES.
(a) ARRANGEMENT, AGENCY FEES. The Company shall pay an
arrangement fee to the Lead Arranger for the Lead Arranger's own account, and
shall pay an agency fee to the Agent for the Agent's own account, as required by
the letter agreement ("Fee Letter") between the Company and the Lead Arranger
and Agent dated August 26, 1998.
(b) FACILITY FEES. The Borrowers shall pay to the Agent for
the account of each Bank a facility fee on such Bank's Commitment (whether used
or unused), computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter, at a rate per annum equal to the Applicable Facility Fee
Rate. Such facility fee shall accrue from the Effective Date to the Revolving
Termination Date and shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter, commencing on December 31, 1998 through
the Revolving Termination Date, with the final payment to be made on the
Revolving Termination Date. The facility fees provided in this subsection shall
accrue at all times after the above-mentioned commencement date, including at
any time during which one or more conditions in Article IV are not met.
(c) UTILIZATION FEES. If on any date the sum of (i) the
aggregate utilization of this Agreement and (ii) the aggregate utilization of
the $500,000,000 Credit Agreement shall exceed 50% (fifty percent) of the sum of
(i) the aggregate Commitments under this Agreement and (ii) the aggregate
commitments of the Banks under the $500,000,000 Credit Agreement, the Borrowers
shall pay to the Agent for the account of each Bank an amount equal to .05 of 1%
(one percent)of the aggregate amount of the utilization of the Agreement as of
each such date, computed on a quarterly basis in arrears on the last Business
Day of each calendar quarter, commencing on December 31, 1998 through the
Revolving Termination Date, with the final payment, if any, to be made on the
Revolving Termination Date.
31
<PAGE> 37
2.10. COMPUTATION OF FEES AND INTEREST.
(a) All computations of interest for Base Rate Committed Loans
when the Base Rate is determined by BofA's "reference rate" shall be made on the
basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.
All other computations of fees and interest shall be made on the basis of a
360-day year and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and fees shall accrue
during each period during which interest or such fees are computed from the
first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall
be conclusive and binding on the Borrowers and the Banks in the absence of
manifest or demonstrable error. The Agent will, at the request of the Borrowers
or any Bank, deliver to the Borrowers or the Bank, as the case may be, a
statement showing the quotations used by the Agent in determining any interest
rate.
2.11. PAYMENTS BY THE BORROWERS.
(a) All payments to be made by the Borrowers shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Borrowers shall be made to the Agent for
the account of the Banks at the Agent's Payment Office, and shall be made in
dollars and in immediately available funds, no later than 10:00 a.m. (San
Francisco time) on the date specified herein. The Agent will promptly distribute
to each Bank its Pro Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment received by the
Agent later than 10:00 a.m. (San Francisco time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Borrowers prior
to the date on which any payment is due to the Banks that a Borrower will not
make such payment in full as and when required, the Agent may assume that the
Borrowers have made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required),
32
<PAGE> 38
in reliance upon such assumption, distribute to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the
Borrowers have not made such payment in full to the Agent, each Bank shall repay
to the Agent on demand such amount distributed to such Bank, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
2.12. PAYMENTS BY THE BANKS TO THE AGENT.
(a) Unless the Agent receives notice from a Bank on or prior
to the Effective Date or, with respect to any Borrowing after the Effective
Date, at least one Business Day prior to the date of such Committed Borrowing,
that such Bank will not make available as and when required hereunder to the
Agent for the account of the Borrowers the amount of that Bank's Pro Rata Share
of the Committed Borrowing, the Agent may assume that each Bank has made such
amount available to the Agent in immediately available funds on the Borrowing
Date and the Agent may (but shall not be so required), in reliance upon such
assumption, make available to the Borrowers on such date a corresponding amount.
If and to the extent any Bank shall not have made its full amount available to
the Agent in immediately available funds and the Agent in such circumstances has
made available to the Borrowers such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Bank with respect to amounts owing under
this subsection (a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Agent shall constitute such Bank's
Loan on the date of Borrowing for all purposes of this Agreement. If such amount
is not made available to the Agent on the Business Day following the Borrowing
Date, the Agent will notify the Borrowers of such failure to fund and, upon
demand by the Agent, the Borrowers shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day elapsed since the
date of such Committed Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Committed Loans comprising such Committed
Borrowing.
(b) The failure of any Bank to make any Committed Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Committed Loan on such Borrowing Date, but no Bank shall be responsible
for the failure of any other Bank to make the Committed Loan to be made by such
other Bank on any Borrowing Date.
2.13. SHARING OF PAYMENTS, ETC. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Committed Loans made
by it any payment (whether
33
<PAGE> 39
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its Pro Rata Share, such Bank shall immediately (a)
notify the Agent of such fact, and (b) purchase from the other Banks such
participations in the Committed Loans made by them as shall be necessary to
cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrowers agree
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were the direct creditor of the Borrowers in the amount of such
participation. The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Banks following any such purchases or
repayments.
2.14. EXTENSION OF REVOLVING TERMINATION DATE. Not more than 60 nor
less than 30 days prior to the then-scheduled Revolving Termination Date, the
Company may, at its option, request that the scheduled Revolving Termination
Date be extended for an additional 364 days by means of a letter, addressed to
the Agent and each Bank, substantially in the form of EXHIBIT F. Each Bank
consenting (in its sole and complete discretion) so to extend the scheduled
Revolving Termination Date shall deliver signed counterparts of such letter to
the Company and the Agent no later than 21 days after the date of such request
by the Company. Any Bank which does not deliver such counterparts by the 21st
day after such request shall be deemed to have declined to extend the scheduled
Revolving Termination Date. If all Banks consent to the requested extension of
the scheduled Revolving Termination Date, the scheduled Revolving Termination
Date shall be extended for an additional 364 days on the previously- scheduled
Revolving Termination Date (and the Agent shall notify the Company and the Banks
of such extension). If all Banks do not consent to the requested extension of
the scheduled Revolving Termination Date, the scheduled Revolving Termination
Date shall not be extended.
34
<PAGE> 40
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1. TAXES.
(a) Any and all payments by the Borrowers to each Bank, Tax
Transferee or the Agent under this Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding for any Taxes.
In addition, the Borrowers shall pay all Other Taxes.
(b) The Borrowers agree to indemnify and hold harmless each
Bank and the Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Bank or the Agent and any liability (including penalties,
interest, additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Payment under this indemnification shall be made within 30 days after
the date the Bank or the Agent makes written demand therefor.
(c) If the Borrowers shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank, Tax Transferee or the Agent, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section) such Bank, Tax Transferee or the Agent, as the case may
be, receives an amount equal to the sum it would have received had no
such deductions or withholdings been made;
(ii) the Borrowers shall make such deductions and
withholdings;
(iii) the Borrowers shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Borrowers shall also pay to each Bank, Tax Transferee
or the Agent for the account of such Bank or Tax Transferee, at the
time interest is paid, all additional amounts which the respective Bank
specifies as necessary to preserve the after-tax yield
35
<PAGE> 41
the Bank or Tax Transferee would have received if such Taxes or Other
Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the
Borrowers of Taxes or Other Taxes, the Borrowers shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) Within 30 days after the date that any Bank, Tax
Transferee or the Agent receives a refund of any Taxes or Other Taxes for which
it has been indemnified by the Borrowers pursuant to this Agreement (other than
through potential use of such Taxes as a Foreign tax credit on a tax return
filed by such Bank, Tax Transferee or Agent), such Bank, Tax Transferee or the
Agent, as the case may be, shall pay to the applicable Borrower such refund of
Taxes or Other Taxes. Notwithstanding the foregoing, such Bank, Tax Transferee
or the Agent shall not be required to make any payment hereunder before such
time as the Borrowers shall have made all payments or indemnities then due
pursuant to this Agreement; PROVIDED HOWEVER, that such Bank, Tax Transferee or
the Agent shall be required to make such payments promptly after such time as
the Borrowers shall have made all such payments or indemnities.
(f) Notwithstanding anything to the contrary herein, the
Borrowers shall not be required to indemnify any Bank or Tax Transferee or pay
any additional amounts to any Bank or Tax Transferee pursuant to this SECTION
3.1 to the extent that such additional amounts are attributable to a
determination by the Internal Revenue Service that such Bank or Tax Transferee
is a "conduit entity" participating in a "conduit financing arrangement" within
the meaning of Treas. Reg. ss.1.881-3.
3.2. ILLEGALITY.
(a) If the introduction of any Requirement of Law, or any
change in any Requirement of Law, or in the interpretation or administration of
any Requirement of Law, in each case occurring after the Effective Date, has
made it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Bank or its applicable Lending Office, to
make Offshore Rate Loans, then, on notice thereof by the Bank to the Borrowers
through the Agent, any obligation of that Bank to make Offshore Rate Loans shall
be suspended until the Bank notifies the Agent and the Borrowers that the
circumstances giving rise to such determination no longer exist.
(b) If it is unlawful to maintain any Offshore Rate Loan, the
Borrowers shall, upon receipt of notice of such fact
36
<PAGE> 42
and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under SECTION 3.4, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If a Borrower is required
to so prepay any Offshore Rate Committed Loan, then concurrently with such
prepayment, such Borrower shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Committed Loan.
3.3. INCREASED COSTS AND REDUCTION OF RETURN.
(a) If due to either (i) the introduction of or any change
(other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the Offshore Rate) in or in the
interpretation of any law or regulation or (ii) the compliance by that Bank with
any guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Bank of agreeing to make or making, funding or maintaining any
Offshore Rate Committed Loans, then the Borrowers shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to be sent to the
Agent), pay to the Agent for the account of such Bank, additional amounts as are
sufficient to compensate such Bank for such increased costs.
(b) If (i) the introduction of any Capital Adequacy
Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change
in the interpretation or administration of any Capital Adequacy Regulation by
any central bank or other Governmental Authority charged with the interpretation
or administration thereof, or (iv) compliance by the Bank (or its Lending
Office) or any corporation controlling the Bank with any Capital Adequacy
Regulation, in each case (A) not currently scheduled to become effective and (B)
occurring after the Effective Date, affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration such Bank's or such
corporation's policies with respect to capital adequacy) determines that the
amount of such capital is increased as a consequence of its Commitments, loans,
credits or obligations under this Agreement, then, upon demand of such Bank to
the Borrowers through the Agent, the Borrowers shall pay to the Bank, from time
to time as specified by the Bank, additional amounts sufficient to compensate
the Bank for such increase.
37
<PAGE> 43
3.4. FUNDING LOSSES. The Borrowers shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(a) the failure of the Borrowers to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(b) the failure of the Borrowers to borrow, continue or
convert an Offshore Rate Committed Loan after the Borrowers have given (or is
deemed to have given) a Notice of Borrowing or a Notice of Conversion/
Continuation;
(c) the failure of the Borrowers to make any prepayment of any
Offshore Rate Committed Loan in accordance with any notice delivered under
SECTION 2.6;
(d) the prepayment (including pursuant to SECTION 2.6) or
other payment (including after acceleration thereof) of any Offshore Rate Loan
on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under SECTION 2.4(a) of any
Offshore Rate Committed Loan to a Base Rate Committed Loan on a day that is not
the last day of the relevant Interest Period; including any such loss or expense
arising from the liquidation or reemployment of funds obtained by it to maintain
its Offshore Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained. For purposes of calculating amounts payable by
the Borrowers to the Banks under this Section and under SECTION 3.3(a), each
Offshore Rate Committed Loan made by a Bank (and each related reserve, special
deposit or similar requirement) shall be conclusively deemed to have been funded
at the IBOR used in determining the Offshore Rate for such Offshore Rate Loan by
a matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such Offshore Rate
Loan is in fact so funded.
3.5. INABILITY TO DETERMINE RATES. If the Majority Banks and the Agent
determine that for any reason adequate and reasonable means do not exist for
determining the Offshore Rate for any requested Interest Period with respect to
a proposed Offshore Rate Loan or dollar deposits in the relevant amount and for
the relevant Interest Period are not available to BofA in the interbank
Eurodollar market, the Agent will promptly so notify the Borrowers and each
Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate
Loans hereunder shall be suspended until the Agent upon the instruction of the
Majority Banks revokes such notice in writing. Upon receipt of such notice, the
Borrowers may revoke any Notice of Borrowing or
38
<PAGE> 44
Notice of Conversion/Continuation then submitted by them. If the Borrowers do
not revoke such Notice, the Banks shall make, convert or continue the Committed
Loans, as proposed by a Borrower, in the amount specified in the applicable
notice submitted by such Borrower, but such Committed Loans shall be made,
converted or continued as Base Rate Committed Loans instead of Offshore Rate
Committed Loans.
3.6. CERTIFICATES OF BANKS. Any Bank claiming reimbursement or
compensation under this Article III shall deliver to the Borrowers (with a copy
to the Agent) a certificate setting forth in reasonable detail the amount
payable to the Bank hereunder and such certificate shall be conclusive and
binding on the Borrowers in the absence of manifest error.
3.7. SUBSTITUTION OF BANKS. Upon the receipt by the Borrowers from
any Bank (an "Affected Bank") of a claim for compensation under SECTION 3.1 or
SECTION 3.3 or in the event any Bank whose obligations to make Offshore Loans
have been suspended under SECTION 3.2, the Borrowers may: (i) request the
Affected Bank to use its reasonable efforts to obtain a replacement bank or
financial institution satisfactory to the Borrowers to acquire and assume all or
a ratable part of all of such Affected Bank's Loans and Commitment (a
"Replacement Bank"); (ii) request one more of the other Banks to acquire and
assume all or part of such Affected Bank's Loans and Commitment; or (iii)
designate a Replacement Bank. Any such designation of a Replacement Bank under
clause (i) or (iii) shall be subject to the prior written consent of the Agent
(which consent shall not be unreasonably withheld).
3.8. AFFECTED BANK'S OBLIGATION TO MITIGATE. Each Bank agrees that,
as promptly as practicable after it becomes aware of the occurrence of an event
or the existence of a condition that would cause (a) a Borrower to be required
to pay additional amounts to it under SECTION 3.1 (b) or (c) or (b) it to be
illegal for such Bank to make or maintain any Offshore Rate Loan, it will, to
the extent not inconsistent with such Bank's internal policies, use its
reasonable efforts to make, fund or maintain the affected Loans of such Bank
through another Lending Office of such Bank if as a result thereof the
additional moneys which would otherwise be required to be paid in respect of
such Loans pursuant to SECTION 3.1(c) would be materially reduced or the
illegality or other adverse circumstances which would otherwise require
prepayment of such Loans pursuant to SECTION 3.2, and if, as such Bank
determines, in its sole discretion, the making, funding or maintaining of such
Loans through such Lending Office would not otherwise materially adversely
affect such Loans or such Bank. The Borrowers hereby agree to pay all reasonable
expenses incurred by any Bank in utilizing another Lending Office pursuant to
this SECTION 3.8.
39
<PAGE> 45
3.9. PRESENTATION OF CLAIMS; SURVIVAL. Each Bank will promptly
notify the Company and the Agent of any event of which it has knowledge,
occurring after the Effective Date, which will entitle such Bank to compensation
pursuant to this Article III (each, a "TRIGGER EVENT"). Notwithstanding any
other provision of this Article III, no Bank shall be entitled to any
compensation pursuant to this Article in respect of any Trigger Event for any
period of time in excess of 6 months prior to such notice unless such Trigger
Event is retroactive and notice is given within 6 months of such retroactive
Trigger Event.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. CONDITIONS OF INITIAL CREDIT EXTENSION. The obligation of each
Bank to make its initial Credit Extension hereunder is subject to the condition
that the Agent have received on or before or concurrently with the Effective
Date, all of the following, in form and substance satisfactory to the Agent and
each Bank, and in sufficient copies for each Bank:
(a) CREDIT AGREEMENT AND NOTES. This Agreement and the Notes
(to the extent requested under SECTION 2.2) executed by each party thereto;
(b) RESOLUTIONS; INCUMBENCY.
(i) Copies of the resolutions of the board of directors of the
Company and each Obligor authorizing the transactions contemplated
hereby, certified as of the Effective Date by the Secretary or an
Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant Secretary of
the Company, and each Obligor certifying the names and true signatures
of the officers of the Company or such Obligor authorized to execute,
deliver and perform, as applicable, this Agreement, and all other Loan
Documents to be delivered by it hereunder;
(c) ORGANIZATION DOCUMENTS; GOOD STANDING. Each of
the following documents:
(i) the articles or certificate of incorporation and the
bylaws of the Company and each Obligor as in effect on the Effective
Date, certified by the Secretary or Assistant Secretary of the Company
or such Obligor as of the Effective Date; and
40
<PAGE> 46
(ii) a good standing certificate for the Company and each
Obligor from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation as of a recent
date;
(d) GUARANTIES. The Guaranty executed by each of the Obligors
and the Company Guaranty executed by the Company;
(e) PRIOR CREDIT AGREEMENTS. Evidence that all commitments to
lend under the Prior Credit Agreements have been terminated and that all
principal, interest, fees and other sums then due and payable under the Prior
Credit Agreements have been paid in full;
(f) MERGER AGREEMENT. A certificate signed by a Responsible
Officer of the Company, dated as of the Effective Date, stating that: (i) the
conditions precedent to the transactions contemplated by the Merger Agreement
have been satisfied without waiver or forbearance; (ii) the representations and
warranties of the Company and Catera set forth in the Merger Agreement are true
and correct immediately before the effective time of the merger (the "EFFECTIVE
TIME") contemplated by the Merger Agreement (the "MERGER"), with the same force
and effect as if made on and as of the Effective Time, except to the extent any
inaccuracies in any such representations or warranties, individually or in the
aggregate, do not materially impair the ability of the Company or Catera to
consummate the transactions contemplated by the Merger Agreement and would not
have a Material Adverse Effect (as defined in the Merger Agreement) on the
Company (provided that any representation or warranty made by the Company and
Catera in the Merger Agreement that is qualified by Material Adverse Effect
language shall be read as if such language were not present), and except that
the accuracy of representations and warranties that by their terms speak as of
the date of the Merger Agreement or some other date will be determined as of
such date; (iii) Manor Care has certified to the Company that its
representations and warranties set forth in the Merger Agreement are true and
correct immediately before the Effective Time, with the same force and effect as
if made on and as of the Effective Time, except to the extent any inaccuracies
in any such representations or warranties, individually or in the aggregate, do
not materially impair the ability of Manor Care to consummate the transactions
contemplated by the Merger Agreement and would not have a Material Adverse
Effect on Manor Care (provided that any representation or warranty made by Manor
Care in the Merger Agreement that is qualified by Material Adverse Effect
language shall be read as if such language were not present), and except that
the accuracy of representations and warranties that by their terms speak as of
the date of the Merger Agreement or some other date will be determined as of
such date; (iv) the Merger Agreement has not been amended in any material
41
<PAGE> 47
respect; and (v) the Company has filed all necessary merger certificates in
order to consummate the transactions contemplated by the Merger Agreement;
(g) LITIGATION. Such evidence as the Agent shall reasonably
require that (i) there exists no litigation challenging or seeking to restrain
or prohibit the consummation of the transactions contemplated by the Merger
Agreement, the making of the Loans by the Banks or the performance of the
Obligations and (ii) there exists no judgment, order, injunction, or other
restraint prohibiting the consummation of the transactions contemplated by the
Merger Agreement, the making of the Loans by the Banks or the performance of the
Obligations;
(h) LEGAL OPINIONS. Opinions of Latham & Watkins, counsel to
the Company and its Subsidiaries and R. Jeffrey Bixler, general counsel of the
Company and addressed to the Agent and the Banks, substantially in the form of
EXHIBIT D;
(i) PAYMENT OF FEES. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Effective Date, together with Attorney Costs of BofA to the extent
invoiced prior to or on the Effective Date, plus such additional amounts of
Attorney Costs as shall constitute BofA's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and BofA); including any such costs, fees and expenses arising under
or referenced in SECTIONS 2.9 and 9.4;
(j) CERTIFICATE. A certificate signed by a Responsible Officer
of the Company, dated as of the Effective Date, stating that:
(i) the representations and warranties contained in Article V
are true and correct on and as of such date, as though made on and as
of such date;
(ii) no Default or Event of Default exists or would result
from the Credit Extension; and
(iii) there has occurred since December 31, 1997, no event or
circumstance that has resulted or could reasonably be expected to
result in a Materially Adverse Effect; and
(k) OTHER DOCUMENTS. Such other approvals, opinions, documents
or materials as the Agent or any Bank may request.
42
<PAGE> 48
4.2. CONDITIONS TO ALL CREDIT EXTENSIONS. The obligation of each
Bank to make any Committed Loan to be made by it (including its initial Loan),
is subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date:
(a) NOTICE OF BORROWING; APPLICATION. The Agent shall have
received a Notice of Borrowing, in the case of each Committed Loan;
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in Article V shall be true and correct in all
material respects on and as of such Borrowing Date with the same effect as if
made on and as of such Borrowing Date (except to the extent such representations
and warranties expressly refer to an earlier date, in which case they shall be
true and correct as of such earlier date); and
(c) NO EXISTING DEFAULT. No Default or Event of Default shall
exist or shall result from such Borrowing.
Each Notice of Borrowing submitted by the Borrowers hereunder shall constitute a
representation and warranty by the Borrowers hereunder, as of the date of each
such notice or request and as of each Borrowing Date, that the conditions in
this SECTION 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Agent and each Bank
that:
5.1. ORGANIZATION, POWER, AUTHORITY, ETC. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the failure so to
qualify would be reasonably likely to have a Materially Adverse Effect, and has
full power and authority and holds all requisite governmental licenses, permits
and other approvals to own and hold under lease its property and to conduct its
business substantially as currently conducted by it where the failure to hold
such licenses, permits, and other approvals would be reasonably likely to have a
Materially Adverse Effect. Each other Obligor is a corporation duly incorporated
or partnership duly formed, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation (to the extent applicable
to
43
<PAGE> 49
partnerships in any such jurisdiction), is duly qualified to do business and is
in good standing as a foreign corporation or partnership in each jurisdiction
where the failure so to qualify would be reasonably likely to have a Materially
Adverse Effect, and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to own and hold under lease
its property and to conduct its business substantially as currently conducted by
it where the failure to hold such licenses, permits, and other approvals would
be reasonably likely to have a Materially Adverse Effect. Each of the Company
and each other Obligor has full power and authority to execute, deliver and
perform its Obligations under this Agreement, the Notes and each other Loan
Document to which it is or is to be a party, to obtain Credit Extensions
hereunder, and all other actions incidental thereto, as applicable.
5.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution and
delivery by the Company and each other Obligor of this Agreement, the Notes and
each other Loan Document executed or to be executed by it, the performance by
the Company and each other Obligor of its Obligations hereunder and thereunder,
all Credit Extensions obtained hereunder by the Borrowers, the execution,
delivery and performance by each other Obligor of each Loan Document executed or
to be executed by it, and all other actions incidental to any thereof have been
duly authorized by all necessary action, do not and will not conflict with,
result in any violation of, or constitute any default under, any provision of
any Organization Document or material Contractual Obligation of the Company or
such Obligor or any law or governmental regulation or court decree or order
(and, in the case of any such material Contractual Obligation or any such law,
regulation, decree or order, such conflict, violation or default would not be
reasonably likely to have a Materially Adverse Effect) and will not result in or
require the creation or imposition of any Lien on any of the Company's or such
Obligor's properties having an aggregate value in excess of $500,000 pursuant to
the provisions of any Contractual Obligation (other than under this Agreement).
5.3. GOVERNMENT APPROVAL, REGULATION, ETC. Except as set forth in ITEM
5.3 ("Approvals") of the Disclosure Schedule, no authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery or performance by the Company or any
other Obligor of this Agreement, the Notes or any other Loan Document to which
it is or is to be a party or the consummation of any other transactions
contemplated hereby or thereby, except for authorizations, approvals, actions,
notices or filings which have been duly obtained or made and are in full force
and effect. Neither the Company nor any other Obligor is (i) an "investment
company" within the meaning of the Investment Company Act of 1940
44
<PAGE> 50
or (ii) a "holding company", or a "subsidiary company" of a "holding company",
or an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", within the meaning of the Public Utility Holding Company Act
of 1935.
5.4. VALIDITY, ETC. This Agreement has been duly executed and
delivered by the Borrowers and constitutes the legal, valid and binding
obligation of the Borrowers enforceable in accordance with its terms; and each
Note and each other Loan Document to which the Borrowers or any other Obligor is
or is to be a party will, on the due execution and delivery thereof, constitute
the legal, valid and binding obligation of the Borrowers or such Obligor, as the
case may be, enforceable in accordance with its terms; except, in each case, as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.
5.5. FINANCIAL INFORMATION.
(a) The audited consolidated balance sheet as of December 31,
1997 and the related consolidated statements of income, of shareholders equity
and of cash flow for the fiscal year then ended, of the Company and its
Subsidiaries, audited by Ernst & Young LLP have been prepared in accordance with
GAAP consistently applied (except as disclosed therein) throughout the period
involved, present fairly the financial position of the Company and such
Subsidiaries as of the date applicable and the results of their operations and
cash flows for the period then ended and show all material indebtedness and
other liabilities, direct or contingent, of the Company and its consolidated
Subsidiaries as of the date thereof, including liabilities for taxes, material
commitments and Contingent Obligations.
(b) The unaudited consolidated balance sheet as of June 30,
1998 and the related consolidated statements of income, of shareholders equity
and of cash flow for the fiscal quarter then ended of the Company and its
Subsidiaries have been prepared in accordance with GAAP consistently applied
(except as disclosed therein) throughout the period involved and present fairly
the financial position of the Company and its Subsidiaries as of the date
applicable and results their operations and cash flows for the period then
ended.
(c) The audited consolidated balance sheet as of May 31, 1998
and the related consolidated statements of income, of shareholders equity and of
cash flow for the fiscal year then ended, of Manor Care and its Subsidiaries,
audited by Arthur Anderson LLP have been prepared in accordance with GAAP
consistently applied (except as disclosed therein) throughout the period
involved, present fairly the financial position of Manor
45
<PAGE> 51
Care and such Subsidiaries as of the date applicable and the results of their
operations and cash flows for the period then ended and show all material
indebtedness and other liabilities, direct or contingent, of Manor Care and its
consolidated Subsidiaries as of the date thereof, including liabilities for
taxes, material commitments and Contingent Obligations.
5.6. NO MATERIALLY ADVERSE EFFECT. Since December 31, 1997, as of
the Effective Date, no event or events have occurred which, individually or in
the aggregate, has had or would be reasonably likely to have a Materially
Adverse Effect.
5.7. LITIGATION, ETC. There is no pending or, to the best knowledge
of the Company, threatened litigation, action, proceeding, order, investigation
or claim, at law or in equity or before or by any governmental department,
commission, board, bureau, agency or instrumentality affecting the Company or
any of the other Obligors, or any of their respective properties, assets or
revenues which
(a) purports to affect or pertains to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) individually or in the aggregate would reasonably be
expected to result in or constitute a Materially Adverse Effect, except as
disclosed in ITEM 5.7 ("Litigation") of the Disclosure Schedule;
and none of the Company and the other Obligors is subject, to the best knowledge
of the Company, to any arbitration proceedings under collective bargaining
agreements or otherwise or any governmental investigations or inquiries which
individually or in the aggregate have resulted or would reasonably be expected
to result in or constitute a Materially Adverse Effect.
5.8. REGULATIONS T, U AND X. Neither Borrower is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock, and less than 25%
of the assets of either Borrower, individually and on a consolidated basis with
its Subsidiaries, consists of margin stock. The proceeds of any Loans made
hereunder will not be used for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regula tions T, U or X. Terms for which meanings
are provided in F.R.S. Board Regulations T, U and X have such meanings when such
terms are used in this SECTION 5.8.
5.9. PENSION AND WELFARE PLANS. Except as specifically
disclosed in ITEM 5.9 of the Disclosure Statement:
46
<PAGE> 52
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best knowledge
of the Company, nothing has occurred which would cause the loss of such
qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Materially Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Company nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
5.10. SUBSIDIARIES. The Obligors have no Subsidiaries except those
listed on ITEM 5.10 ("Subsidiaries") of the Disclosure Schedule and those
Subsidiaries which are permitted to have been acquired after the Effective Date
in accordance with the terms hereof.
5.11. TAXES. Each of the Company and each other Obligor has filed
all Federal and all other material tax returns and reports required by law to
have been filed by it; all such tax returns are complete and accurate in all
material respects; and the Company and each other Obligor has paid or properly
accrued for or withheld (as applicable) all taxes and governmental charges
thereby shown to be owing or required to be withheld, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which
47
<PAGE> 53
adequate reserves in accordance with GAAP shall have been set aside on its
books.
5.12. ABSENCE OF DEFAULT. Neither the Company nor any other Obligor
is in default under any governmental regulation or court decree or order or
under any law if such default would be reasonably likely to have a Materially
Adverse Effect.
5.13. LABOR CONTROVERSIES. There are no labor controversies pending
or, to the best knowledge of the Company, threatened against the Company or any
other Obligor, which would be reasonably likely to have a Materially Adverse
Effect.
5.14. OWNERSHIP OF PROPERTIES. Each of the Company and each other
Obligor has good and marketable title to, or a valid leasehold interest in, all
of its properties and assets, real and personal, of any nature whatsoever, free
and clear of all Liens, except as permitted pursuant to SECTION 6.2.3 and, as of
the Effective Date, as disclosed in ITEM 6.2.2(L)/6.2.3(A) ("Existing
Indebtedness and Existing Liens") of the Disclosure Schedule and except for
defects to title which have not had and would not, individually or in the
aggregate, reasonably be expected to have a Materially Adverse Effect.
5.15. PATENTS, TRADEMARKS, ETC. Each of the Company and each other
Obligor owns and possesses all such patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights and copyrights as the Company considers necessary for the conduct of the
businesses of the Company and the other Obligors as now conducted without, to
the best knowledge of the Company after due inquiry, any infringement upon
rights of other Persons, except as may be disclosed in ITEM 5.15 ("Patent and
Trademark Infringements") of the Disclosure Schedule.
5.16. ENVIRONMENTAL MATTERS. The Company conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and as
a result thereof the Company has reasonably concluded that, except as
specifically disclosed in ITEM 5.16 ("Environmental Matters") of the Disclosure
Schedule, such Environmental Laws and Environmental Claims could not,
individually or in the aggregate, reasonably be expected to have a Materially
Adverse Effect.
5.17. ACCURACY OF INFORMATION. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Company
or any other Obligor in writing to any Bank for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all other
such
48
<PAGE> 54
factual information (taken as a whole) hereafter furnished by or on behalf of
the Company or any other Obligor in writing to the Agent or any Bank will be,
true and accurate in every material respect on the date as of which such
information is dated or certified.
5.18. YEAR 2000 REPRESENTATIONS. On the basis of a comprehensive
review and assessment of Company's systems and equipment and inquiry made of
Company's material suppliers, vendors and customers, the Company reasonably
believes that the "Year 2000 problem" (that is, the inability of computers, as
well as embedded microchips in non-computing devices, to perform properly
date-sensitive functions with respect to certain dates prior to and after
December 31, 1999), including costs of remediation, will not have a Materially
Adverse Effect. The Company has developed feasible contingency plans adequate to
ensure uninterrupted and unimpaired business operation in the event of failure
of its own or, to the extent within the Company's control, a third party's
systems or equipment due to the Year 2000 problem, including those of vendors,
customers, and suppliers, as well as a general failure of or interruption in its
communications and delivery infrastructure.
5.19. HEALTH CARE REGULATORY MATTERS.
(a) Except as disclosed in ITEM 5.19 ("Regulatory Matters") of
the Disclosure Schedule and except to the extent that the failure to obtain or
maintain any of the items in clauses (i) through (iv) below would not be
material to the conduct of the Company's business, each Facility or the
appropriate Subsidiary, as the case may be, has:
(i) where required by Applicable Law, obtained all required
CONs for the construction or expansion of or investment in such
Facility;
(ii) obtained and maintains all Health Facility Licenses
necessary to operate such Facility as a long-term care facility;
(iii) obtained and maintains Medicaid Certification and
Medicare Certification with respect to such Facility;
(iv) entered into and maintains its Medicaid Provider
Agreement and its Medicare Provider Agreement with respect to such
Facility; and
(v) not received, to the knowledge of the Company, any
Hill-Burton Act funds nor has any
49
<PAGE> 55
obligations with respect to Hill-Burton Act charity
care.
(b) Except as disclosed in ITEM 5.19 ("Regulatory Matters") of
the Disclosure Schedule, all necessary steps have been or are being taken to
secure the renewal of any Health Facility License, Medicaid Provider Agreement
or Medicare Provider Agreement issued with respect to any Facility that is to
expire within 60 days after the date hereof and that is material to the conduct
of the Company's business, and there is no reasonable basis known to the Company
or its Subsidiaries that any such renewal will not be obtained.
(c) Except as disclosed in ITEM 5.19 ("Regulatory Matters") of
the Disclosure Schedule, there are no proceedings pending, or, to the best of
the Company's knowledge, threatened by any Governmental Authority seeking to
modify, revoke or suspend any Health Facility License, Medicaid Provider
Agreement, Medicare Provider Agreement, Medicare Certification or Medicaid
Certification with respect to any Facility, which would be reasonably likely to
have a Materially Adverse Effect. Since the date of the most recent Medicare
Certification and Medicaid Certification with respect to each Facility, none of
the Company or any Subsidiary has taken any action that would materially
adversely affect such Certification or the Medicare Provider Agreement or
Medicaid Provider Agreement with respect to such Facility.
5.20. MERGER AGREEMENT.
(a) Consummation of the transactions contemplated by the
Merger Agreement by the Company and Manor Care has not and will not:
(i) contravene the terms of any of that Person's
Organization Documents;
(ii) result in a breach or contravention of, or the creation
of any Lien under, any document evidencing any material Contractual
Obligation to which such Person is a party or any order, injunction,
writ or decree of any Governmental Authority to which such Person or
its property is subject, except where the breach, continuation or
creation would neither materially impair the ability of Manor Care to
consummate the transactions contemplated by the Merger Agreement nor
have a Material Adverse Effect (as defined in the Merger Agreement) on
the Company or Manor Care; or
50
<PAGE> 56
(iii) violate a Requirement of Law, except where the violation
would neither materially impair the ability of Manor Care to consummate
the transactions contemplated by the Merger Agreement nor have a
Material Adverse Effect (as defined in the Merger Agreement) on the
Company or Manor Care.
(b) The Merger Agreement constitutes the legal, valid and
binding obligations of the Company and, to the Company's knowledge, Manor Care,
enforceable against such Person in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
ARTICLE VI
COVENANTS
6.1. AFFIRMATIVE COVENANTS. The Company agrees with the Agent and
each Bank that, until all Commitments have terminated and all Obligations have
been paid and performed in full, the Company will perform the Obligations set
forth in this SECTION 7.1.
6.1.1. FINANCIAL INFORMATION, ETC. The Company will furnish, or will
cause to be furnished, to each Bank and to the Agent copies of the following
financial statements, reports and information:
(a) promptly when available and in any event within 100 days
after the close of each fiscal year,
(i) a consolidated balance sheet at the close of such fiscal
year, and related consolidated statements of earnings, partners' or
stockholders' equity and cash flow for such fiscal year, of the Company
and its Subsidiaries, in each case (with comparable information at the
close of and for the prior fiscal year, as available), prepared in
accordance with GAAP consistently applied and audited without
Impermissible Qualification by a firm of independent, nationally
recognized certified public accountants,
(ii) a letter report of such firm of independent certified
public accountants at the close of such fiscal year to the effect that
nothing has come to their attention that has caused them to believe
that the Company is not in compliance with any of the terms,
51
<PAGE> 57
covenants, provisions or conditions of SECTION 6.2.4, 6.2.5 or 6.2.9
insofar as such terms, covenants, provisions or conditions relate to
accounting matters, and
(iii) a Compliance Certificate, including computation of the
financial covenants contained in SECTION 6.2.4, calculated as of the
close of such fiscal year;
(b) promptly when available and in any event within 50 days
after the close of the fiscal quarter ending September 30, 1998, a consolidated
balance sheet at the close of such fiscal quarter, and consolidated statements
of earnings and partners' or stockholders' equity for such fiscal quarter, and
consolidated statements of earnings, partners' or stockholders' equity and cash
flow for the period commencing at the close of the previous fiscal year and
ending with the close of such fiscal quarter, of the Company and its
Subsidiaries, in each case (with comparable information at the close of and for
the corresponding fiscal quarter of the prior fiscal year and for the
corresponding portion of such prior fiscal year, in each case, as such
comparable information is available) prepared in accordance with GAAP
consistently applied, certified by the principal accounting or financial
Responsible Officer of the Company,
(c) promptly when available and in any event within 50 days
after the close of each fiscal quarter (other than the last fiscal quarter of a
fiscal year), beginning with the fiscal quarter ending March 31, 1999,
(i) a consolidated balance sheet at the close of such fiscal
quarter, and consolidated statements of earnings and partners' or
stockholders' equity for such fiscal quarter, and consolidated
statements of earnings, partners' or stockholders' equity and cash flow
for the period commencing at the close of the previous fiscal year and
ending with the close of such fiscal quarter, of the Company and its
Subsidiaries, in each case (with comparable information at the close of
and for the corresponding fiscal quarter of the prior fiscal year and
for the corresponding portion of such prior fiscal year, in each case,
as such comparable information is available) prepared in accordance
with
52
<PAGE> 58
GAAP consistently applied, certified by the principal accounting or
financial Responsible Officer of the Company, and
(ii) a Compliance Certificate, including computation of the
financial covenants contained in SECTION 6.2.4, calculated as of the
close of such fiscal quarter;
(d) promptly upon receipt thereof, copies of all management
letters and other detailed information (if any) prepared with respect to the
Company by any independent public accountants in connection with each annual or
interim audit (in the case of interim audits, if any) made by such independent
public accountants of the books of the Company or any Subsidiary;
(e) promptly upon any filing thereof by the Company or any
Subsidiary with the SEC or with any securities exchange on which any of their
respective securities are then listed, any annual, periodic or special report or
registration statement that is then generally available to the public;
(f) concurrently with the delivery of financial statements
pursuant to SECTIONS 6.1.1(a) and 6.1.1(c), a statement of the amount of
proceeds of outstanding Loans which have been advanced to, or for the benefit
of, the various Obligors during the prior fiscal quarter; and
(g) such other information with respect to the financial
condition of the Company or any Subsidiary as the Agent or any Bank may from
time to time reasonably request.
Each of the financial statements referred to in SECTIONS 6.1.1(a), 6.1.1(b) and
6.1.1(c) will fairly present the financial position of the Company and its
Subsidiaries as of the dates and for the periods stated therein, subject, in the
case of unaudited financial statements, to changes resulting from normal
year-end audit adjustments (none of which would, alone or in the aggregate, have
a Materially Adverse Effect).
6.1.2. MAINTENANCE OF EXISTENCES, ETC. Except as expressly otherwise
permitted by SECTION 6.2.6 or 6.2.7, the Company will:
(a) cause to be done at all times all things necessary to
maintain and preserve the existences, rights (statutory and other) and
franchises (including licenses, authorizations and permits necessary to the
operation of its businesses) of the Company, the other Obligors and their
respective Subsidiaries, in the case of the Company as a corporation and in the
case of each
53
<PAGE> 59
other Obligor and each such Subsidiary as a partnership or corporation or other
business entity, as the case may be, unless the failure so to do in any case
could not reasonably be expected to have a Materially Adverse Effect; and
(b) as of the Effective Date and thereafter, continue to own
and hold, directly or indirectly, free and clear of all Liens (except for the
Liens permitted by clauses (c), (e) and (f) of SECTION 6.2.3), all of the
outstanding shares of capital stock (excluding directors' qualifying shares, if
any) or other equity of each Subsidiary.
6.1.3. FOREIGN QUALIFICATION. The Company will, and will cause each
other Obligor and each Subsidiary of the Obligors to, cause to be done at all
times all things necessary to be duly qualified to do business and be in good
standing as a foreign corporation or partnership (to the extent applicable to
partnerships in any such jurisdiction) in each jurisdiction where the failure so
to qualify would reasonably be expected to have a Materially Adverse Effect.
6.1.4. PAYMENT OF TAXES, ETC. The Company will, and will cause each
other Obligor and each Subsidiary of the Obligors to, pay and discharge, as the
same may become due and payable, all Federal, state, local and foreign taxes,
assessments, fees and other governmental charges or levies against it or on any
of its property or the income or profits therefrom, in excess of $500,000 in the
aggregate; PROVIDED that the foregoing shall not require the Company or any
other Obligor or Subsidiary to pay or discharge any such tax, assessment, fee,
charge or levy so long as it shall be diligently contesting the validity thereof
in good faith by appropriate proceedings and shall have set aside on its books
adequate reserves in accordance with GAAP with respect thereto.
6.1.5. INSURANCE. The Company will, and will cause each other Obligor
and each Subsidiary of the Obligors to, maintain, with reputable, financially
sound insurance companies, insurance with respect to its properties and business
against such casualties and contingencies and of such types and in such amounts
as is customary in accordance with prudent business practice in the case of
similar businesses in similar locations and will from time to time upon the
reasonable request of the Agent, furnish a certificate of a Responsible Officer
of the Company setting forth the nature and extent of all insurance maintained
by the Company, the other Obligors and their Subsidiaries in accordance with
this SECTION 6.1.5.
6.1.6. NOTICE OF DEFAULT, LITIGATION, ETC. The Company will give
prompt notice (but in no event later than ten days after any Responsible Officer
of the Company has or should
54
<PAGE> 60
reasonably have obtained knowledge thereof) (with a description in reasonable
detail of the nature and period of existence thereof and of the actions which
the Company has taken and proposes to take with respect thereto) to the Agent
for distribution to each Bank of:
(a) the occurrence of any Default;
(b) any litigation, arbitration or governmental investigation
or proceeding not previously disclosed by the Company to the Banks which has
been instituted or, to the knowledge of the Company, is threatened against, the
Company or any other Obligor or any of their Subsidiaries or to which any of its
properties, assets or revenues is subject which
(i) would be reasonably likely to have a
Materially Adverse Effect, or
(ii) relates to this Agreement or any other Loan Document;
(c) the occurrence of any other circumstance of which any of
the officers of the Company has knowledge and which has a reasonable likelihood
of resulting in a Materially Adverse Effect;
(d) any material adverse development which shall occur in any
litigation, arbitration or governmental investigation or proceeding previously
disclosed by the Company to the Banks; and
(e) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension Liability of
any Pension Plan;
(iii) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by the Company or any
ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan subject to
section 412 of the Code, if such amendment results in a material
increase in contributions or Unfunded Pension Liability.
6.1.7. PERFORMANCE OF OBLIGATIONS. The Company will, and
will cause each other Obligor and each Subsidiary of the Obligors
to, (a) perform promptly and faithfully all of its Obligations
55
<PAGE> 61
under each Loan Document executed by it and (b) comply with the provisions of
all contracts or agreements to which it is a party or by which it is bound,
whether oral or written, express or implied, and pay all obligations which it
has incurred or may incur pursuant to any such contract or agreement as such
obligations become due, where the failure so to comply or make such payment
would, individually or in the aggregate with all such other failures, have a
Materially Adverse Effect.
6.1.8. BOOKS AND RECORDS. The Company will, and will cause each other
Obligor and each Subsidiary of the Obligors to, keep proper books and records
reflecting all of its business affairs and transactions so that its consolidated
financial statements are in accordance with GAAP and permit the Agent and the
Banks, on reasonable notice and at reasonable times and intervals during
ordinary business hours, to visit all of its offices, discuss its financial
matters with officers of any Obligor or any Subsidiary of the Obligors and its
independent public accountants, and examine and make abstracts from any of its
books or other corporate records. The Company shall pay any reasonable fees of
such independent public accountants incurred in connection with the exercise by
the Agent and the Banks of their rights pursuant to this SECTION 6.1.8.
6.1.9. COMPLIANCE WITH LAWS, ETC. The Company will, and will cause each
other Obligor and each Subsidiary of the Obligors to, comply with the
requirements of all Applicable Laws (including, without limitation,
Environmental Laws) noncompliance with which would reasonably be expected to
have a Materially Adverse Effect.
6.1.10. MANOR CARE OBLIGORS. The Company will cause each Manor Care
Obligor to execute and deliver to the Agent for the benefit of the Banks on or
before October 31, 1998:
(i) the Manor Care Subsidiary Guarantee;
(ii) copies of resolutions, incumbency certificates
organizational documents and good standing certificates responsive to
the requirements of clauses (b) and (c) of SECTION 4.1. or such other
evidence reasonably satisfactory to the Agent; and
(iii) a legal opinion of R. Jeffrey Bixler, general counsel to
the Manor Care Obligors, in the form of EXHIBIT D or otherwise
satisfactory to the Agent.
In addition, the Company will use reasonable efforts to cause each Manor Care
Obligor to become a party to the Guaranty by
56
<PAGE> 62
executing and delivering to the Agent for the benefit of the Banks an Assumption
Agreement in the form of Exhibit 1 to the Guaranty.
6.1.11. MAINTENANCE OF PROPERTY. The Company will, and will cause each
other Obligor and each Subsidiary of the Obligors to, at their joint and several
expense, maintain and keep its properties which are used or useful to its
business in good repair, working order and condition (except for ordinary wear
and tear), and from time to time make all necessary or desirable repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times.
6.1.12. ASSUMPTION BY NEW SUBSIDIARIES.
(a) As soon as practicable following the acquisition or
creation of any Subsidiary by the Company after the Effective Date which is not
already a party to the Guaranty (other than the Manor Care Obligors) and which
is not a Non-Obligor the Company shall immediately notify the Agent thereof and,
upon the request of the Agent or the Majority Banks, shall cause any such
Subsidiary to become a party to the Guaranty by executing an Assumption
Agreement in the form of Exhibit 1 to the Guaranty to the extent permissible
under Applicable Law. In addition, the Company shall cause such Subsidiary to
provide the Agent with such additional instruments or documents, including,
without limitation, opinions of counsel, certified resolutions, incumbency
certificates, third party consents and other evidences of authority, with
respect to such Subsidiary's ratification of, and assumption of all obligations
of an Obligor under, the Guaranty as the Agent shall reasonably request.
(b) If any Non-Obligor (other than those described in clause
(i) of the definition of "Non-Obligor") has a total asset value of greater than
$1,000,000 at any fiscal quarter end, the Company shall notify the Agent thereof
within 30 days of such fiscal quarter end and, upon the request of the Agent or
the Majority Banks, the Company shall cause any such Subsidiary to become a
party to the Guaranty (or, if such Subsidiary is a Subsidiary of Manor Care, the
Manor Care Subsidiary Guaranty) by executing an Assumption Agreement in the form
of Exhibit 1 to such instrument to the extent permissible under Applicable Law.
In addition, the Company shall cause such Subsidiary to provide the Agent with
such additional instruments or documents, including, without limitation,
opinions of counsel, certified resolutions, incumbency certificates, third party
consents and other evidences of authority, with respect to such Subsidiary's
ratification of, and assumption of all obligations of an Obligor under, the
Guaranty as the Agent shall reasonably request.
57
<PAGE> 63
6.1.13. USE OF PROCEEDS. The Borrowers shall use the proceeds of the
Extensions of Credit (i) to refinance existing Indebtedness, (ii) to support
commercial paper, (iii) for working capital and (iv) for general corporate
purposes (including Acquisitions not prohibited hereunder) of the Company and
its Subsidiaries.
6.2. NEGATIVE COVENANTS. The Company agrees with the Agent and each
Bank that, until all Commitments have terminated and all Obligations have been
paid and performed in full, the Company will perform the Obligations set forth
in this SECTION 6.2.
6.2.1. BUSINESS ACTIVITIES. The Company will not, nor will it permit
any other Obligor or any Subsidiary of the Obligors to, engage in any business
activity other than the businesses carried on by the Company and the other
Obligors and their Subsidiaries prior to the date hereof and such other
businesses as may be incidental or related thereto and other businesses relating
to health care services.
6.2.2. INDEBTEDNESS. The Company will not permit any Subsidiary of the
Company to create, incur, assume or suffer to exist or otherwise become or be
liable in respect of any Indebtedness other than (without duplication):
(a) Indebtedness in respect of the Loans and other Obligations
or refinancings thereof;
(b) Indebtedness outstanding under the $500,000,000 Credit
Agreement;
(c) Indebtedness in respect of taxes, assessments or
governmental charges to the extent that payment thereof shall not at the time be
required to be made in accordance with the pro visions of SECTION 6.1.4 or which
is being contested in good faith, by diligent proceedings, for which adequate
reserves in accordance with GAAP shall have been set aside and with respect to
which no Lien has attached;
(d) Indebtedness in respect of judgments or awards not
constituting an Event of Default under SECTION 7.1.8;
(e) Indebtedness for Borrowed Money secured by Liens permitted
by SECTION 6.2.3(b), PROVIDED that the aggregate outstanding principal amount of
Indebtedness incurred pursuant to this CLAUSE (e) shall at no time exceed
$50,000,000;
(f) refinancings, renewals, replacements or extensions of
Indebtedness permitted by CLAUSE (b) or (e) above or by CLAUSE (g),(h) OR (l)
below, in an amount not greater than the
58
<PAGE> 64
amount required to repay the Indebtedness so refinanced, and otherwise
conforming to the terms of such clauses;
(g) Indebtedness secured by Liens permitted by SECTION
6.2.3(l);
(h) Indebtedness of Subsidiaries acquired after the date
hereof existing at the time of such acquisition or attaching to assets purchased
as part of the purchase of all or substantially all the assets of a Person or
any distinct business segment of a Person and not created in anticipation of
such acquisition, so long as after giving effect to such Indebtedness no Default
shall exist hereunder;
(i) Contingent Liabilities in respect of any obligation of the
Company or any other Obligor or any Subsidiary of the Obligors permitted by this
Agreement;
(j) Indebtedness in respect of interest rate risk management
agreements;
(k) Indebtedness to the Company or any other Subsidiary;
(l) Existing Indebtedness listed on ITEM 6.2.2(l) ("Existing
Indebtedness") of the Disclosure Schedule;
(m) Capitalized Leases of the Obligors that together with all
Indebtedness outstanding under CLAUSE (o) hereof and all Capitalized Lease
Liabilities outstanding (other than Capitalized Leases under CLAUSES (h) AND (l)
hereof) do not exceed $75,000,000 in the aggregate outstanding at any one time,
so long as after giving effect to such Capitalized Leases no Default shall exist
hereunder;
(n) Indebtedness represented by notes or letters of credit
issued in connection with insurance policies and in a form substantially similar
to the notes or letters of credit set forth in ITEM 6.2.2(n) of the Disclosure
Schedule issued in connection with existing insurance policies of any
Subsidiary; and
(o) Other Indebtedness that together with all Capitalized
Lease Liabilities outstanding under CLAUSE (m) hereof does not exceed
$75,000,000 in the aggregate outstanding at any one time, so long as after
giving effect to such Indebtedness no Default shall exist hereunder.
6.2.3. LIENS. The Company will not, nor will it permit any other
Obligor or any Subsidiary of the Obligors to, create, incur, assume or suffer to
exist any Lien upon any of its
59
<PAGE> 65
property, revenues or assets, whether now owned or hereafter acquired, except
(without duplication):
(a) Liens encumbering the assets of the Company or any of its
Subsidiaries which were granted and in effect prior to the Effective Date to
secure Existing Indebtedness as listed in ITEM 6.2.3(a) ("Existing Liens") of
the Disclosure Schedule;
(b) Liens (excluding Capitalized Leases) in respect of
property acquired or constructed or improved by any Obligor or any Subsidiary of
the Obligors for the account of such Obligor or such Subsidiary or in connection
with CON's held by any Obligor or any Subsidiary of the Obligors, to secure
Indebtedness for Borrowed Money assumed or incurred to finance all or any part
of the purchase price or cost of construction or improvement of such property,
but any such Lien shall cover only the property so acquired or constructed and
any improvements thereto (and any real property on which such property is
located, if such property is a building, improvement or fixture);
(c) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without penalty or
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books;
(d) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books;
(e) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of bids, tenders,
trade contracts (other than for Indebtedness) statutory obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds or performance
bonds;
(f) judgment Liens not constituting an Event of Default under
SECTION 7.1.8;
(g) easements, restrictions and other minor defects of title
which are not, in the aggregate, material and which do not, individually or in
the aggregate, have a Materially Adverse Effect;
60
<PAGE> 66
(h) extensions, renewals or replacements of any Liens
permitted under CLAUSES (a) and (b), but only if the principal amount of the
Indebtedness secured by such Lien immediately prior to such extension, renewal
or replacement is not increased and the Lien is not extended to other property;
(i) Capitalized Leases of the Obligors, with Capitalized Lease
Liabilities that together with all Capitalized Lease Liabilities outstanding
(other than Capitalized Leases under clauses (a) and (j) hereof) do not exceed
$75,000,000 in the aggregate outstanding at any one time;
(j) Capitalized Leases of Subsidiaries acquired after the date
hereof existing at the time of the acquisition and not created in anticipation
of the acquisition;
(k) leases or subleases granted to others not interfering in
any material respect with the business of any Obligor or any Subsidiary of the
Obligors, and any interest or title of a lessor under any lease permitted by
this Agreement;
(l) purchase money Liens securing payables arising from the
purchase by any Obligor or any Subsidiary of the Obligors of any equipment or
goods in the ordinary course of business, PROVIDED that such payables do not
constitute Indebtedness for Borrowed Money;
(m) rights of set off incidental to Indebtedness permitted
hereunder;
(n) Liens securing Indebtedness permitted under SECTION
6.2.2(h) attaching only to the property so acquired and not created in
anticipation of such acquisition; and
(o) other Liens securing Indebtedness otherwise permitted
under this Agreement in an aggregate amount not to exceed $25,000,000.
6.2.4. FINANCIAL CONDITION.
(a) DEBT TO CAPITALIZATION. The Debt to Capitalization Ratio
shall not exceed at any time 0.55 to 1.0.
(b) FIXED CHARGE COVERAGE. The Fixed Charge Coverage Ratio for
each fiscal quarter shall not be less than 2.0 to 1.0.
(c) LEVERAGE RATIO. The Leverage Ratio of the Company and its
Subsidiaries as at the end of any fiscal quarter shall not be greater than 3.5
to 1.0.
61
<PAGE> 67
6.2.5. RESTRICTED PAYMENTS. The Company shall not (i) declare or make
any dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock, or (ii) purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding, except that the Company may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock or make cash payments for the redemption of
fractional shares;
(b) purchase, redeem or otherwise acquire shares of its common
stock or warrants or options to acquire any such shares with the proceeds
received from the substantially concurrent issue of new shares of its common
stock;
(c) subdivide its outstanding shares of common stock into a
larger number of shares of common stock, including, without limitation, by means
of a stock split; and
(d) purchase, redeem or otherwise acquire shares of its common
stock in connection with the administration of the Company's employee benefits
program; and
(e) declare or pay cash dividends to its stockholders and
purchase, redeem or otherwise acquire shares of its capital stock or warrants,
rights or options to acquire any such shares for cash;
PROVIDED, that the cumulative amount of such dividends, purchases, redemptions
and acquisitions after June 30, 1998 shall not exceed the sum of (i)
$300,000,000 PLUS (ii) 50% of net income of the Company and its Subsidiaries
arising after June 30, 1998 (excluding the Restructuring Charges), computed on a
cumulative consolidated basis; and PROVIDED FURTHER that, in no event may any
such payment, purchase, redemption or acquisition be made if immediately after
giving effect to any such proposed action, any Default or Event of Default would
exist. The provisions of this SECTION 6.2.5 shall not be breached by the payment
of any dividend within 60 days after the declaration thereof if, at such date of
declaration, the making of such payment would not have been in violation of this
Section.
6.2.6. CONSOLIDATION, MERGER, ETC. The Company will not, nor will it
permit any other Obligor to, liquidate or dissolve, consolidate with, or merge
into or with, any other Person, except (i) that any other Obligor may liquidate
or dissolve voluntarily into the Company, and any other Obligor may merge with
any
62
<PAGE> 68
Subsidiary and with and into the Company so long as the Company is the surviving
entity or with or into another Obligor and (ii) in connection with any merger
permitted by SECTION 6.2.12.
6.2.7. ASSET DISPOSITIONS, ETC. The Company will not, nor will it
permit any other Obligor or any Subsidiary of the Obligors to, sell, transfer,
lease or otherwise dispose of, or grant options, warrants or other rights with
respect to, any of its assets (including accounts receivable and capital stock
or other equity of Subsidiaries but excluding Company's capital stock) to any
Person, except for:
(a) orderly liquidations of Cash Equivalent Investments;
(b) sales of nutritional products, pharmaceuticals, and other
health care related products in the ordinary course of business;
(c) sales, transfers or other dispositions to the Company or
any Subsidiary of the Company;
(d) sales by the Company or its Subsidiaries of recently
constructed development facilities in accordance with historical practices;
(e) other dispositions not in excess of (i) in any fiscal
year, 15% of the Consolidated total assets of the Company and its Subsidiaries
as of the Effective Date or (ii) over the term of this Agreement, 25% of the
Consolidated total assets of the Company and its Subsidiaries as of the
Effective Date, so long as, in each case after giving effect to any such
disposition, the Company is in compliance with all provisions of this Agreement.
In connection with any proposed disposition permitted under this SECTION 6.2.7
of a Subsidiary that is an Obligor to a Person that is neither an Obligor nor a
Subsidiary of the Obligors, the Agent shall, upon request of the Company,
provide a release of the Guaranty or, if applicable, the Manor Care Subsidiary
Guarantee, with respect to such Subsidiary, such release to be effective upon
such permitted disposition of such Subsidiary. The Company shall provide such
certification or other evidence reasonably satisfactory to the Agent
demonstrating that such proposed disposition is permitted under this SECTION
6.2.7.
6.2.8. MODIFICATION OF CERTAIN INSTRUMENTS, ORGANIZATIONAL DOCUMENTS,
ETC. The Company will not, nor will it permit any other Obligor or any
Subsidiary of the Obligors to, consent to any amendment, supplement or other
modification of any of the
63
<PAGE> 69
terms or provisions contained in any of the Obligors' or such Subsidiaries'
Organizational Documents which would be materially adverse to the Agent and the
Banks.
6.2.9. TRANSACTIONS WITH AFFILIATES. The Company will not, nor will
it permit any other Obligor or any Subsidiary of the Obligors to, enter into, or
cause, suffer or permit to exist, any arrangement or contract with any of its
other Affiliates unless such arrangement is fair and equitable to the Company or
such other Obligor or such Subsidiary and is not of a sort which would not be
entered into by a prudent Person in the position of the Company or such other
Obligor or such Subsidiary with, or which is on terms which are less favorable
than are obtainable from, any Person which is not one of its Affiliates;
provided, however, that nothing in this SECTION 6.2.9 shall restrict (i)
compensation, advances or loans payable to directors or officers of the Obligors
in the ordinary course of business consistent with prior practices or (2)
transactions approved by a majority of the disinterested members of the Board of
Directors of Company or the applicable Subsidiary.
6.2.10. AGREEMENTS RESTRICTING LIENS AND DISTRIBUTIONS. The Company
will not, nor will it permit any other Obligor or any Subsidiary of the Obligors
to, enter into any agreement (other than a Loan Document) which (a) except with
respect to specific property encumbered to secure payment of Indebtedness
related to such property permitted under SECTIONS 6.2.2 and 6.2.3, imposes
restrictions greater in the aggregate than those under this Agreement upon the
creation or assumption of any Lien upon its properties, revenues or assets,
whether now owned or hereafter acquired, or (b), except as otherwise provided in
the Manor Care Indenture, restricts the making or payment of dividends or
distributions by any other Obligor or any Subsidiary of the Obligors to the
Company or in respect of Indebtedness of the Company.
6.2.11. ENVIRONMENTAL MATTERS. The Company will not, nor will it
permit any other Obligor or any Subsidiary of the Obligors to, violate any
Environmental Law if such violation would be reasonably likely to have a
Materially Adverse Effect and, without limiting the foregoing, the Company will
not, and will not permit any Person to, except in accordance with Applicable
Law, dispose of any Hazardous Material into, onto or from any real property
owned or operated by the Company or any other Obligor or any Subsidiary of the
Obligors, nor allow any Lien imposed pursuant to any law, regulation or order
relating to Hazardous Materials or the disposal thereof to remain on such real
property, which disposal or Lien would be reasonably likely to have a Materially
Adverse Effect.
64
<PAGE> 70
6.2.12. ACQUISITIONS. The Company will not, nor will it permit any of
its Subsidiaries to, make any Acquisition unless:
(i) immediately before and after giving effect to the
consummation of each Acquisition, no Default has occurred and is
continuing or will exist;
(ii) for each such Acquisition involving the purchase of a
majority of the stock of another party, the prior, effective written
consent or approval to such Acquisition of the board of directors or
equivalent governing body of the other party or parties has been
obtained; and
(iii) the aggregate value of the cash or other non-stock
consideration (including Indebtedness assumed by the Company or its
Subsidiaries in connection therewith) for all such Acquisitions (other
than those described in the following proviso) does not exceed
$150,000,000 in any fiscal year;
PROVIDED, HOWEVER, that notwithstanding the foregoing, any Subsidiary of the
Company may be merged or consolidated with or into the Company if the Company
shall be the continuing or surviving corporation or with or into any other
Subsidiary of the Company.
ARTICLE VII
EVENTS OF DEFAULT
7.1. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" shall mean any of
the events set forth in this SECTION 7.1.
7.1.1. NON-PAYMENT OF OBLIGATIONS. The Company or any other Obligor
shall default in the payment or prepayment when due (whether at stated maturity
or by acceleration, mandatory prepayment or otherwise) of any principal of, or
any interest in respect of, any Loan or any other amount due under any Loan
Document, and, in the case of interest or any other amount due, continuance of
such default for 3 Business Days or more.
7.1.2. NON-PERFORMANCE OF CERTAIN COVENANTS. The Company shall default
in the due performance or observance of any of its obligations under SECTION
6.1.6, 6.1.11, 6.2.2, 6.2.3, 6.2.4, 6.2.6, 6.2.7, 6.2.8 or 6.2.9 and (if such
default can be remedied within the grace period provided in this SECTION 7.1.2
by the Company) such default shall continue unremedied for a period of 5 days
after the earlier of (x) notice thereof having been given to the Company by the
Agent or any Bank or (y) the date on which a
65
<PAGE> 71
Responsible Officer of the Company had actual knowledge of such default.
7.1.3. NON-PERFORMANCE OF OTHER OBLIGATIONS. Any Obligor shall
default in the due performance and observance of any other agreement contained
herein or in any other Loan Document executed by it, and (if such default does
not otherwise constitute an Event of Default under this ARTICLE VII and can be
remedied within the grace period provided in this SECTION 7.1.3 such Obligor)
such default shall continue unremedied for a period of 30 days after the earlier
of (x) notice thereof having been given to the Company by the Agent or any Bank
or (y) the date on which a Responsible Officer of the applicable Obligor had
actual knowledge of such default.
7.1.4. BANKRUPTCY, INSOLVENCY, ETC. The Company or a Material Group
of Subsidiaries shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Company or any
Material Group of Subsidiaries or any property of any thereof, or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Material Group of
Subsidiaries or for a substantial part of the property of any thereof, and such
trustee, receiver, sequestrator or other custodian shall not be discharged
within 60 days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Company or any Material Group of Subsidiaries and,
if such case or proceeding is not commenced by the Company or any Material Group
of Subsidiaries, such case or proceeding shall be consented to or acquiesced in
by the Company or any Material Group of Subsidiaries or shall result in the
entry of an order for relief or shall remain for 60 days undismissed; or
(e) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
66
<PAGE> 72
7.1.5. BREACH OF WARRANTY. Any representation or warranty of the
Company hereunder or of the Company or any other Obligor in any other Loan
Document or any other writing furnished by or on behalf of the Company or any
other Obligor to the Agent or any Bank for the purposes of or in connection with
this Agreement or any such Loan Document is or shall be incorrect when made or
deemed made in any material respect.
7.1.6. CROSS DEFAULT. The Company or any Obligor (i) fails to make
any payment in respect of any Indebtedness for Borrowed Money having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $10,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure; or (ii) fails to perform or
observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity.
7.1.7. ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$5,000,000; (ii) except as disclosed on ITEM 6.9 of the Disclosure Schedule, the
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $5,000,000; or (iii) the Company or any ERISA Affiliate shall fail
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$5,000,000.
7.1.8. JUDGMENTS. Any undischarged, unstayed, unbonded final
judgments or orders for the payment of money in an aggregate amount in excess of
1% of Consolidated total assets (in each case, after giving effect to insurance,
if any, available with respect thereto) shall be rendered against the Company or
any Obligor which remain in effect for more than 60 days.
67
<PAGE> 73
7.1.9. IMPERMISSIBLE CHANGE IN CONTROL. Any Impermissible Change in
Control shall occur.
7.1.10. GUARANTOR DEFAULTS. Any Obligor fails in any material respect
to perform or observe any term, covenant or agreement in the Guaranty or, if
applicable, the Manor Care Subsidiary Guaranty subject, in each case, to the
grace periods set forth in this Article VII that would otherwise be applicable
to the Company; or the Guaranty or the Manor Care Subsidiary Guaranty is for any
reason partially (including with respect to future advances) or wholly revoked
or invalidated, or otherwise ceases to be in full force and effect, or any
Obligor or any other Person contests in any manner the validity or
enforceability thereof or denies that it has any further liability or obligation
thereunder.
7.1.11. LOSS OF LICENSES. Any Governmental Authority revokes or fails
to renew any material license, permit or franchise of the Company or any
Subsidiary, or the Company or any Subsidiary for any reason loses any material
license, permit or franchise, or the Company or any Subsidiary suffers the
imposition of any restraining order, escrow, suspension or impound of funds in
connection with any proceeding (judicial or administrative) with respect to any
material license, permit or franchise, in each case which would be reasonably
likely to have a Materially Adverse Effect.
7.2. REMEDIES. If any Event of Default occurs, the Agent
shall, at the request of, or may, with the consent of, the
Majority Banks,
(a) declare the commitment of each Bank to make Loans to be
terminated, whereupon such commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in clauses
(a) through (d) of SECTION 7.1.4, the obligation of each Bank to make Loans
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall
68
<PAGE> 74
automatically become due and payable without further act of the Agent or any
Bank.
7.3. RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE VIII
THE AGENT
8.1. APPOINTMENT AND AUTHORIZATION. Each Bank hereby irrevocably
(subject to SECTION 9.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
8.2. DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
8.3. LIABILITY OF AGENT. None of the Agent-Related Persons shall
(i) be liable to the Banks for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Company or
any Subsidiary or Affiliate of the Company, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement
69
<PAGE> 75
or any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Company or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent- Related Person shall
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Company or any of the Company's Subsidiaries or
Affiliates.
8.4. RELIANCE BY AGENT.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Borrowers), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Majority Banks as it deems appropriate and, if it
so requests, it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Majority
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in SECTION 4.1, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
8.5. NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Borrowers referring to this
Agreement, describing such Default or Event of Default and
70
<PAGE> 76
stating that such notice is a "notice of default". The Agent will notify the
Banks of its receipt of any such notice. The Agent shall take such action with
respect to such Default or Event of Default as may be requested by the Majority
Banks in accordance with Article VII; PROVIDED, HOWEVER, that unless and until
the Agent has received any such request, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Banks.
8.6. CREDIT DECISION. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company and its Subsidiaries
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
8.7. INDEMNIFICATION OF AGENT. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrowers and without limiting the obligation of the Borrowers to do so), pro
rata, from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER,
that no Bank shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified
71
<PAGE> 77
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Borrowers. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
8.8. AGENT IN INDIVIDUAL CAPACITY. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
8.9. SUCCESSOR AGENT. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon 60 days' notice to the Banks and the
Company. If the Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks which successor
agent shall be approved by the Company (which approval shall not be unreasonably
withheld or delayed). If no successor agent is appointed prior to the effective
date of the resignation of the Agent, the Agent may appoint, after consulting
with the Banks and the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article VIII and
SECTIONS 9.4 and 9.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this
72
<PAGE> 78
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above.
8.10. WITHHOLDING TAX.
(a) If any Non-U.S. Bank claims exemption from, or a reduction
of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Non-U.S.
Bank agrees with and in favor of the Borrowers and the Agent, to deliver to the
Borrowers and the Agent:
(i) if such Non-U.S. Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 or any successor form, before
the payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement or such other time as
may be required by any change in law if so requested by the Borrowers;
(ii) if such Non-U.S. Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Non-U.S. Bank, two properly completed and executed copies of IRS Form
4224 or any successor form before the payment of any interest is due in
the first taxable year of such Non-U.S. Bank and in each succeeding
taxable year of such Non-U.S. Bank during which interest may be paid
under this Agreement or such other time as may be required by any
change in law if so requested by the Borrowers, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Non-U.S. Bank agrees to promptly notify the Borrowers and the Agent of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Non-U.S. Bank claims exemption from, or reduction
of, withholding tax under a United States tax treaty by
73
<PAGE> 79
providing IRS Form 1001 and such Non-U.S. Bank sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrowers to such Non-U.S. Bank, such Non- U.S. Bank agrees to notify the
Borrowers and the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrowers to such Non-U.S. Bank. To the
extent of such percentage amount, the Borrowers and the Agent will treat such
IRS Form 1001 as no longer valid.
(c) If any Non-U.S. Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrowers to such Non-U.S. Bank, such Non-U.S. Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Non-U.S. Bank is entitled to a reduction in the
applicable withholding tax, the Borrowers and the Agent may withhold from any
interest payment to such Non-U.S. Bank an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or other
documentation required by subsection (a) of this Section are not delivered to
the Borrowers and the Agent, then the Agent may withhold from any interest
payment to such Non-U.S. Bank not providing such forms or other documentation an
amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Non-U.S.
Bank (because the appropriate form was not delivered, was not properly executed,
or because such Non-U.S. Bank failed to notify the Borrowers or the Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Non-U.S. Bank shall
indemnify the Borrowers and the Agent fully for all amounts paid, directly or
indirectly, by the Borrowers and the Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Borrowers and the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Non-U.S. Banks under this subsection shall survive the payment of all
Obligations and the resignation or replacement of the Agent.
8.11. DOCUMENTATION AGENTS AND SYNDICATION AGENT. None of the Banks
identified on the facing page or signature pages of this Agreement as a
"documentation agent" or "syndication agent" shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those
74
<PAGE> 80
applicable to all Banks as such. Without limiting the foregoing, none of the
Banks so identified as a "documentation agent" or "syndication agent" shall have
or be deemed to have any fiduciary relationship with any Bank. Each Bank
acknowledges that it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
ARTICLE IX
MISCELLANEOUS
9.1. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Borrowers therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Banks (or by the Agent
at the written request of the Majority Banks) and the Borrowers and acknowledged
by the Agent, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; PROVIDED,
HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks and the Borrowers and acknowledged by the Agent, do any
of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to SECTION 7.2);
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan (except that payment of the default rate of interest under
SECTION 2.8(c) may be waived by Majority Banks), or (subject to clause (ii)
below) any fees or other amounts payable hereunder or under any other Loan
Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder;
(e) amend this Section, or SECTION 2.13, or any provision
herein providing for consent or other action by all Banks; or
(f) except as provided in SECTION 6.2.7 or in accordance with
their respective terms, terminate the Guaranty or
75
<PAGE> 81
the Manor Care Subsidiary Guaranty or release a Material Group of Subsidiaries
from their obligations under the Guaranty or the Manor Care Subsidiary Guaranty;
and, PROVIDED FURTHER, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
9.2. NOTICES.
(a) All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by
facsimile transmission, PROVIDED that any matter transmitted by the Borrowers by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 9.2, and (ii) shall be followed
promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices on SCHEDULE
9.2; or, as directed to the Borrowers or the Agent, to such other address as
shall be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be designated by
such party in a written notice to the Borrowers and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or VIII shall not be effective until actually
received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Borrowers. The Agent and the Banks shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Borrowers to give such notice and the Agent and the Banks shall not have any
liability to the Borrowers or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Borrowers to repay the Loans shall not be affected
in any way or to any extent by any failure by the Agent and the Banks to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Agent and the Banks of a confirmation which is at variance with the terms
understood by
76
<PAGE> 82
the Agent and the Banks to be contained in the telephonic or facsimile notice.
9.3. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
9.4. COSTS AND EXPENSES. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) within
five Business Days after demand (subject to SECTION 4.1(g)) for all reasonable
costs and expenses incurred by BofA (including in its capacity as Agent) in
connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by BofA (including in its capacity as Agent)
with respect thereto; and
(b) pay or reimburse the Agent, the Lead Arranger and each
Bank within five Business Days after demand (subject to SECTION 4.1(g)) for all
costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
9.5. COMPANY INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Borrowers shall indemnify and hold the
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of
77
<PAGE> 83
this Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of this Agreement
or the Loans or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "INDEMNIFIED
LIABILITIES"); PROVIDED, that the Borrowers shall have no obligation hereunder
to any Indemnified Person with respect to Indemnified Liabilities resulting from
the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
9.6. PAYMENTS SET ASIDE. To the extent that the Borrowers makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
9.7. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrowers may not assign or
transfer any of their rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
9.8. ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) Any Bank may, with the written consent of the Company at
all times other than during the existence of an Event of Default and the Agent,
which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no written consent of
the Company or the Agent shall be required in connection with any assignment and
delegation by a Bank to another Bank or to an Eligible Assignee that is an
Affiliate of such Bank) (each an "ASSIGNEE") all, or any ratable part of all, of
the Loans, the Commitments and the other rights and obligations of such Bank
hereunder, in a minimum amount of $10,000,000 or, if less, the
78
<PAGE> 84
entire amount of such Bank's Commitment; PROVIDED, HOWEVER, that the Company and
the Agent may continue to deal solely and directly with such Bank in connection
with the interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment and Acceptance
in the form of EXHIBIT I ("ASSIGNMENT AND ACCEPTANCE") together with any Note or
Notes subject to such assignment and (iii) the assignor Bank or Assignee has
paid to the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received (and provided its consent with respect to) an
executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by
the Agent that it has received an executed Assignment and Acceptance and payment
of the processing fee, (and provided that it consents to such assignment in
accordance with SECTION 9.8(a)), the Company shall execute and deliver to the
Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and,
if the assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held by
such Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "PARTICIPANT")
participating interests in any Loans, the Commitment of that Bank and the other
interests of that Bank (the "ORIGINATOR") hereunder and under the other Loan
Documents;
79
<PAGE> 85
PROVIDED, HOWEVER, that (i) the Originator's obligations under this Agreement
shall remain unchanged, (ii) the Originator shall remain solely responsible for
the performance of such obligations, (iii) the Company and the Agent shall
continue to deal solely and directly with the Originator in connection with the
Originator's rights and obligations under this Agreement and the other Loan
Documents, and (iv) no Bank shall transfer or grant any participating interest
under which the Participant has rights to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment, consent or waiver would require unanimous
consent of the Banks as described in the first proviso to SECTION 9.1. In the
case of any such participation, the Participant shall be entitled to the benefit
of SECTIONS 3.1, 3.3 and 9.5 as though it were also a Bank (as the case may be)
hereunder, and if amounts outstanding under this Agreement are due and unpaid,
or shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Notes held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CAR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
9.9. CONFIDENTIALITY. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on such Company's or Subsidiary's behalf, under this Agreement or
any other Loan Document, and neither it nor any of its Affiliates shall use any
such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non- confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; PROVIDED, HOWEVER, that any Bank may disclose such
information (A) at the request or
80
<PAGE> 86
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of such Bank by any such authority;
(B) pursuant to subpoena or other court process; (C) subject to appropriate
confidentiality protections, when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) subject to appropriate
confidentiality protections, to the extent reasonably required in connection
with any litigation or proceeding to which the Agent, any Bank or its Affiliates
may be party; (E) to the extent reasonably required in connection with the
exercise of any remedy hereunder or under any other Loan Document; (F) to such
Bank's independent auditors and other professional advisors; (G) to any
Participant or Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same extent required of
the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly permitted
under the terms of any other document or agreement regarding confidentiality to
which the Company or any Subsidiary is party or is deemed party with such Bank
or such Affiliate; and (I) to its Affiliates subject to confidentiality and only
for use in connection herewith.
9.10. SET-OFF. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Borrowers, any such notice being waived by the Borrowers to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Borrowers against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Borrowers and the Agent after any such set-off and application made
by such Bank; PROVIDED, HOWEVER, that the failure to give such notice shall not
affect the validity of such set-off and application.
9.11. NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Bank
shall notify the Agent in writing of any changes in the address to which notices
to the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
9.12. COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken
81
<PAGE> 87
together shall be deemed to constitute but one and the same instrument.
9.13. SEVERABILITY. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
9.14. NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrowers, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
9.15. GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE BANKS AND THE BORROWER
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
BORROWERS, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
NEW YORK LAW.
9.16. WAIVER OF JURY TRIAL. THE BORROWERS, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS,
82
<PAGE> 88
TORT CLAIMS, OR OTHERWISE. THE BORROWERS, THE BANKS AND THE AGENT EACH AGREE
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
9.17. ENTIRE AGREEMENT. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Borrowers,
the Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
83
<PAGE> 89
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
HCR MANOR CARE, INC.
By:
------------------------------
Title:
---------------------------
MANOR CARE, INC.
By:
------------------------------
Title:
---------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
------------------------------
Title:
---------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By:
------------------------------
Title:
---------------------------
84
<PAGE> 90
SCHEDULE 2.1
COMMITMENTS AND PRO RATA SHARES
-------------------------------
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
<S> <C> <C>
Bank of America National
Trust and Savings
Association $ 99,375,000 33.125%
The Toronto - 37,500,000 12.500%
Dominion Bank
The Chase 37,500,000 12.500%
Manhattan Bank
Deutsche Bank AG 28,125,000 9.375%
The Huntington 18,750,000 6.250%
National Bank
Bank of Montreal 11,250,000 3.750%
The Bank of New 11,250,000 3.750%
York
NBD Bank 11,250,000 3.750%
The First National 11,250,000 3.750%
Bank of Maryland
National City Bank 11,250,000 3.750%
Sun Trust Bank, 11,250,000 3.750%
Central Florida,
National
Association
Wachovia Bank, 11,250,000 3.750%
N.A.
TOTAL $300,000,000 100%
</TABLE>
<PAGE> 91
EXHIBIT A
NOTICE OF COMMITTED BORROWING
-----------------------------
Date: ____________, [199_/200_]
To: Bank of America National Trust and Savings Association
as Agent for the Banks parties to the 364 Day Credit
Agreement dated as of September 25, 1998 (as extended,
renewed, amended or restated from time to time, the
"CREDIT AGREEMENT") among HCR Manor Care, Inc., Manor
Care, Inc., certain Banks which are signatories thereto
and Bank of America National Trust and Savings
Association, as Agent
Ladies and Gentlemen:
The undersigned, [HCR Manor Care, Inc./Manor Care, Inc.] (the
"COMPANY"), refers to the Credit Agreement, the terms defined therein being used
herein as therein defined, and hereby gives you notice irrevocably, pursuant to
Section 2.3 of the Credit Agreement, of the Committed Borrowing specified below:
1. The Business Day of the proposed Committed Borrowing is
_______________, [199_/200_].
2. The aggregate amount of the proposed Committed Borrowing is
$____________.
3. The Committed Borrowing is to be comprised of $__________
of [Base Rate] [Offshore Rate] Loans.
4. The duration of the Interest Period of the Offshore Rate
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 Company
contained in Article V 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);
<PAGE> 92
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Committed Borrowing; and
(c) The proposed Committed Borrowing will not cause the
aggregate principal amount of all outstanding Committed Loans PLUS the
aggregate principal amount of all outstanding Bid Loans PLUS the
aggregate amount available for drawing under all outstanding Letters of
Credit PLUS the aggregate principal amount of all outstanding L/C
Borrowings to exceed the combined Commitments of the Banks.
[HCR MANOR CARE, INC./MANOR
CARE, INC.]
By:___________________________
Title:________________________
<PAGE> 93
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
---------------------------------
Date: _____________, [199_/200_]
To: Bank of America National Trust and Savings Association,
as Agent for the Banks parties to the 364 Day Credit
Agreement dated as of September 25, 1998 (as extended,
renewed, amended or restated from time to time, the
"CREDIT AGREEMENT") among HCR Manor Care, Inc., Manor
Care, Inc., certain Banks which are signatories thereto
and Bank of America National Trust and Savings
Association, as Agent
Ladies and Gentlemen:
The undersigned, [HCR Manor Care, Inc./Manor Care, Inc.] (the
"COMPANY"), refers to the Credit Agreement, the terms defined therein being used
herein as therein defined, and hereby gives you notice irrevocably, pursuant to
Section 2.4 of the Credit Agreement, of the [conversion] [continuation] of the
Committed Loans specified herein, that:
1. The Conversion/Continuation Date is
___________, [199_/200_].
2. The aggregate amount of the Committed Loans to be
[converted] [continued] is $____________.
3. The Committed Loans are to be [converted into] [continued
as] [Offshore Rate] [Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period for
the Committed Loans included in the [conversion] [continuation] shall
be ____ months.
[HCR MANOR CARE, INC./MANOR
CARE, INC.]
By:___________________________
Title:________________________
<PAGE> 94
EXHIBIT C
COMPLIANCE CERTIFICATE
----------------------
To: Bank of America National Trust and Savings Association for the Banks
parties to the Credit Agreement dated as of September 25, 1998 (as
extended, renewed, amended or restated from time to time, the "CREDIT
AGREEMENT") among HCR Manor Care, Inc., Manor Care, Inc., certain Banks
which are signatories thereto and Bank of America National Trust and
Savings Association, as Agent
Ladies and Gentlemen:
This Compliance Certificate is delivered to you pursuant to Section
7.1.1 of the Credit Agreement. Unless the context clearly indicates to the
contrary, capitalized terms used herein which are defined in the Credit
Agreement shall have the meanings which the Credit Agreement assigns to such
terms.
The Company hereby certifies and warrants to the Agent, for the benefit
of the Agent and the Banks, that the following is true and correct calculation
of the ratios and financial conditions contained in Section 7.2.4 of the Credit
Agreement for the computation date shown on the attachments hereto (the
"COMPUTATION DATE"):
(a) The Debt to Capitalization Ratio on the Computation Date
was ___ to 1.0, as calculated on ATTACHMENT I hereto. The maximum Debt
to Capitalization Ratio permitted by Section 7.2.4(a) for such date is
0.55 to
1.0.
(b) The Fixed Charge Coverage Ratio for the period ending on
the Computation Date, with respect to the last day of the last fiscal
quarter, was __ to 1.0, as calculated on ATTACHMENT II hereto. The
minimum Fixed Charge Coverage Ratio required by Section 7.2.4(b) for
such period is 2.0 to
1.0.
(c) The Leverage Ratio for the period ending on the
Computation Date, with respect to the last day of the last fiscal
quarter, was ___ to 1.0, as calculated on ATTACHMENT III hereto. The
maximum Leverage Ratio permitted by Section 7.2.4(c) for such period is
3.5 to 1.0.
<PAGE> 95
IN WITNESS WHEREOF, the Company has caused this Compliance Certificate
to be executed and delivered by its Responsible Officer this ___ day of
______________, [19__/200__].
HCR MANOR CARE, INC.
By:
-----------------------------------
Name Printed:
-------------------------
Its:
----------------------------------
Address: One SeaGate
23rd Floor
Toledo, Ohio 43604-2616
<PAGE> 96
Attachment I
(to Compliance Certificate
dated _________, [19__/200__])
DEBT TO CAPITALIZATION RATIO (Section 7.2.4(a))
Computation Date: _______________, [19__/200__]
Item Measurement
- ---- -----------
1. Consolidated Indebtedness for
Borrowed Money of the Company
and its Subsidiaries $
------------------
2. Consolidated Net Worth of the
Company and its Subsidiaries $
------------------
3. Sum of ITEM 1 and ITEM 2
(Consolidated Capitalization) $
------------------
4. ITEM 1 divided by ITEM 3 (DEBT
TO CAPITALIZATION RATIO as of
Computation Date) $
------------------
5. Maximum ratio permitted by
Section 7.2.4(a) as of
Computation Date 0.55 to 1.0
------------------
<PAGE> 97
Attachment II
(to Compliance Certificate
dated _________, [19__/200__])
FIXED CHARGE COVERAGE RATIO (Section 7.2.4(b))
Computation Date: _______________, [19__/200__]
(end of the ______ fiscal quarter
of the ____ fiscal year)
Item Measurement
- ---- -----------
1. Consolidated EBITDA (calculated for the four
fiscal quarter period then ended and
adjusted on a pro forma basis for any
acquisitions or investments as if such
acquisition or investment took place on the
first day of said four fiscal quarter
period) $
-------------
2. Lease and Rental Expense of the
Company and its Subsidiaries $
--------------
3. Sum of ITEM 1 and ITEM 2 $
--------------
4. Consolidated Interest Expense $
--------------
5. Scheduled principal payments $
--------------
6. Lease and Rental Expense of the
Company and its Subsidiaries $
--------------
7. Sum of ITEM 4, ITEM 5, and
ITEM 6 $
--------------
8. ITEM 3 divided by ITEM 7 (FIXED
CHARGE COVERAGE RATIO as of
Computation Date) $
--------------
9. Minimum ratio permitted by
Section 7.2.4(b) as of the
Computation Date $ 2.0:1.0
--------------
<PAGE> 98
Attachment III
(to Compliance Certificate
dated _________, [19__/200__])
Leverage Ratio (Section 7.2.4(c))
Computation Date: _______________, [19__/200__]
(end of the ______ fiscal quarter
of the ____ fiscal year)
Item Measurement
- ---- -----------
1. Consolidated Indebtedness for
Borrowed Money of the Company
and its Subsidiaries $
-------------
2. Consolidated EBITDA (calculated for the four
fiscal quarter period then ended and
adjusted on a pro forma basis for any
acquisitions or investments as if such
acquisition or investment took place on the
first day of said four fiscal quarter
period) $
-------------
3. ITEM 1 divided by ITEM 2
(LEVERAGE RATIO as of
Computation Date) $
-------------
4. Maximum ratio permitted by
Section 7.2.4(c) as of the
Computation Date 3.5 to 1.0
-------------
<PAGE> 99
EXHIBIT E
GUARANTY
--------
THIS GUARANTY (this "GUARANTY") dated as of September 25, 1998 is
executed by the undersigned (collectively hereinafter referred to as the
"GUARANTORS" and individually as a "GUARANTOR") in favor of Bank of America
National Trust and Savings Association, as Agent (as hereinafter defined in the
first recital below).
RECITALS
--------
WHEREAS, HCR Manor Care, Inc. (the "COMPANY"), Manor Care, Inc. ("MANOR
CARE"), certain lenders (the "BANKS"), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, individually and as administrative agent
for the Banks (in such capacity, the "AGENT"), have entered into that certain
364 Day Credit Agreement dated as of even date herewith (as amended or modified
and in effect, hereinafter referred to as the "CREDIT AGREEMENT") pursuant to
which the Agent and the Banks may from time to time extend credit to the
Borrowers (each capitalized term used but not defined herein shall have the
meaning assigned thereto in the Credit Agreement);
WHEREAS, as partial consideration for the Banks and the Agent entering
into the Credit Agreement, each of the undersigned agrees to execute and deliver
this Guaranty to the Agent for the benefit of the Agent and the Banks; and
WHEREAS, the ability of the Borrowers to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the Guarantors are a part,
NOW, THEREFORE, in order to induce the Banks and the Agent to enter
into the Credit Agreement, each Guarantor hereby covenants as follows:
SECTION 5. GUARANTY.
a. Subject to SECTION 1(b), each Guarantor hereby jointly and severally
and unconditionally guarantees the performance and the full and prompt payment
when due, whether by acceleration or otherwise, and at all times thereafter, of
all Obligations of the Borrowers, including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C
Section 502(b) and Section 506(b)(all such
<PAGE> 100
Obligations being hereinafter collectively called the "GUARANTEED LIABILITIES").
b. The liability of each of the Guarantors under this Guaranty shall
not exceed the maximum amount of liability that such Guarantor can hereby incur
without rendering this Guaranty void or voidable under Applicable Law relating
to fraudulent conveyance or fraudulent transfers, and not for any greater
amount. For purposes of determining such liability of each of the Guarantors,
due consideration shall be given to the direct and indirect benefits received by
each of the Guarantors as a result of the Credit Extension under the Credit
Agreement.
c. Subject to clause (b) above, the liability under the Guaranty of
each Guarantor shall not be less than the outstanding amount of Loans which have
been advanced to such Guarantor as reflected from time to time in the statements
required by Section 6.1.1(g) of the Credit Agreement.
d. This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect as to each
other Guarantor notwithstanding the dissolution of any Guarantor or that at any
time or from time to time all Guaranteed Liabilities may have been paid in full
so long as any Commitment under the Credit Agreement remains outstanding.
SECTION 6. DISGORGED PAYMENTS. Each Guarantor further agrees that, if at
any time all or any part of any payment theretofore applied by the Agent or the
Banks to any of the Guaranteed Liabilities is or must be rescinded or returned
by the Agent or the Banks for any reason whatsoever (including the insolvency,
bankruptcy or reorganization of the Company or any Guarantor), such Guaranteed
Liabilities shall, for the purposes of this Guaranty, to the extent that such
payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by the Agent or the Banks, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Guaranteed Liabilities, all as though such application by the Agent or
the Banks had not been made.
SECTION 7. COVENANTS. Each Guarantor agrees with the Agent and each
Bank that, until all Commitments have been terminated and all Obligations have
been paid and performed in full, each Guarantor will perform all Obligations
applicable to such Guarantor set forth in Article VI of the Credit Agreement.
SECTION 8. CERTAIN PERMITTED ACTIONS. To the extent permitted by law or
the Loan Documents, each of the Agent and any Bank may, from time to time,
whether before or after any discontinuance of this Guaranty, at its sole
discretion and
<PAGE> 101
without notice to any Guarantor, take any or all of the following actions
without impairing its rights arising hereunder: (a) retain or obtain a lien upon
or a security interest in any property to secure any of the Guaranteed
Liabilities, (b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to such Guarantors' obligations, with respect
to any of the Guaranteed Liabilities, (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Guaranteed Liabilities, or release or compromise any obligation of any
Obligor under any Loan Document or any obligation of any nature of any other
obligor with respect to any of the Guaranteed Liabilities, (d) release or fail
to perfect its lien upon or security interest in, or impair, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Guaranteed Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to
any such property, and (e) resort to any Guarantor for payment of any of the
Guaranteed Liabilities, whether or not the Agent or the Banks (i) shall have
resorted to any property securing any of the Guaranteed Liabilities or (ii)
shall have proceeded against any other obligor primarily or secondarily
obligated with respect to any of the Guaranteed Liabilities (all of the actions
referred to in preceding CLAUSES (i) and (ii) being hereby expressly waived by
each Guarantor to the fullest extent permitted by Applicable Law).
SECTION 9. APPLICATION OF FUNDS. The Agent may apply any payments
hereunder to the payment of expenses which the Agent incurs in connection with
the enforcement of this Guaranty, including reasonable attorneys' fees and legal
expenses. The Agent may apply any balance of such payments hereunder toward the
payment of such of the Guaranteed Liabilities, and in such order of application,
as the Agent may, in its sole discretion, elect from time to time.
SECTION 10. LIMIT ON SUBROGATION; WAIVERS.
a. Except as provided in clause (b) below, no payment made by or for
the account of any Guarantor pursuant to this Guaranty shall entitle any
Guarantor by subrogation or otherwise to any payment by any Borrower or from or
out of any property of any Borrower, and no Guarantor shall exercise any right
or remedy against any Borrower or any property of any Borrower by reason of any
performance by such Guarantor of this Guaranty, all of which rights and remedies
are hereby waived by such Guarantor to the fullest extent permitted by
Applicable Law.
<PAGE> 102
b. In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under this
Guaranty, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets (as
hereinafter defined) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Guaranteed Liabilities or any other Guarantor's obligations with respect to
this Guaranty. "ADJUSTED NET ASSETS" of any Guarantor at any date means the
lesser of (a) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities (including, without
limitation, contingent liabilities, but excluding liabilities of such Guarantor
under this Guaranty) of such Guarantor at such date, and (b) the amount by which
the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all contingent liabilities, but
excluding liabilities of such Guarantor under this Guaranty) as they become
absolute and matured.
c. To the extent permitted by Applicable Law, each Guarantor hereby
expressly waives (i) notice of the acceptance by the Agent or the Banks of this
Guaranty, (ii) notice of the existence or creation or non-payment of all or any
of the Guaranteed Liabilities, (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever, (iv) all diligence in collection or
protection of or realization upon the Guaranteed Liabilities or any security for
or guaranty of any of the foregoing and (v) all other rights and defenses
(including, without limitation, all suretyship rights and defenses) the
assertion of which would in any way diminish the liability of such Guarantor
hereunder.
SECTION 11. TRANSFER OF OBLIGATIONS. Subject to Section 9.8 of the
Credit Agreement, the Agent and the Banks may, from time to time, without notice
to any Guarantor, assign or transfer, or cause to be assigned or transferred,
any or all of the Guaranteed Liabilities or any interest therein and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Guaranteed Liabilities shall be and remain Guaranteed
Liabilities for the purposes of this Guaranty, and each and every immediate and
successive assignee or transferee of any of the Guaranteed Liabilities or of any
interest therein shall, to the extent of the interest of such assignee or
transferee in the Guaranteed Liabilities, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the Agent or
a Bank.
<PAGE> 103
SECTION 12. NO CONDITIONS TO EFFECTIVENESS. No claim or defense by any
Person as to the invalidity or unenforceability of any obligation under the Loan
Documents shall affect or impair the obligations of the Guarantors under this
Guaranty. The obligations of the Guarantors under this Guaranty shall be
absolute and unconditional irrespective of any circumstance whatsoever which
might constitute a legal or equitable discharge or defense of any Borrower. Each
Guarantor hereby acknowledges that there are no conditions to the effectiveness
of this Guaranty.
SECTION 13. WARRANTIES. Each Guarantor hereby warrants and represents
to the Agent and the Banks that (i) it now has and expects to continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of the Company, and the Agent and the Banks shall not
have any duty or responsibility to provide such Guarantor with any credit or
other information concerning the affairs, financial condition or business of the
Company which may come into such Person's possession; (ii) the execution,
delivery and performance of this Guaranty by such Guarantor are within its
corporate or partnership powers and do not (a) contravene any law, rule or
regulation presently in effect which affects or binds it or any of its
properties, or (b) conflict with or result in a material breach of any guaranty
or loan or credit agreement or any other agreement or instrument to which it is
a party in respect of indebtedness for money borrowed; and (iii) any and all
information heretofore or hereafter provided by such Guarantor to the Agent and
the Banks hereunder and certified by a Responsible Officer of such Guarantor is
and shall be true and accurate in all material respects as of the date
furnished.
SECTION 14. MODIFICATION OF GUARANTY. This Guaranty shall not be
amended, supplemented or otherwise modified without the written consent of the
Agent and the Majority Banks and, as to any Guarantor, such Guarantor. Except as
otherwise provided in the Credit Agreement, this Guaranty shall not be released
or terminated as to any Guarantor without the written consent of all Banks.
SECTION 15. NOTICES.
a. All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, PROVIDED that any matter transmitted by the Guarantors by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 9.2 of the Credit Agreement, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number, in the case of
the Agent and the Banks, specified for notices on SCHEDULE 9.2 of the Credit
Agreement and
<PAGE> 104
in the case of the Guarantors, specified on the signature pages hereof; or, as
directed to the Guarantors or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Guarantors and the Agent;
b. All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
c. Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Guarantors. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Guarantors to give such notice and the Agent and the Banks shall not have any
liability to the Guarantors or other Person on account of any action taken or
not taken by the Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligations of the Guarantors under this Guaranty shall
not be affected in any way or to any extent by any failure by the Agent and the
Banks to receive written confirmation of any telephonic or facsimile notice or
the receipt by the Agent and the Banks of a confirmation which is at variance
with the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
SECTION 16. GOVERNING LAW AND JURISDICTION. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE
BANKS AND THE GUARANTORS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY,
EACH OF THE GUARANTORS, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
OF THE GUARANTORS, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTORS, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR
<PAGE> 105
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 17. WAIVER OF JURY TRIAL. THE GUARANTORS, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTORS, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
SECTION 18. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 19. LOAN DOCUMENT. This Guaranty is a Loan Document.
<PAGE> 106
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
Manor Care, Inc.
Ancillary Services Management, Inc.
Birchwood Manor, Inc.
Blue Ridge Rehabilitation Services, Inc.
Cantebury Village, Inc.
Diversified Rehabilitation Services, Inc.
Donahoe Manor, Inc.
East Michigan Care Corporation
EYE-Q Network, Inc.
Georgian Bloomfield, Inc.
Greenview Manor, Inc.
HCR Acquisition Corporation
HCR Home Health Care and Hospice, Inc.
HCR Information Corporation
HCR Physician Management Services, Inc.
HCR Rehabilitation Corp.
HCR Therapy Services, Inc.
HCRA of Texas, Inc.
HCRC Inc.
Health Care and Retirement Corporation
of America
Heartland CarePartners, Inc.
Heartland Home Care, Inc.
Heartland Home Health Care Services, Inc.
Heartland Hospice Services, Inc.
Heartland Management Services, Inc.
Heartland Pain and Rehabilitation
Center, Inc.
Heartland Rehabilitation Services of
North Florida, Inc.
Heartland Rehabilitation Services, Inc.
Heartland Services Corp.
Herbert Laskin, RPT - John McKenzie, RPT
Physical Therapy Professional
Associates, Inc.
HGCC of Allentown, Inc.
Ionia Manor, Inc.
Kensington Manor, Inc.
Knollview Manor, Inc.
Lincoln Health Care, Inc.
Marina View Manor, Inc.
Medi-Speech Service, Inc.
Mid-Shore Physical Therapy
Associates, Inc.
MileStone Health Systems, Inc.
MileStone Healthcare, Inc.
MileStone Rehabilitations Services, Inc.
<PAGE> 107
MileStone Therapy Services, Inc.
MRC Rehabilitation, Inc.
NuVista Refractive Surgery and Laser
Center, Inc.
Perrysburg Physical Therapy, Inc.
Physical Occupational and Speech
Therapy, Inc.
Rehabilitation Administrative Corporation
Rehabilitation Associates, Inc.
Rehabilitation Services of Roanoke, Inc.
Reinbolt and Burkam, Inc.
Richards Healthcare, Inc.
Ridgeview Manor, Inc.
RVA Management Services, Inc.
Springhill Manor, Inc.
Sun Valley Manor, Inc.
Therapy Associates, Inc.
Three Rivers Manor, Inc.
Vision Management Services, Inc.
Washtenaw Hills Manor, Inc.
Whitehall Manor, Inc.
By:____________________________________
Name Printed: _________________________
Its:___________________________________
Address: One Seagate
Toledo, Ohio 43604-2616
Fax No. 419-252-5571
Telephone: 419-252-5500
<PAGE> 108
EXHIBIT 1
to the Guaranty
GUARANTY ASSUMPTION AGREEMENT
WHEREAS, HCR Manor Care, Inc., a Delaware corporation (the "COMPANY")
and Manor Care, Inc., a Delaware corporation ("MANOR CARE") entered into the 364
Day Credit Agreement dated as of September 30, 1998 (as the same may at any time
be amended or modified and in effect, the "CREDIT AGREEMENT") with various Banks
(as defined in the Credit Agreement), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, as administrative agent for the Banks
(in such capacity, the "AGENT");
WHEREAS, certain affiliates and subsidiaries of the Company executed
and delivered the Guaranty dated as of September 25, 1998 (as the same may at
any time be amended or modified and in effect, the "GUARANTY") in favor of the
Agent and the Banks in respect of the Borrowers;
WHEREAS, the undersigned corporations and partnerships (herein
collectively called the "NEW SUBSIDIARIES" and individually called a "NEW
SUBSIDIARY") have become Subsidiaries (as defined in the Credit Agreement) of
the Borrowers;
WHEREAS, the ability of the Borrowers to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the New Subsidiaries will be a part; and
WHEREAS, to induce the Agent and the Banks to enter into the Credit
Agreement, the Company agreed to cause the New Subsidiaries to enter into this
Agreement;
NOW, THEREFORE, in order to fulfill the requirements of the Credit
Agreement, and for other good and valuable consideration, receipt of which is
hereby acknowledged, each of the New Subsidiaries agrees as follows:
1. Unless otherwise specified herein, all capitalized terms used but
not otherwise defined herein have the meanings assigned to such terms in the
Credit Agreement.
2. Each New Subsidiary hereby unconditionally assumes and agrees to
pay, perform and discharge all of the obligations as a Guarantor under the
Guaranty; and each New Subsidiary agrees that it will, for all purposes of the
Guaranty, be deemed to be a Guarantor. From and after the date hereof, all
references in the
<PAGE> 109
Credit Agreement to the Obligors or an Obligor shall be deemed to include
reference to the New Subsidiaries.
3. Each of the New Subsidiaries hereby makes, for the benefit of the
Agent and the Banks, all of the representations and warranties made by a
Guarantor in the Guaranty, which representations and warranties are true and
correct in all material respects as of the date hereof.
4. Anything herein to the contrary notwithstanding, all of the Obligors
shall at all times remain liable under the Credit Agreement and the Guaranty to
pay, perform and discharge all of their obligations thereunder to the same
extent as if this Agreement had not been executed.
5. The obligations of each New Subsidiary hereunder and under the
Guaranty are independent of any obligations of the other Obligors, and a
separate action or actions may be brought and prosecuted against each New
Subsidiary whether or not such action is brought against the other Obligors or
whether the other Obligors are joined in such action or actions.
6. This Agreement is governed by and construed under the internal laws
of the State of New York without regard to principles of conflicts of law.
IN WITNESS WHEREOF, each of the New Subsidiaries has caused this
Agreement to be authorized by its duly authorized officer as of , .
[NEW SUBSIDIARY]
By:
-----------------------------------
Name Printed:
----------------------
Its:
------------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
<PAGE> 110
EXHIBIT F
---------
FORM OF EXTENSION REQUEST
-------------------------
Date: _______________
To: Bank of America National Trust and Savings Association
as Agent for the Banks party to the 364 Day Credit
Agreement dated as of September 25, 1998 among HCR
Manor Care, Inc., Manor Care, Inc., the Banks party
thereto, and Bank of America National Trust and Savings
Association as Administrative Agent for the Banks (as
extended, renewed, amended or restated, the "CREDIT
AGREEMENT") (in such capacity, the "AGENT")
Ladies and Gentlemen:
The undersigned refers to the Credit Agreement, the terms defined
therein being used herein as therein defined, and hereby gives you notice
irrevocably, pursuant to Section 2.14 of the Credit Agreement of the
undersigned's request that the Revolving Termination Date be extended for an
additional 364 days from the [originally scheduled/currently effective]
Revolving Termination Date.
HCR MANOR CARE, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
<PAGE> 111
EXHIBIT G
[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT
---------------------------------------------
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "ASSIGNMENT AND
ACCEPTANCE") dated as of _______________, [199__/200__] is made between
_____________________ (the "ASSIGNOR") and ____________________ (the
"ASSIGNEE").
RECITALS
WHEREAS, the Assignor is party to that certain 364 Day Credit Agreement
dated as of September 25, 1998 (as amended, amended and restated, modified,
supplemented or renewed, the "CREDIT AGREEMENT") among HCR Manor Care, Inc., a
Delaware corporation (the "COMPANY"), Manor Care, Inc., the several financial
institutions from time to time party thereto (including the Assignor, the
"BANKS"), and Bank of America National Trust and Savings Association, as
administrative agent for the Banks (the "AGENT"). Any terms defined in the
Credit Agreement and not defined in this Assignment and Acceptance are used
herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Loans (the "COMMITTED LOANS") to [the Company/Manor Care] in
an aggregate amount not to exceed $___________ (the "COMMITMENT");
WHEREAS, [the Assignor has made Committed Loans in the aggregate
principal amount of $_________ to [the Company/Manor Care] [no Committed Loans
are outstanding under the Credit Agreement]; and
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, in an amount equal to $________ (the "ASSIGNED
AMOUNT") on the terms and subject to the conditions set forth herein and the
Assignee wishes to accept assignment of such rights and to assume such
obligations from the Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
<PAGE> 112
1. ASSIGNMENT AND ACCEPTANCE.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) ____% (the "ASSIGNEE'S PERCENTAGE
SHARE") of (A) the Commitment [and the Committed Loans] of the Assignor and (B)
all related rights, benefits, obligations, liabilities and indemnities of the
Assignor under and in connection with the Credit Agreement and the Loan
Documents.
[If appropriate, add paragraph specifying payment to Assignor
by Assignee of outstanding principal of, accrued interest on, and fees with
respect to, Committed Loans assigned.]
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee 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. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; PROVIDED, HOWEVER, the Assignor shall not relinquish its rights under
Sections 3.1, 3.3 and 9.5 of the Credit Agreement to the extent such rights
relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignee's Commitment will be
$__________.
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date the Assignor's Commitment will be
$__________.
2. PAYMENTS.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available
<PAGE> 113
funds an amount equal to $__________, representing the Assignee's Pro Rata Share
of the principal amount of all Committed Loans.
(b) The [Assignor] [Assignee] further agrees to pay to the
Agent a processing fee in the amount specified in Section 9.8(a) of the Credit
Agreement.
3. REALLOCATION OF PAYMENTS.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment and Committed Loans shall be for the account of
the Assignor. Any interest, fees and other payment accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.
4. INDEPENDENT CREDIT DECISION.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 6.1.1 of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent 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 and legal decisions in taking or not taking
action under the Credit Agreement.
5. EFFECTIVE DATE; NOTICES.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be ______________, [199_/200_]
(the "EFFECTIVE DATE"); PROVIDED that the following conditions precedent have
been satisfied on or
before the Effective Date:
(i) this Assignment and Acceptance shall be
executed and delivered by the Assignor and the Assignee;
(iii) the consent of the Company, the Issuing Bank
and the Agent required for an effective assignment of the
Assigned Amount by the Assignor to the Assignee under Section
<PAGE> 114
10.8 of the Credit Agreement shall have been duly obtained and shall be in full
force and effect as of the Effective date;
(iii) the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Assignment and Acceptance;
(iv) the processing fee referred to in Section
2(b) hereof and in Section 9.8(a) of the Credit Agreement shall have been paid
to the Agent; and
(v) the Assignor shall have assigned and the
Assignee shall have assumed a percentage equal to the Assignee's Percentage
Share of the rights and obligations of the Assignor under the Credit Agreement
(if such agreement exists).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company, the Issuing Bank and the
Agent for acknowledgment by the Agent, a Notice of Assignment substantially in
the form attached hereto as SCHEDULE 1.
[6. AGENT. [INCLUDE ONLY IF ASSIGNOR IS AGENT]
(a) The Assignee hereby appoints and authorizes the Assignor
to take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement.
(b) The Assignee shall assume no duties or obligations held by
the Assignor in its capacity as Agent under the Credit Agreement.]
7. WITHHOLDING TAX.
The Assignee (a) represents and warrants to the Bank, the Agent and the
Company that under applicable law and treaties no tax will be required to be
withheld by the Bank with respect to any payments to be made to the Assignee
hereunder, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
the Company prior to the time that the Agent or Company is required to make any
payment of principal, interest or fees hereunder, duplicate executed originals
of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a
tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and
<PAGE> 115
amendments thereto, duly executed and completed by the Assignee,
and (c) agrees to comply with all applicable U.S. laws and
regulations with regard to such withholding tax exemption.
8. REPRESENTATIONS AND WARRANTIES.
(a) The Assignor represents and warrants that (i) 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 Lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its execution, delivery and performance of this Assignment and Acceptance,
and apart from any agreements or undertaking or filings required by the Credit
Agreement, no further action by, or notice to, or filing with, any Person is
required of it for such execution, delivery or performance; and (iv) this
Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor 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. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of the Company, or the performance or observance by the Company, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder; (ii) no notices to, or consents, authorizations or approvals of, any
Person are required (other
<PAGE> 116
than any already given or obtained) for its due execution, delivery and
performance of this Assignment and Acceptance; and apart from any agreements or
undertakings or filings required by the Credit Agreement, no further action by,
or notice to, or filing with, any Person is required of it for such execution,
delivery or performance; (iii) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligation of the Assignee, enforceable against the Assignee in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors' rights and to general equitable principles; and (iv) it is
an Eligible Assignee.
9. FURTHER ASSURANCES.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Company or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. MISCELLANEOUS.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any
set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
<PAGE> 117
YORK. The Assignor and the Assignee each irrevocably submits to the
non-exclusive jurisdiction of any State or Federal court sitting in New York
over any suit, action or proceeding arising out of or relating to this
Assignment and Acceptance and irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such New York State or
Federal court. Each party to this Assignment and Acceptance hereby irrevocably
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]
<PAGE> 118
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:____________________________
Title:_________________________
By:____________________________
Title:_________________________
Address:
[ASSIGNEE]
By:____________________________
Title:_________________________
By:____________________________
Title:_________________________
Address:
<PAGE> 119
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
-----------------------------------
_______________, 19__
Bank of America National Trust
and Savings Association, as Agent
Health Care Finance #9173
555 South Flower Street, 11th Floor
Los Angeles, CA 90071
HCR Manor Care, Inc.
[address]
Ladies and Gentlemen:
We refer to the 364 Day Credit Agreement dated as of September 25, 1998
(as amended, as amended and restated, modified, supplemented or renewed from
time to time the "CREDIT AGREEMENT") among HCR Manor Care, Inc. (the "COMPANY"),
Manor Care, Inc., the Banks referred to therein and Bank of America National
Trust and Savings Association, as administrative agent for the Banks (the
"AGENT"). Terms defined in the Credit Agreement are used herein as therein
defined.
1. We hereby give you notice of, and request your consent to, the
assignment by ________________ (the "ASSIGNOR") to _______________ (the
"ASSIGNEE") of ___% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor[,] [and] all
outstanding Loans made by the Assignor) pursuant to the Assignment and
Acceptance Agreement attached hereto (the "ASSIGNMENT AND ACCEPTANCE"). Before
giving effect to such assignment the Assignor's Commitment is $___________, the
aggregate amount of its outstanding Loans is $__________.
2. The Assignee agrees that, upon receiving the consent of the Agent,
the Issuing Bank and the Company to such assignment, the Assignee will be bound
by the terms of the Credit Agreement as fully and to the same extent as if the
Assignee were the Bank originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the Assignee:
(A) Notice Address:
<PAGE> 120
Assignee name: ____________________________
Address: ____________________________
____________________________
____________________________
Attention: ________________________________
Telephone: (___) __________________________
Telecopier: (___)__________________________
Telex (Answerback): _______________________
(B) Payment Instructions:
Account No.: ____________________________
At: ____________________________
____________________________
____________________________
Reference: ____________________________
Attention: ____________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:___________________________
Title:________________________
By:___________________________
Title:________________________
[NAME OF ASSIGNEE]
By:___________________________
<PAGE> 121
Title:________________________
By:___________________________
Title:________________________
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
HCR MANOR CARE, INC.
By:___________________________
Title:________________________
By:___________________________
Title:________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:___________________________
Title:________________________
<PAGE> 122
EXHIBIT H
GUARANTY
--------
THIS GUARANTY (this "GUARANTY") dated as of ____________, 1998 is
executed by the undersigned (collectively hereinafter referred to as the
"GUARANTORS" and individually as a "GUARANTOR") in favor of Bank of America
National Trust and Savings Association, as Agent (as hereinafter defined in the
first recital below).
RECITALS
WHEREAS, HCR Manor Care, Inc. (the "COMPANY"), Manor Care, Inc. ("MANOR
CARE"), certain lenders (the "BANKS"), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, individually and as administrative agent
for the Banks (in such capacity, the "AGENT"), have entered into that certain
364 Day Credit Agreement dated as of September 25, 1998 (as amended or modified
and in effect, hereinafter referred to as the "CREDIT AGREEMENT") pursuant to
which the Agent and the Banks may from time to time extend credit to the
Borrowers (each capitalized term used but not defined herein shall have the
meaning assigned thereto in the Credit Agreement);
WHEREAS, as partial consideration for the Banks and the Agent entering
into the Credit Agreement, each of the undersigned agreed to execute and deliver
this Guaranty to the Agent for the benefit of the Agent and the Banks; and
WHEREAS, the ability of the Borrowers to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the Guarantors are a part,
NOW, THEREFORE, in order to induce the Banks and the Agent to enter
into the Credit Agreement, each Guarantor hereby covenants as follows:
SECTION 20. GUARANTY.
a. Subject to SECTION 1(b), each Guarantor hereby jointly and severally
and unconditionally guarantees the performance and the full and prompt payment
when due, whether by acceleration or otherwise, and at all times thereafter, of
all Obligations of Manor Care under the Credit Agreement and the Notes,
including all such amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. Section 362(a), and the operation of Sections 502(b) and 506(b) of the
United States Bankruptcy Code, 11 U.S.C
<PAGE> 123
ss.502(b) and ss.506(b)(all such Obligations being hereinafter collectively
called the "GUARANTEED LIABILITIES").
b. The liability of each of the Guarantors under this Guaranty shall
not exceed the maximum amount of liability that such Guarantor can hereby incur
without rendering this Guaranty void or voidable under Applicable Law relating
to fraudulent conveyance or fraudulent transfers, and not for any greater
amount. For purposes of determining such liability of each of the Guarantors,
due consideration shall be given to the direct and indirect benefits received by
each of the Guarantors as a result of the Credit Extension under the Credit
Agreement.
c. Subject to clause (b) above, the liability under the Guaranty of
each Guarantor shall not be less than the outstanding amount of Loans which have
been advanced to such Guarantor as reflected from time to time in the statements
required by Section 6.1.1(g) of the Credit Agreement.
d. This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect as to each
other Guarantor notwithstanding the dissolution of any Guarantor or that at any
time or from time to time all Guaranteed Liabilities may have been paid in full
so long as any Commitment under the Credit Agreement remains outstanding.
SECTION 21. DISGORGED PAYMENTS. Each Guarantor further agrees that, if at
any time all or any part of any payment theretofore applied by the Agent or the
Banks to any of the Guaranteed Liabilities is or must be rescinded or returned
by the Agent or the Banks for any reason whatsoever (including the insolvency,
bankruptcy or reorganization of Manor Care or any Guarantor), such Guaranteed
Liabilities shall, for the purposes of this Guaranty, to the extent that such
payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by the Agent or the Banks, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Guaranteed Liabilities, all as though such application by the Agent or
the Banks had not been made.
SECTION 22. COVENANTS. Each Guarantor agrees with the Agent and each
Bank that, until all Commitments have been terminated and all Obligations have
been paid and performed in full, each Guarantor will perform all Obligations
applicable to such Guarantor set forth in Article VI of the Credit Agreement.
SECTION 23. CERTAIN PERMITTED ACTIONS. To the extent permitted by law or
the Loan Documents, each of the Agent and any Bank may, from time to time,
whether before or after any discontinuance of this Guaranty, at its sole
discretion and
<PAGE> 124
without notice to any Guarantor, take any or all of the following actions
without impairing its rights arising hereunder: (a) retain or obtain a lien upon
or a security interest in any property to secure any of the Guaranteed
Liabilities, (b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to such Guarantors' obligations, with respect
to any of the Guaranteed Liabilities, (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Guaranteed Liabilities, or release or compromise any obligation of any
Obligor under any Loan Document or any obligation of any nature of any other
obligor with respect to any of the Guaranteed Liabilities, (d) release or fail
to perfect its lien upon or security interest in, or impair, surrender, release
or permit any substitution or exchange for, all or any part of any property
securing any of the Guaranteed Liabilities, or extend or renew for one or more
periods (whether or not longer than the original period) or release, compromise,
alter or exchange any obligations of any nature of any obligor with respect to
any such property, and (e) resort to any Guarantor for payment of any of the
Guaranteed Liabilities, whether or not the Agent or the Banks (i) shall have
resorted to any property securing any of the Guaranteed Liabilities or (ii)
shall have proceeded against any other obligor primarily or secondarily
obligated with respect to any of the Guaranteed Liabilities (all of the actions
referred to in preceding CLAUSES (i) and (ii) being hereby expressly waived by
each Guarantor to the fullest extent permitted by Applicable Law).
SECTION 24. APPLICATION OF FUNDS. The Agent may apply any payments
hereunder to the payment of expenses which the Agent incurs in connection with
the enforcement of this Guaranty, including reasonable attorneys' fees and legal
expenses. The Agent may apply any balance of such payments hereunder toward the
payment of such of the Guaranteed Liabilities, and in such order of application,
as the Agent may, in its sole discretion, elect from time to time.
SECTION 25. LIMIT ON SUBROGATION; WAIVERS.
a. Except as provided in clause (b) below, no payment made by or for
the account of any Guarantor pursuant to this Guaranty shall entitle any
Guarantor by subrogation or otherwise to any payment by Manor Care or from or
out of any property of Manor Care, and no Guarantor shall exercise any right or
remedy against Manor Care or any property of Manor Care by reason of any
performance by such Guarantor of this Guaranty, all of which rights and remedies
are hereby waived by such Guarantor to the fullest extent permitted by
Applicable Law.
<PAGE> 125
b. In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, INTER SE, that in the event any payment or
distribution is made by any Guarantor (a "FUNDING GUARANTOR") under this
Guaranty, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets (as
hereinafter defined) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Guaranteed Liabilities or any other Guarantor's obligations with respect to
this Guaranty. "ADJUSTED NET ASSETS" of any Guarantor at any date means the
lesser of (a) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities (including, without
limitation, contingent liabilities, but excluding liabilities of such Guarantor
under this Guaranty) of such Guarantor at such date, and (b) the amount by which
the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all contingent liabilities, but
excluding liabilities of such Guarantor under this Guaranty) as they become
absolute and matured.
c. To the extent permitted by Applicable Law, each Guarantor hereby
expressly waives (i) notice of the acceptance by the Agent or the Banks of this
Guaranty, (ii) notice of the existence or creation or non-payment of all or any
of the Guaranteed Liabilities, (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever, (iv) all diligence in collection or
protection of or realization upon the Guaranteed Liabilities or any security for
or guaranty of any of the foregoing and (v) all other rights and defenses
(including, without limitation, all suretyship rights and defenses) the
assertion of which would in any way diminish the liability of such Guarantor
hereunder.
SECTION 26. TRANSFER OF OBLIGATIONS. Subject to Section 9.8 of the
Credit Agreement, the Agent and the Banks may, from time to time, without notice
to any Guarantor, assign or transfer, or cause to be assigned or transferred,
any or all of the Guaranteed Liabilities or any interest therein and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Guaranteed Liabilities shall be and remain Guaranteed
Liabilities for the purposes of this Guaranty, and each and every immediate and
successive assignee or transferee of any of the Guaranteed Liabilities or of any
interest therein shall, to the extent of the interest of such assignee or
transferee in the Guaranteed Liabilities, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the Agent or
a Bank.
<PAGE> 126
SECTION 27. NO CONDITIONS TO EFFECTIVENESS. No claim or defense by any
Person as to the invalidity or unenforceability of any obligation under the Loan
Documents shall affect or impair the obligations of the Guarantors under this
Guaranty. The obligations of the Guarantors under this Guaranty shall be
absolute and unconditional irrespective of any circumstance whatsoever which
might constitute a legal or equitable discharge or defense of Manor Care. Each
Guarantor hereby acknowledges that there are no conditions to the effectiveness
of this Guaranty.
SECTION 28. WARRANTIES. Each Guarantor hereby warrants and represents
to the Agent and the Banks that (i) it now has and expects to continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of Manor Care, and the Agent and the Banks shall not have
any duty or responsibility to provide such Guarantor with any credit or other
information concerning the affairs, financial condition or business of Manor
Care which may come into such Person's possession; (ii) the execution, delivery
and performance of this Guaranty by such Guarantor are within its corporate or
partnership powers and do not (a) contravene any law, rule or regulation
presently in effect which affects or binds it or any of its properties, or (b)
conflict with or result in a material breach of any guaranty or loan or credit
agreement or any other agreement or instrument to which it is a party in respect
of indebtedness for money borrowed; and (iii) any and all information heretofore
or hereafter provided by such Guarantor to the Agent and the Banks hereunder and
certified by a Responsible Officer of such Guarantor is and shall be true and
accurate in all material respects as of the date furnished.
SECTION 29. MODIFICATION OF GUARANTY. This Guaranty shall not be
amended, supplemented or otherwise modified without the written consent of the
Agent and the Majority Banks and, as to any Guarantor, such Guarantor. Except as
otherwise provided in the Credit Agreement, this Guaranty shall not be released
or terminated as to any Guarantor without the written consent of all Banks.
SECTION 30. NOTICES.
a. All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, PROVIDED that any matter transmitted by the Guarantors by
facsimile (i) shall be immediately confirmed by a telephone call to the
recipient at the number specified on SCHEDULE 9.2 of the Credit Agreement, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number, in the case of
the Agent and the Banks, specified for notices on SCHEDULE 9.2 of the Credit
Agreement and
<PAGE> 127
in the case of the Guarantors, specified on the signature pages hereof; or, as
directed to the Guarantors or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Guarantors and the Agent;
b. All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
c. Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Guarantors. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Guarantors to give such notice and the Agent and the Banks shall not have any
liability to the Guarantors or other Person on account of any action taken or
not taken by the Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligations of the Guarantors under this Guaranty shall
not be affected in any way or to any extent by any failure by the Agent and the
Banks to receive written confirmation of any telephonic or facsimile notice or
the receipt by the Agent and the Banks of a confirmation which is at variance
with the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
SECTION 31. GOVERNING LAW AND JURISDICTION. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE
BANKS AND THE GUARANTORS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY,
EACH OF THE GUARANTORS, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
OF THE GUARANTORS, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTORS, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR
<PAGE> 128
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 32. WAIVER OF JURY TRIAL. THE GUARANTORS, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTORS, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
SECTION 33. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 34. LOAN DOCUMENT. This Guaranty is a Loan Document.
<PAGE> 129
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
[Manor Care Obligors]
By:____________________________________
Name Printed: _________________________
Its:___________________________________
Address: One Seagate
Toledo, Ohio 43604-2616
Fax No. 419-252-5571
Telephone: 419-252-5500
<PAGE> 130
EXHIBIT 1
to the Guaranty
GUARANTY ASSUMPTION AGREEMENT
WHEREAS, HCR Manor Care, Inc., a Delaware corporation (the "COMPANY")
and Manor Care, Inc., a Delaware corporation ("MANOR CARE") entered into the 364
Day Credit Agreement dated as of September 25, 1998 (as the same may at any time
be amended or modified and in effect, the "CREDIT AGREEMENT") with various Banks
(as defined in the Credit Agreement), The Chase Manhattan Bank, as syndication
agent, TD Securities (USA) Inc., as documentation agent and Bank of America
National Trust and Savings Association, as administrative agent for the Banks
(in such capacity, the "AGENT");
WHEREAS, certain affiliates and subsidiaries of Manor Care executed and
delivered the Guaranty dated as of ____________, 1998 (as the same may at any
time be amended or modified and in effect, the "GUARANTY") in favor of the Agent
and the Banks in respect of Manor Care;
WHEREAS, the undersigned corporations and partnerships (herein
collectively called the "NEW SUBSIDIARIES" and individually called a "NEW
SUBSIDIARY") have become Subsidiaries (as defined in the Credit Agreement) of
Manor Care;
WHEREAS, the ability of Manor Care to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the New Subsidiaries will be a part; and
WHEREAS, to induce the Agent and the Banks to enter into the Credit
Agreement, Manor Care agreed to cause the New Subsidiaries to enter into this
Agreement;
NOW, THEREFORE, in order to fulfill the requirements of the Credit
Agreement, and for other good and valuable consideration, receipt of which is
hereby acknowledged, each of the New Subsidiaries agrees as follows:
1. Unless otherwise specified herein, all capitalized terms used but
not otherwise defined herein have the meanings assigned to such terms in the
Credit Agreement.
2. Each New Subsidiary hereby unconditionally assumes and agrees to
pay, perform and discharge all of the obligations as a Guarantor under the
Guaranty; and each New Subsidiary agrees that it will, for all purposes of the
Guaranty, be deemed to be a Guarantor. From and after the date hereof, all
references in the
<PAGE> 131
Credit Agreement to the Obligors or an Obligor shall be deemed to include
reference to the New Subsidiaries.
3. Each of the New Subsidiaries hereby makes, for the benefit of the
Agent and the Banks, all of the representations and warranties made by a
Guarantor in the Guaranty, which representations and warranties are true and
correct in all material respects as of the date hereof.
4. Anything herein to the contrary notwithstanding, all of the Obligors
shall at all times remain liable under the Credit Agreement and the Guaranty to
pay, perform and discharge all of their obligations thereunder to the same
extent as if this Agreement had not been executed.
5. The obligations of each New Subsidiary hereunder and under the
Guaranty are independent of any obligations of the other Obligors, and a
separate action or actions may be brought and prosecuted against each New
Subsidiary whether or not such action is brought against the other Obligors or
whether the other Obligors are joined in such action or actions.
6. This Agreement is governed by and construed under the internal laws
of the State of New York without regard to principles of conflicts of law.
IN WITNESS WHEREOF, each of the New Subsidiaries has caused this
Agreement to be authorized by its duly authorized officer as of , .
[NEW SUBSIDIARY]
By:
------------------------------------
Name Printed:
-----------------------
Its:
--------------------------------
Address:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
<PAGE> 132
EXHIBIT I
GUARANTY
--------
THIS GUARANTY (this "GUARANTY") dated as of September 25, 1998 is
executed by the undersigned (the "GUARANTOR") in favor of Bank of America
National Trust and Savings Association, as Agent (as hereinafter defined in the
first recital below).
RECITALS
--------
WHEREAS, the Guarantor, Manor Care, Inc. ("MANOR CARE"), certain
lenders (the "BANKS"), The Chase Manhattan Bank, as syndication agent, TD
Securities (USA) Inc., as documentation agent and Bank of America National Trust
and Savings Association, individually and as administrative agent for the Banks
(in such capacity, the "AGENT"), have entered into that certain 364 Day Credit
Agreement dated as of even date herewith (as amended or modified and in effect,
hereinafter referred to as the "CREDIT AGREEMENT") pursuant to which the Agent
and the Banks may from time to time extend credit to the Borrowers (each
capitalized term used but not defined herein shall have the meaning assigned
thereto in the Credit Agreement);
WHEREAS, as partial consideration for the Banks and the Agent entering
into the Credit Agreement, the undersigned agrees to execute and deliver this
Guaranty to the Agent for the benefit of the Agent and the Banks; and
WHEREAS, the ability of Manor Care to receive Credit Extensions from
time to time under the Credit Agreement is expected to be of benefit to the
consolidated group of which the Guarantor is a part,
NOW, THEREFORE, in order to induce the Banks and the Agent to enter
into the Credit Agreement, the Guarantor hereby covenants as follows:
SECTION 35. GUARANTY.
a. Subject to SECTION 1(b), the Guarantor hereby unconditionally
guarantees the performance and the full and prompt payment when due, whether by
acceleration or otherwise, and at all times thereafter, of all Obligations of
Manor Care, including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b)
and 506(b) of the United States Bankruptcy Code, 11 U.S.C Section 502(b) and
Section 506(b)(all such Obligations being hereinafter collectively called the
"GUARANTEED LIABILITIES").
<PAGE> 133
b. The liability of the Guarantor under this Guaranty shall not exceed
the maximum amount of liability that such Guarantor can hereby incur without
rendering this Guaranty void or voidable under Applicable Law relating to
fraudulent conveyance or fraudulent transfers, and not for any greater amount.
For purposes of determining such liability of the Guarantor, due consideration
shall be given to the direct and indirect benefits received by the Guarantor as
a result of the Credit Extensions under the Credit Agreement.
c. This Guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect as to the
Guarantor notwithstanding the dissolution of any other guarantor or that at any
time or from time to time all Guaranteed Liabilities may have been paid in full
so long as any Commitment under the Credit Agreement remains outstanding.
SECTION 36. DISGORGED PAYMENTS. The Guarantor further agrees that, if at
any time all or any part of any payment theretofore applied by the Agent or the
Banks to any of the Guaranteed Liabilities is or must be rescinded or returned
by the Agent or the Banks for any reason whatsoever (including the insolvency,
bankruptcy or reorganization of Manor Care or the Guarantor), such Guaranteed
Liabilities shall, for the purposes of this Guaranty, to the extent that such
payment is or must be rescinded or returned, be deemed to have continued in
existence, notwithstanding such application by the Agent or the Banks, and this
Guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Guaranteed Liabilities, all as though such application by the Agent or
the Banks had not been made.
SECTION 37. Intentionally omitted]
SECTION 38. CERTAIN PERMITTED ACTIONS. To the extent permitted by law or
the Loan Documents, each of the Agent and any Bank may, from time to time,
whether before or after any discontinuance of this Guaranty, at its sole
discretion and without notice to the Guarantor, take any or all of the following
actions without impairing its rights arising hereunder: (a) retain or obtain a
lien upon or a security interest in any property to secure any of the Guaranteed
Liabilities, (b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to such Guarantor's obligations, with respect
to any of the Guaranteed Liabilities, (c) extend or renew for one or more
periods (whether or not longer than the original period), alter or exchange any
of the Guaranteed Liabilities, or release or compromise any obligation of any
Obligor under any Loan Document or any obligation of any nature of any other
obligor with respect to any of the Guaranteed Liabilities, (d)
<PAGE> 134
release or fail to perfect its lien upon or security interest in, or impair,
surrender, release or permit any substitution or exchange for, all or any part
of any property securing any of the Guaranteed Liabilities, or extend or renew
for one or more periods (whether or not longer than the original period) or
release, compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property, and (e) resort to the Guarantor for
payment of any of the Guaranteed Liabilities, whether or not the Agent or the
Banks (i) shall have resorted to any property securing any of the Guaranteed
Liabilities or (ii) shall have proceeded against any other obligor primarily or
secondarily obligated with respect to any of the Guaranteed Liabilities (all of
the actions referred to in preceding CLAUSES (i) and (ii) being hereby expressly
waived by the Guarantor to the fullest extent permitted by Applicable Law).
SECTION 39. APPLICATION OF FUNDS. The Agent may apply any payments
hereunder to the payment of expenses which the Agent incurs in connection with
the enforcement of this Guaranty, including reasonable attorneys' fees and legal
expenses. The Agent may apply any balance of such payments hereunder toward the
payment of such of the Guaranteed Liabilities, and in such order of application,
as the Agent may, in its sole discretion, elect from time to time.
SECTION 40. LIMIT ON SUBROGATION; WAIVERS.
a. No payment made by or for the account of the Guarantor pursuant to
this Guaranty shall entitle the Guarantor by subrogation or otherwise to any
payment by Manor Care or from or out of any property of Manor Care, and the
Guarantor shall not exercise any right or remedy against any Borrower or any
property of Manor Care by reason of any performance by the Guarantor of this
Guaranty, all of which rights and remedies are hereby waived by the Guarantor to
the fullest extent permitted by Applicable Law.
b. To the extent permitted by Applicable Law, the Guarantor hereby
expressly waives (i) notice of the acceptance by the Agent or the Banks of this
Guaranty, (ii) notice of the existence or creation or non-payment of all or any
of the Guaranteed Liabilities, (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever, (iv) all diligence in collection or
protection of or realization upon the Guaranteed Liabilities or any security for
or guaranty of any of the foregoing and (v) all other rights and defenses
(including, without limitation, all suretyship rights and defenses) the
assertion of which would in any way diminish the liability of the Guarantor
hereunder.
<PAGE> 135
SECTION 41. TRANSFER OF OBLIGATIONS. Subject to Section 4.8 of the
Credit Agreement, the Agent and the Banks may, from time to time, without notice
to the Guarantor, assign or transfer, or cause to be assigned or transferred,
any or all of the Guaranteed Liabilities or any interest therein and,
notwithstanding any such assignment or transfer or any subsequent assignment or
transfer thereof, such Guaranteed Liabilities shall be and remain Guaranteed
Liabilities for the purposes of this Guaranty, and each and every immediate and
successive assignee or transferee of any of the Guaranteed Liabilities or of any
interest therein shall, to the extent of the interest of such assignee or
transferee in the Guaranteed Liabilities, be entitled to the benefits of this
Guaranty to the same extent as if such assignee or transferee were the Agent or
a Bank.
SECTION 42. NO CONDITIONS TO EFFECTIVENESS. No claim or defense by any
Person as to the invalidity or unenforceability of any obligation under the Loan
Documents shall affect or impair the obligations of the Guarantor under this
Guaranty. The obligations of the Guarantor under this Guaranty shall be absolute
and unconditional irrespective of any circumstance whatsoever which might
constitute a legal or equitable discharge or defense of Manor Care. The
Guarantor hereby acknowledges that there are no conditions to the effectiveness
of this Guaranty.
SECTION 43. WARRANTIES. The Guarantor hereby warrants and represents to
the Agent and the Banks that (i) it now has and expects to continue to have
independent means of obtaining information concerning the affairs, financial
condition and business of Manor Care, and the Agent and the Banks shall not have
any duty or responsibility to provide the Guarantor with any credit or other
information concerning the affairs, financial condition or business of Manor
Care which may come into such Person's possession; (ii) the execution, delivery
and performance of this Guaranty by the Guarantor are within its corporate or
partnership powers and do not (a) contravene any law, rule or regulation
presently in effect which affects or binds it or any of its properties, or (b)
conflict with or result in a material breach of any guaranty or loan or credit
agreement or any other agreement or instrument to which it is a party in respect
of indebtedness for money borrowed; and (iii) any and all information heretofore
or hereafter provided by the Guarantor to the Agent and the Banks hereunder and
certified by a Responsible Officer of the Guarantor is and shall be true and
accurate in all material respects as of the date furnished.
SECTION 44. MODIFICATION OF GUARANTY. This Guaranty shall
not be amended, supplemented or otherwise modified without the
written consent of the Agent and the Majority Banks and the
Guarantor. Except as otherwise provided in the Credit Agreement,
<PAGE> 136
this Guaranty shall not be released or terminated as to the Guarantor without
the written consent of all Banks.
SECTION 45. NOTICES.
a. All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, PROVIDED that any matter transmitted by the Guarantor by facsimile
(i) shall be immediately confirmed by a telephone call to the recipient at the
number specified on SCHEDULE 9.2 of the Credit Agreement, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered, to the address or facsimile number, in the case of the Agent and
the Banks, specified for notices on SCHEDULE 9.2 of the Credit Agreement and in
the case of the Guarantor, specified on the signature pages hereof; or, as
directed to the Guarantor or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Guarantor and the Agent;
b. All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
c. Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Guarantor. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Guarantor to give such notice and the Agent and the Banks shall not have any
liability to the Guarantor or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligations of the Guarantor under this Guaranty shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
SECTION 46. GOVERNING LAW AND JURISDICTION. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS; PROVIDED THAT THE AGENT AND THE
BANKS AND THE GUARANTOR SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
<PAGE> 137
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY,
THE GUARANTOR, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE GUARANTOR,
THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY OR ANY DOCUMENT
RELATED HERETO. THE GUARANTOR, THE AGENT AND THE BANKS EACH WAIVE PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 47. WAIVER OF JURY TRIAL. THE GUARANTOR, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE GUARANTOR, THE BANKS AND THE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY
OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
SECTION 48. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 49. LOAN DOCUMENT. This Guaranty is a Loan Document.
<PAGE> 138
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be
executed by its officer thereunder duly authorized as of the day and year first
above written.
HCR MANOR CARE, INC.
By:____________________________________
Name Printed: _________________________
Its:___________________________________
Address: One Seagate
Toledo, Ohio 43604-2616
Fax No. 419-252-5571
Telephone: 419-252-5500
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 100,643
<SECURITIES> 0
<RECEIVABLES> 358,289
<ALLOWANCES> 55,692
<INVENTORY> 0
<CURRENT-ASSETS> 490,812
<PP&E> 2,286,963
<DEPRECIATION> 564,948
<TOTAL-ASSETS> 2,771,278
<CURRENT-LIABILITIES> 528,881
<BONDS> 690,249
0
0
<COMMON> 1,108
<OTHER-SE> 1,152,786
<TOTAL-LIABILITY-AND-EQUITY> 2,771,278
<SALES> 0
<TOTAL-REVENUES> 1,723,077
<CGS> 0
<TOTAL-COSTS> 1,329,918
<OTHER-EXPENSES> 93,610
<LOSS-PROVISION> 24,426
<INTEREST-EXPENSE> 34,099
<INCOME-PRETAX> 48,028
<INCOME-TAX> 52,242
<INCOME-CONTINUING> (4,214)
<DISCONTINUED> 8,044
<EXTRAORDINARY> (19,036)
<CHANGES> 0
<NET-INCOME> (15,206)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998
<CASH> 37,525 62,420
<SECURITIES> 0 0
<RECEIVABLES> 358,236 350,704
<ALLOWANCES> 54,375 50,078
<INVENTORY> 0 0
<CURRENT-ASSETS> 429,285 445,093
<PP&E> 2,188,384 2,253,663
<DEPRECIATION> 525,868 547,470
<TOTAL-ASSETS> 2,642,142 2,726,024
<CURRENT-LIABILITIES> 334,482 306,748
<BONDS> 747,895 821,991
0 0
0 0
<COMMON> 7,182 7,206
<OTHER-SE> 1,200,491 1,232,125
<TOTAL-LIABILITY-AND-EQUITY> 2,642,142 2,726,024
<SALES> 0 0
<TOTAL-REVENUES> 577,221 1,145,885
<CGS> 0 0
<TOTAL-COSTS> 446,367 890,296
<OTHER-EXPENSES> 30,180 60,651
<LOSS-PROVISION> 10,028 17,330
<INTEREST-EXPENSE> 10,682 22,148
<INCOME-PRETAX> 64,894 112,856
<INCOME-TAX> 21,966 37,809
<INCOME-CONTINUING> 42,928 75,047
<DISCONTINUED> 4,370 7,891
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 47,298 82,938
<EPS-PRIMARY> 0.44 0.77
<EPS-DILUTED> 0.43 0.75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 52,319 30,822 47,943 47,933
<SECURITIES> 0 0 0 0
<RECEIVABLES> 281,472 315,083 346,980 361,387
<ALLOWANCES> 39,097 50,720 45,870 52,590
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 389,806 375,048 577,284 462,269
<PP&E> 1,960,826 2,020,596 2,071,925 2,120,727
<DEPRECIATION> 446,311 469,219 493,599 515,814
<TOTAL-ASSETS> 2,595,927 2,541,548 2,646,665 2,584,905
<CURRENT-LIABILITIES> 356,593 321,405 329,378 300,023
<BONDS> 805,338 753,967 812,191 751,281
0 0 0 0
0 0 0 0
<COMMON> 7,166 7,171 7,190 7,199
<OTHER-SE> 1,058,301 1,096,452 1,132,655 1,155,830
<TOTAL-LIABILITY-AND-EQUITY> 2,595,927 2,541,548 2,646,665 2,584,905
<SALES> 0 0 0 0
<TOTAL-REVENUES> 546,543 1,105,317 1,656,994 2,228,534
<CGS> 0 0 0 0
<TOTAL-COSTS> 429,958 865,962 1,311,625 1,760,923
<OTHER-EXPENSES> 26,353 54,424 82,879 112,723
<LOSS-PROVISION> 5,618 12,816 22,116 34,745
<INTEREST-EXPENSE> 14,424 29,422 43,420 56,805
<INCOME-PRETAX> 58,554 120,170 175,359 240,355
<INCOME-TAX> 21,350 41,762 60,957 85,064
<INCOME-CONTINUING> 37,204 78,408 114,402 155,291
<DISCONTINUED> 40,512 35,948 37,965 41,209
<EXTRAORDINARY> 0 0 0 (3,216)
<CHANGES> 0 0 0 (3,173)
<NET-INCOME> 77,716 114,356 152,367 190,111
<EPS-PRIMARY> 0.72 1.06 1.41 1.76
<EPS-DILUTED> 0.70 1.03 1.37 1.71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 52,816
<SECURITIES> 0
<RECEIVABLES> 256,567
<ALLOWANCES> 39,136
<INVENTORY> 0
<CURRENT-ASSETS> 377,016
<PP&E> 1,936,058
<DEPRECIATION> 457,429
<TOTAL-ASSETS> 2,382,038
<CURRENT-LIABILITIES> 343,987
<BONDS> 731,346
0
0
<COMMON> 7,086
<OTHER-SE> 987,604
<TOTAL-LIABILITY-AND-EQUITY> 2,382,038
<SALES> 0
<TOTAL-REVENUES> 2,022,710
<CGS> 0
<TOTAL-COSTS> 1,598,826
<OTHER-EXPENSES> 99,165
<LOSS-PROVISION> 21,834
<INTEREST-EXPENSE> 47,799
<INCOME-PRETAX> 182,816
<INCOME-TAX> 64,177
<INCOME-CONTINUING> 118,639
<DISCONTINUED> 25,626
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144,265
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.29
</TABLE>
