<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
LTC HEALTHCARE, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
50217R 10 4
- --------------------------------------------------------------------------------
(CUSIP Number)
Pamela J. Privett, Esq.
Senior Vice President, General Counsel and Secretary
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
(805) 981-8655
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 21, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box:
(Continued on the following page)
Page 1 of 11 Pages
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SCHEDULE 13D
CUSIP No. 50217R 10 4 Page 2 of 11
1 NAME OF REPORTING PERSON
LTC PROPERTIES, INC.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 299,900 shares
OWNED BY EACH --------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON WITH
0
--------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
299,900 shares
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
299,900 shares
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
<PAGE>
Page 3 of 11
ITEM 1. SECURITY AND ISSUER.
This statement relates to shares of common stock, $.01 par value per
share (the "Common Stock"), of LTC Healthcare, Inc., a Nevada corporation (the
"Company"). The principal executive offices of the Company are located at 300
Esplanade Drive, Suite 1860, Oxnard, California 93030.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is being filed by LTC Properties, Inc., a Maryland
corporation ("Properties").
(b) The address of Properties' principal offices is 300 Esplanade
Drive, Suite 1860, Oxnard, California 93030. The names, business addresses and
principal businesses of each of the directors and executive officers of
Properties are set forth on Schedule I hereto and incorporated by reference
herein.
(c) The current principal business of Properties, a self-administered
real estate investment trust, is investing primarily in long-term care and other
health care-related facilities through mortgage loans, facility lease
transactions and other investments.
(d) During the last five years, neither Properties nor, to the best
of its knowledge, any of the executive officers or directors of Properties, has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, neither Properties nor, to the best
of its knowledge, any of the executive officers or directors of Properties, has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and, as a result of such proceeding, was or is subject to
a judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
(f) To the best knowledge of Properties, each of the executive
officers and directors of Properties is a United States citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Properties acquired the 10,000 shares of Common Stock to which this
report relates for an aggregate consideration of $20,000 (excluding brokerage
commissions), and Properties used its working capital to make such investment.
As of October 31, 1998, the aggregate amount of funds paid in cash by Properties
in connection with the acquisition of an aggregate total of 299,900 shares of
the Common Stock of the Company was $644,056 (excluding brokerage commissions).
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the acquisition of the Common Stock is for investment
purposes only, and the acquisitions of the Common Stock were made in the
ordinary course of business and were not made for the purpose of acquiring
control of the Company.
Properties intends to review its investment in the Company from time
to time and, depending upon the price and availability of the Common Stock,
subsequent developments affecting the
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Page 4 of 11
Company, the Company's business and prospects, other investment and business
opportunities available to Properties, general stock market and economic
conditions, tax considerations and other factors deemed relevant, may decide to
increase or decrease the size of its investment in the Company; PROVIDED
HOWEVER, that due to limitations resulting from Properties' status as a real
estate investment trust, Properties expects that its investment in the Company
will not exceed 10% of the Company's voting Common Stock.
Except as described herein, Properties has no present plan or proposal
which relates to, or could result in, any of the events referred to in
paragraphs (a) through (j), inclusive, of Item 4 of Schedule 13D. However,
Properties will continue to review the business of the Company and, depending
upon one or more of the factors referred to above, may in the future propose
that the Company take one or more of such actions.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of the date hereof, Properties beneficially owns 299,900
shares of the Company's Common Stock, representing approximately 9.0% of the
Company's outstanding Common Stock. In addition, the executive officers and
directors of Properties beneficially own shares of the Company's Common Stock.
See Schedule II hereto and incorporated by reference herein.
(b) Properties has the sole power to vote or to direct the vote, and
to dispose or to direct the disposition of 299,900 shares of Common Stock.
Properties does not share the power to vote or direct the vote, and to dispose
or direct the disposition of the 299,900 shares of Common Stock with any other
individual or entity. To the best knowledge of Properties, each of the
executive officers and directors of Properties that beneficially own the shares
of Common Stock listed on Schedule II hereto has the sole power to vote or to
direct the vote, and to dispose or to direct the disposition of such shares of
Common Stock and does not share the power to vote or direct the vote, and to
dispose or direct the disposition of such shares of Common Stock with any other
individual or entity.
(c) See Schedule III hereto and incorporated by reference herein for
transactions effected by Properties and the executive officers and directors of
Properties who beneficially own shares of the Company's Common Stock.
(d) To the best knowledge of Properties, no other person has the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the shares of Common Stock owned by Properties.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
On September 30, 1998, Properties consummated a spin-off of the
Company through the distribution to the holders of record of Properties' common
stock on September 15, 1998 (the "Record Date") of all of the Common Stock of
the Company held by Properties (the "Distribution"), pursuant to a Distribution
Agreement dated as of September 30, 1998 between Properties and the Company (the
"Distribution Agreement"). Each holder of Properties common stock received one
share of Company Common Stock for every ten shares of Properties common stock
owned on the Record Date. No consideration was paid by the holders of
Properties common stock in exchange for the Company
<PAGE>
Page 5 of 11
Common Stock. In connection with the Distribution, and in addition to the
Distribution Agreement, Properties and the Company entered into an
Administrative Services Agreement, Intercompany Agreement and Tax Sharing
Agreement.
In addition, Properties has provided the Company with a $20 million
unsecured line of credit bearing interest at 10% and maturing in 2008. The four
executive officers of Properties are also executive officers of the Company.
Two of such executive officers, Andre C. Dimitriadis and James J. Pieczynski,
are also directors of each of Properties and the Company.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Distribution Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
Exhibit 2. Administrative Services Agreement, dated as of September
30, 1998, by and between LTC Properties, Inc. and LTC
Healthcare, Inc.
Exhibit 3. Intercompany Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
Exhibit 4. Tax Sharing Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
Exhibit 5. Amended and Restated Promissory Note, dated as of May 19,
1998, between LTC Healthcare, Inc. and LTC Properties, Inc.
<PAGE>
Page 6 of 11
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: November 2, 1998 LTC PROPERTIES, INC.
By: /s/ Pamela J. Privett
----------------------------
Name: Pamela J. Privett
Title: Senior Vice President,
General Counsel
and Secretary
<PAGE>
Page 7 of 11
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
LTC PROPERTIES, INC.
The name, business address, present principal occupation or
employment, and the name, principal business and address of any corporation or
other organization in which such employment is conducted, of each of the
directors and executive officers of LTC Properties, Inc. is set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, IF OTHER THAN
AS EXECUTIVE OFFICER OF LTC
NAME AND BUSINESS ADDRESS POSITION WITH LTC PROPERTIES, INC. PROPERTIES, INC.
- ---------------------------------- ------------------------------------ ------------------------------------
<S> <C> <C>
Andre C. Dimitriadis Chairman of the Board and Chief
300 Esplanade Drive, Suite 1860 Executive Officer
Oxnard, CA 93030
James J. Pieczynski President, Chief Financial Officer
300 Esplanade Drive, Suite 1860 and Director
Oxnard, CA 93030i
Christopher T. Ishikawa Senior Vice President and Chief
300 Esplanade Drive, Suite 1860 Investment Officer
Oxnard, CA 93030
Pamela J. Privett Senior Vice President, General
300 Esplanade Drive, Suite 1860 Counsel and Secretary
Oxnard, CA 93030
Edmund C. King Director General Partner of Trouver Capital
4153 North Dover Lane Partners
Provo, UT 84604
Wendy L. Simpson Director Executive Vice President and Chief
1125 17th Street, Suite 2100 Financial Officer of Coram
Denver, CO 80202 Healthcare Corporation
Sam Yellen Director Self-employed consultant; retired
22433 Oxnard Street Partner of KPMG Peat Marwick LLP
Woodland Hills, CA 91367
</TABLE>
<PAGE>
Page 8 of 11
SCHEDULE II
BENEFICIAL OWNERSHIP OF LTC HEALTHCARE, INC. COMMON STOCK BY EXECUTIVE OFFICERS
OF LTC PROPERTIES, INC.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF LTC HEALTHCARE, PERCENT
POSITION WITH LTC INC. COMMON STOCK BENEFICIALLY
NAME PROPERTIES, INC. BENEFICIALLY OWNED OWNED
- ------------------------ ------------------------- ------------------ ------------
<S> <C> <C> <C>
Andre C. Dimitriadis Chairman of the Board and 124,318 (1) 3.7%
Chief Executive Officer
James J. Pieczynski President, Chief Financial 37,298 (1) *
Officer and Director
Christopher T. Ishikawa Senior Vice President and 7,525 (1) *
Chief Investment Officer
Pamela J. Privett Senior Vice President, 9,340 (1) *
General Counsel and
Secretary
Edmund C. King Director 6,460 *
Wendy L. Simpson Director 4,076 *
Sam Yellen Director 6,370 *
</TABLE>
________________
* Less than 1%
(1) Excludes the following options granted on May 19, 1998 for the purchase of
LTC Healthcare, Inc. Common Stock: (a) Mr. Dimitriadis - 40,000; (b) Mr.
Pieczynski - 35,000; (c) Mr. Ishikawa - 22,500; and (d) Ms. Privett - 22,500.
Such options are not currently exercisable and become exercisable in three equal
installments on each of the first, second and third anniversary of the date of
grant.
<PAGE>
Page 9 of 11
SCHEDULE III
TRANSACTIONS EFFECTED BY LTC PROPERTIES, INC.
DURING THE PAST 60 DAYS
<TABLE>
<CAPTION>
Date No. of Shares Price per Share (1)
---- ------------- --------------------
<S> <C> <C>
10/5/98 12,100 $2.00
10/5/98 800 $1.6875
10/5/98 200 $2.50
10/5/98 200 $2.25
10/6/98 200 $2.50
10/6/98 2,200 $2.25
10/7/98 3,900 $2.25
10/8/98 2,000 $2.25
10/9/98 9,000 $2.25
10/9/98 20,400 $2.125
10/12/98 103,000 $2.00
10/12/98 200 $1.875
10/12/98 9,600 $2.1875
10/21/98 10,000 $2.00
10/22/98 2,000 $2.3125
10/22/98 30,000 $2.1875
10/23/98 26,100 $2.3125
10/26/98 24,300 $2.3125
10/27/98 43,700 $2.3125
</TABLE>
TRANSACTIONS EFFECTED BY MR. DIMITRIADIS
DURING THE PAST 60 DAYS
<TABLE>
<CAPTION>
Date No. of Shares Price per Share (1)
---- ------------- --------------------
<S> <C> <C>
9/30/98 74,318 $0 (2)
10/13/98 2,400 $2.00
10/15/98 19,300 $2.00
10/16/98 2,000 $2.00
10/19/98 3,300 $2.00
10/19/98 10,000 $2.00
10/20/98 8,200 $2.00
10/21/98 4,800 $2.00
</TABLE>
____________
(1) Excludes brokerage commissions.
(2) Represents shares received by the individual in the spin-off of LTC
Healthcare, Inc. by LTC Properties, Inc. No consideration was paid by the
holder in exchange for the shares of LTC Healthcare, Inc. common stock.
<PAGE>
Page 10 of 11
TRANSACTIONS EFFECTED BY MR. PIECZYNSKI
DURING THE PAST 60 DAYS
<TABLE>
<CAPTION>
Date No. of Shares Price per Share (1)
---- ------------- --------------------
<S> <C> <C>
9/30/98 15,698 $0 (2)
10/20/98 7,000 $2.25
10/29/98 3,600 $2.375
10/30/98 11,000 $2.50
TRANSACTIONS EFFECTED BY MR. ISHIKAWA
DURING THE PAST 60 DAYS
<CAPTION>
Date No. of Shares Price per Share
---- ------------- --------------------
<S> <C> <C>
9/30/98 7,525 $0 (2)
TRANSACTIONS EFFECTED BY MS. PRIVETT
DURING THE PAST 60 DAYS
<CAPTION>
Date No. of Shares Price per Share
---- ------------- --------------------
<S> <C> <C>
9/30/98 9,340 $0 (2)
TRANSACTIONS EFFECTED BY MR. KING
DURING THE PAST 60 DAYS
<CAPTION>
Date No. of Shares Price per Share
---- ------------- --------------------
<S> <C> <C>
9/30/98 6,460 $0 (2)
TRANSACTIONS EFFECTED BY MS. SIMPSON
DURING THE PAST 60 DAYS
<CAPTION>
Date No. of Shares Price per Share
---- ------------- --------------------
<S> <C> <C>
9/30/98 4,076 $0 (2)
TRANSACTIONS EFFECTED BY MR. YELLEN
DURING THE PAST 60 DAYS
<CAPTION>
Date No. of Shares Price per Share
---- ------------- --------------------
<S> <C> <C>
9/30/98 6,370 $0 (2)
</TABLE>
____________
(1) Excludes brokerage commissions.
(2) Represents shares received by the individual in the spin-off of LTC
Healthcare, Inc. by LTC Properties, Inc. No consideration was paid by the
holder in exchange for the shares of LTC Healthcare, Inc. common stock.
<PAGE>
Page 11 of 11
EXHIBIT INDEX
Exhibit 1. Distribution Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
Exhibit 2. Administrative Services Agreement, dated as of September
30, 1998, by and between LTC Properties, Inc. and LTC
Healthcare, Inc.
Exhibit 3. Intercompany Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
Exhibit 4. Tax Sharing Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
Exhibit 5. Amended and Restated Promissory Note, dated as of May 19,
1998, between LTC Healthcare, Inc. and LTC Properties, Inc.
<PAGE>
EXHIBIT 1
DISTRIBUTION AGREEMENT
BY AND BETWEEN
LTC PROPERTIES, INC.
AND
LTC HEALTHCARE, INC.
DATED AS OF
September 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TRANSFER OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.01. Transfer of Assets to Healthcare . . . . . . . . . . . . . . . . 6
Section 2.02. Consideration for Asset Transfers. . . . . . . . . . . . . . . . 7
Section 2.04. Cooperation Re: Assets. . . . . . . . . . . . . . . . . . . . . 7
Section 2.05. No Representations or Warranties; Consents . . . . . . . . . . . 8
Section 2.06. Conveyancing and Assumption Instruments. . . . . . . . . . . . . 8
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES . . . . . . . . . . . . . 9
Section 3.01. Assumption and Satisfaction of Liabilities . . . . . . . . . . . 9
ARTICLE IV. THE DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.01. Cooperation Prior to the Distribution. . . . . . . . . . . . . . 10
Section 4.03. The Distribution . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.04. Cash in Lieu of Fractional Shares. . . . . . . . . . . . . . . . 11
ARTICLE V. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.01. Indemnification by LTC . . . . . . . . . . . . . . . . . . . . . 11
Section 5.03. Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.04. Procedure for Indemnification. . . . . . . . . . . . . . . . . . 12
Section 5.05. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.06. Survival of Indemnities. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI. CERTAIN ADDITIONAL MATTERS. . . . . . . . . . . . . . . . . . . . . . 15
Section 6.01. Healthcare Board . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII. ACCESS TO INFORMATION AND SERVICES . . . . . . . . . . . . . . . . . 16
Section 7.01. Provision of Corporate Records . . . . . . . . . . . . . . . . . 16
Section 7.02. Access to Information. . . . . . . . . . . . . . . . . . . . . . 16
Section 7.03. Production of Witnesses. . . . . . . . . . . . . . . . . . . . . 17
Section 7.04. Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.06. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.07. Privileged Matters . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
ARTICLE VIII. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.01. Policies and Rights Included Within the Healthcare Assets. . . . 19
Section 8.02. Post-Distribution Date Claims. . . . . . . . . . . . . . . . . . 20
Section 8.03. Administration and Reserves. . . . . . . . . . . . . . . . . . . 20
Section 8.04. Agreement for Waiver of Conflict and Shared Defense. . . . . . . 21
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.01. Complete Agreement; Construction . . . . . . . . . . . . . . . . 21
Section 9.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.03. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.04. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 22
Section 9.07. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.09. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 23
Section 9.10. Titles and Headings. . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.11. Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . 23
Section 9.12. Legal Enforceability . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.13. Arbitration of Disputes. . . . . . . . . . . . . . . . . . . . . 24
Section 9.14. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.16. Relationship of Parties. . . . . . . . . . . . . . . . . . . . . 25
Section 9.17. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.18. Predecessors and Successors. . . . . . . . . . . . . . . . . . . 25
</TABLE>
EXHIBITS
Exhibit A: Administrative Services Agreement
Exhibit B: Healthcare Bylaws
Exhibit C: Healthcare Articles
Exhibit D: Healthcare Employees
Exhibit E: Tax Sharing Agreement
<PAGE>
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this
30th day of September, 1998 by and between LTC Properties, Inc., a Maryland
corporation ("LTC"), and LTC Healthcare, Inc., a Nevada corporation
("Healthcare").
RECITALS
WHEREAS, the Board of Directors of LTC has determined that it is in
the best interests of its stockholders to transfer to Healthcare certain
equity investments, real properties and related assets and liabilities
currently held by LTC (the "Asset Transfers"), and thereafter to distribute
all of the outstanding shares of Healthcare Common Stock that are held by LTC
(approximately 99% of all outstanding shares of Healthcare Common Stock) to
the holders of LTC common stock, the holders of LTC 8.5% Series C cumulative
convertible preferred stock, par value $.01 per share and the holders of LTC
convertible subordinated debentures (the "Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Asset Transfers and the
Distribution, and to set forth the agreements that will govern certain matters
following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
ADMINISTRATIVE SERVICES AGREEMENT: The Administrative Services
Agreement between LTC and Healthcare, which agreement shall be entered into on
or prior to the Distribution Date in substantially the form of Exhibit A
attached hereto.
AFFILIATE: With respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of LTC shall not include
Healthcare or any other Person which would be an Affiliate of LTC by reason of
LTC's ownership of the capital stock of
<PAGE>
Healthcare prior to the Distribution or the fact that any officer or director of
Healthcare shall also serve as an officer or director of LTC, and (ii) the
Affiliates of Healthcare shall not include LTC or any other Person which would
be an Affiliate of Healthcare by reason of LTC's ownership of the capital stock
of Healthcare prior to the Distribution or the fact that any officer or director
of Healthcare shall also serve as an officer or director of LTC.
AGENT: The distribution agent appointed by LTC to distribute the
Healthcare Common Stock pursuant to the Distribution.
ASSET TRANSFERS: shall have the meaning set forth in the recitals
hereof.
COMMISSION: The Securities and Exchange Commission.
CONSENTS: shall have the meaning set forth in Section 4.01(c) hereof.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Asset Transfers and the assumption of Liabilities in the manner contemplated by
this Agreement and the Related Agreements.
DISTRIBUTION: shall have the meaning set forth in the recitals
hereof.
DISTRIBUTION DATE: The date determined by the LTC Board as the date
on which the Distribution shall be effected, which Distribution Date is
contemplated by the LTC Board to occur on or about September 30, 1998.
DISTRIBUTION RECORD DATE: The date established by the LTC Board as
the date for taking a record of the Holders of LTC Common Stock entitled to
participate in the Distribution, which Distribution Record Date has been
established as September 15, 1998, subject to the fulfillment on or before
September 30, 1998 of certain conditions to the Distribution as provided in
Section 4.02.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FINANCING OBLIGATIONS: All (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations under capitalized leases and deferred purchase arrangements,
(iv) reimbursement or other obligations relating to letters of credit or similar
arrangements, and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
HEALTHCARE: shall have the meaning set forth in the recitals hereof.
HEALTHCARE ARTICLES: The Amended and Restated Articles of
Incorporation of Healthcare, substantially in the form of Exhibit C, to be in
effect at the Distribution Date.
HEALTHCARE ASSETS: shall have the meaning set forth in Section
2.01(b) hereof.
2
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HEALTHCARE BOARD: The Board of Directors of Healthcare.
HEALTHCARE BOOKS AND RECORDS: The books and records (including
computerized records) of Healthcare and all books and records owned by LTC which
relate to the Healthcare Business or are necessary to operate the Healthcare
Business, including, without limitation, all such books and records relating to
Healthcare Employees, all files relating to any Action being assumed by
Healthcare as part of the Healthcare Liabilities, original corporate minute
books, stock ledgers and certificates and corporate seals, and all licenses,
leases, agreements and filings, relating to Healthcare or the Healthcare
Business (but not including the LTC Books and Records, provided that Healthcare
shall have access to, and have the right to obtain duplicate copies of, the LTC
Books and Records in accordance with the provisions of Article VII).
HEALTHCARE BUSINESS: The business conducted by Healthcare pursuant to
or utilizing the Healthcare Assets, including without limitation, the
acquisition, development and operation of real estate and health care assets.
HEALTHCARE BYLAWS: The Amended and Restated Bylaws of Healthcare,
substantially in the form of Exhibit B, to be in effect at the Distribution
Date.
HEALTHCARE COMMON STOCK: The common stock, par value $.01 per share,
of Healthcare.
HEALTHCARE EMPLOYEES: All of the Healthcare employees at the time of
the Distribution, as identified on Exhibit D.
HEALTHCARE INDEMNITEES: shall have the meaning set forth in Section
5.01 hereof.
HEALTHCARE INDEMNIFIABLE LOSSES: shall have the meaning set forth in
Section 5.01 hereof.
HEALTHCARE LIABILITIES: (i) All of the Liabilities of Healthcare
under, or to be retained or assumed by Healthcare pursuant to, this Agreement or
any of the Related Agreements, including those set forth on Schedule 1.01(c),
(ii) all Liabilities for payment of outstanding drafts of LTC attributable to
the Healthcare Business existing as of the Distribution Date, and (iii) all
Liabilities arising out of or in connection with any of the Healthcare Assets or
the Healthcare Business.
HEALTHCARE POLICIES: All Policies, current or past, which are owned
or maintained by or on behalf of LTC or any of its Affiliates or predecessors,
which relate to the Healthcare Business but do not relate to the LTC Retained
Business, and which Policies are either maintained by Healthcare or assignable
to Healthcare.
HOLDERS: The holders of record of LTC Common Stock as of the
Distribution Record Date.
INDEMNIFIABLE LOSSES: shall have the meaning set forth in Section
5.02 hereof.
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INDEMNIFYING PARTY: shall have the meaning set forth in Section 5.03
hereof.
INDEMNITEE: shall have the meaning set forth in Section 5.03 hereof.
INFORMATION: shall have the meaning set forth in Section 7.02 hereof.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively-rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Policy limits, including aggregates.
LIABILITIES: Any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
LTC: shall have the meaning set forth in the recitals hereof.
LTC BOARD: The Board of Directors of LTC.
LTC BOOKS AND RECORDS: The books and records (including computerized
records) of LTC and all books and records owned by Healthcare which relate to
the LTC Retained Business or are necessary to operate the LTC Retained Business,
or are required by law to be retained by LTC, including without limitation, all
files relating to any Action pertaining to the LTC Retained Liabilities,
original corporate minute books, stock ledgers and certificates and corporate
seals, and all licenses, leases, agreements and filings, relating to LTC or the
LTC Retained Business (but not including the Healthcare Books and Records,
provided that LTC shall have access to, and shall have the right to obtain
duplicate copies of, the Healthcare Books and Records in accordance with the
provisions of Article VII).
LTC COMMON STOCK: The common stock, par value $.01 per share, of LTC.
LTC INDEMNITEES: shall have the meaning set forth in Section 5.02
hereof.
LTC INDEMNIFIABLE LOSSES: shall have the meaning set forth in Section
5.02 hereof.
LTC REAL ESTATE ASSETS: The real estate assets listed on Schedule
1.01(b).
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LTC RETAINED ASSETS: The assets of LTC other than the Healthcare
Assets transferred to Healthcare by LTC, including without limitation (i) assets
relating to the LTC Retained Business, (iii) all of the assets expressly
allocated to LTC under this Agreement or the Related Agreements, and (iv) any
other assets of LTC and its Affiliates relating to the LTC Retained Business.
LTC RETAINED BUSINESS: The businesses conducted by LTC pursuant to or
utilizing the LTC Retained Assets, including without limitation, the investment
in long-term care and other health-care related facilities through mortgage
loans, facility lease transactions and other investments.
LTC RETAINED LIABILITIES: (i) All of the Liabilities arising out of
or in connection with the LTC Retained Assets or the LTC Retained Business,
(ii) all Liabilities arising out of or in connection with any lawsuits relating
to the Distribution (other than those Liabilities relating to employee claims
which shall be allocated pursuant to the Administrative Services Agreement),
(iii) all of the Liabilities of LTC under, or to be retained or assumed by LTC
pursuant to, this Agreement or any of the Related Agreements, (iv) any Financing
Obligations not constituting Healthcare Liabilities, (v) all Liabilities for the
payment of outstanding drafts of LTC attributable to the LTC Retained Business
existing as of the Distribution Date, (vi) all Liabilities arising out of LTC's
prior ownership of the LTC Real Estate Assets and the LTC Shares, and (vii) all
other Liabilities of LTC not constituting Healthcare Liabilities.
LTC RETAINED POLICIES: All Policies, current or past, which are owned
or maintained by or on behalf of LTC (or any of its predecessors) which relate
to the LTC Retained Business but do not relate to the Healthcare Business.
LTC SHARES: The shares of stock listed on Schedule 1.01(a).
PENDING ACTION: shall have the meaning set forth in Section 5.04(h)
hereof.
PERSON: Any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
POLICIES: Insurance policies and insurance contracts of any kind
relating to the Healthcare Business or the LTC Retained Business as conducted
prior to the Distribution Date, including without limitation primary and excess
policies, comprehensive general liability policies, automobile and workers'
compensation insurance policies, and self-insurance and captive insurance
company arrangements, together with the rights, benefits and privileges
thereunder.
PRIVILEGES: All privileges that may be asserted under applicable law,
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
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PRIVILEGED INFORMATION: All Information as to which LTC, Healthcare
or any of their Subsidiaries are entitled to assert the protection of a
Privilege.
RELATED AGREEMENTS: All of the agreements, instruments,
understandings, assignments or other arrangements which are entered into in
connection with the transactions contemplated hereby and which are set forth in
a writing, including, without limitation (i) the Conveyancing and Assumption
Instruments, (ii) the Administrative Services Agreement and (iii) the Tax
Sharing Agreement.
SHARED POLICIES: All Policies, current or past, which are owned or
maintained by or on behalf of LTC or its predecessors which relate to both the
LTC Retained Business and the Healthcare Business, and all other Policies not
constituting Healthcare Policies or LTC Retained Policies.
SUBSIDIARY: With respect to any Person, (a) any corporation of which
at least a majority in interest of the outstanding voting stock (having by the
terms thereof voting power under ordinary circumstances to elect a majority of
the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any non-corporate entity in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has at
least majority ownership interest.
TAX SHARING AGREEMENT: The Tax Sharing Agreement between Healthcare
and LTC, which agreement shall be entered into on or prior to the Distribution
Date in substantially the form of Exhibit E attached hereto.
THIRD-PARTY CLAIM: shall have the meaning set forth in Section
5.04(a) hereof.
ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. TRANSFER OF ASSETS TO HEALTHCARE (a) Prior to the
Distribution Date, LTC shall take or cause to be taken all actions necessary to
cause the transfer, assignment, delivery and conveyance to Healthcare of all of
LTC's right, title and interest in the following assets:
(i) the LTC Real Estate Assets;
(ii) the LTC Shares;
(iii) the Healthcare Books and Records;
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(iii) all of the other assets to be assigned to Healthcare by
LTC under this Agreement or the Related Agreements; and
(iv) all other assets relating to the Healthcare Business held
by LTC.
(b) The "Healthcare Assets" shall consist of the assets transferred
to Healthcare by LTC pursuant to this Section 2.01.
Section 2.02. CONSIDERATION FOR ASSET TRANSFERS
As consideration for the foregoing asset transfers on or prior to the
Distribution Date, LTC shall receive from Healthcare a sufficient number of
shares of Healthcare Common Stock to effect the Distribution to the Holders of
LTC Common Stock.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION
To the extent that any transfers contemplated by this Article II shall
not have been fully effected on the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; PROVIDED, HOWEVER, that LTC
and Healthcare and their respective Subsidiaries and Affiliates shall cooperate
in seeking to obtain any necessary consents or approvals for the transfer of all
assets and Liabilities contemplated to be transferred pursuant to this Article
II. In the event that any such transfer of assets or Liabilities has not been
consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had such asset been
transferred or such Liability been assumed as contemplated hereby. As and when
any such asset or Liability becomes transferable, such transfer and assumption
shall be effected forthwith. The parties agree that, except as set forth in
this Section 2.03, as of the Distribution Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of the
assets, together with all rights, powers and privileges incidental thereto, and
shall be deemed to have assumed in accordance with the terms of this Agreement
all of the Liabilities, and all duties, obligations and responsibilities
incidental thereto, which such party is entitled to acquire or required to
assume pursuant to the terms of this Agreement.
Section 2.04. COOPERATION RE: ASSETS
In the case that at any time after the Distribution Date, Healthcare
reasonably determines that any of the LTC Retained Assets are essential for the
conduct of the Healthcare Business, or LTC reasonably determines that any of the
Healthcare Assets are essential for the conduct of the LTC Retained Business,
and the nature of such assets makes it impracticable for Healthcare or LTC, as
the case may be, to obtain substitute assets or to make alternative
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arrangements on commercially reasonable terms to conduct their respective
businesses, and reasonable provisions for the use thereof are not already
included in the Related Agreements, then Healthcare (with respect to the
Healthcare Assets) and LTC (with respect to the LTC Retained Assets) shall
cooperate to make such assets available to the appropriate party on commercially
reasonable terms, as may be reasonably required for such party to maintain
normal business operations (provided that such assets shall be required to be
made available only until such time as the other party may reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations).
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS
Each of the parties hereto understands and agrees that no party hereto
is, in this Agreement or in any other agreement or document contemplated by this
Agreement or otherwise, representing or warranting in any way (i) as to the
value or freedom from encumbrance of, or any other matter concerning, any assets
of such party or (ii) as to the legal sufficiency to convey title to any asset
transferred pursuant to this Agreement or any Related Agreement, including,
without limitation, any Conveyancing and Assumption Instruments. It is also
agreed and understood that there are no warranties, express or implied, as to
the merchantability or fitness of any of the assets either transferred to or
retained by the parties, as the case may be, and all such assets shall be "as
is, where is" and "with all faults" (provided, however, that the absence of
warranties shall have no effect upon the allocation of liabilities under this
Agreement). Similarly, each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications contemplated
by this Agreement will satisfy the provisions of any or all applicable laws or
judgments or other instruments or agreements relating to such assets.
Notwithstanding the foregoing, the parties shall use their good faith efforts to
obtain all consents and approvals, to enter into all reasonable amendatory
agreements and to make all filings and applications which may be reasonably
required for the consummation of the transactions contemplated by this
Agreement, and shall take all such further reasonable actions as shall be
reasonably necessary to preserve for each of LTC and Healthcare, to the greatest
extent feasible, the economic and operational benefits of the allocation of
assets and liabilities provided for in this Agreement. In case at any time
after the Distribution Date any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall take all such necessary or desirable action.
Section 2.06. CONVEYANCING AND ASSUMPTION INSTRUMENTS
In connection with the Asset Transfers and the assumptions of
Liabilities contemplated by this Agreement, the parties shall execute or cause
to be executed by the appropriate entities the Conveyancing and Assumption
Instruments in such forms as the parties shall reasonably agree, including the
transfer of real property with deeds as may be appropriate, and the assignment
of trademarks and other intellectual property rights. The transfer of capital
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stock shall be effected by means of delivery of stock certificates and executed
stock powers and notation on the stock record books of the corporation or other
legal entities involved and, to the extent required by applicable law, by
notation on public registries.
Section 2.07. CASH MANAGEMENT
(a) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. Healthcare shall
establish and maintain a separate cash management system and accounting records
with respect to the Healthcare Business effective as of 12:01 a.m. on the day
following the Distribution Date; thereafter, (i) any payments by LTC on behalf
of Healthcare in connection with the Healthcare Business (including, without
limitation, any such payments in respect of Liabilities or other obligations of
Healthcare under the Administrative Services Agreement) shall be recorded in the
accounts of Healthcare as a payable to LTC; (ii) any payments by Healthcare on
behalf of LTC in connection with the LTC Retained Business (including, without
limitation, any such payments in respect of Liabilities or other obligations of
LTC under the Administrative Services Agreement), shall be recorded in the
accounts of LTC, as a payable to Healthcare; (iii) any cash payments received by
LTC relating to the Healthcare Business or the Healthcare Assets shall be
recorded in the accounts of LTC, as a payable to Healthcare; (iv) any cash
payments received by Healthcare relating to the LTC Retained Business or the LTC
Retained Assets shall be recorded in the accounts of Healthcare as a payable to
LTC; (v) LTC and Healthcare shall make adjustments for late deposits, checks
returned for not sufficient funds and other post-Distribution Date transactions
as shall be reasonable under the circumstances consistent with the purpose and
intent of this Agreement; and (vi) the net balance due to LTC or Healthcare, as
the case may be, in respect of the aggregate amounts of clauses (i), (ii),
(iii), (iv) and (v) shall be paid by LTC or Healthcare, as appropriate, as
promptly as practicable. For purposes of this Section 2.07(a), the parties
contemplate that the LTC Retained Business and the Healthcare Business,
including but not limited to the administration of accounts payable and accounts
receivable, will be conducted in the normal course.
(b) All transactions contemplated in this Section 2.07 shall be
subject to audit by the parties, and any dispute thereunder shall be resolved by
Ernst & Young LLP (or, if Ernst & Young LLP is not available, by such other
independent firm of certified public accountants mutually acceptable to LTC and
Healthcare), whose decision shall be final and unappealable.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES
Except as set forth in the Administrative Services Agreement, the Tax
Sharing Agreement or the other Related Agreements, effective as of and after the
Distribution Date, (a) Healthcare shall assume, pay, perform and discharge in
due course all of the Healthcare Liabilities, and (b) LTC shall pay, perform and
discharge in due course all of the LTC Retained Liabilities.
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ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION
(a) LTC and Healthcare shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit plans and other plans contemplated by the
Administrative Services Agreement.
(b) LTC and Healthcare shall take all such action as may be necessary
or appropriate under the securities or blue sky laws of states or other
political subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(c) LTC and Healthcare shall use all reasonable efforts to obtain any
third-party consents or approvals necessary or desirable in connection with the
transactions contemplated hereby ("Consents").
(d) LTC and Healthcare will use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement and the Related Agreements.
Section 4.02. LTC BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION
The LTC Board shall, in its discretion, establish any appropriate
procedures in connection with the Distribution. In no event shall the
Distribution occur unless the following conditions shall have been satisfied:
(a) the transactions contemplated by Sections 2.01 and 2.02 shall
have been consummated in all material respects;
(b) the Healthcare Board, comprised as contemplated by Section 6.01,
shall have been elected, and the Healthcare Articles and Healthcare Bylaws shall
have been adopted and shall be in effect;
(c) LTC and Healthcare shall have obtained all Consents, the failure
of which to obtain would not, in the sole judgment of the LTC Board, have a
material adverse effect on LTC or Healthcare;
(d) the Registration Statement on Form 10 under the Exchange Act
filed by Healthcare shall have been declared effective by the Commission;
(e) the Healthcare Common Stock shall have been approved for
quotation and trading on the Pacific Exchange subject to official notice of
issuance; and
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(f) LTC and Healthcare shall have entered into the Related Agreements
to which they are a party;
PROVIDED, HOWEVER, that (i) any such condition may be waived by the LTC Board in
its sole discretion, and (ii) the satisfaction of such conditions shall not
create any obligation on the part of LTC or any other party hereto to effect the
Distribution or in any way limit LTC's power of termination set forth in Section
9.07 or alter the consequences of any such termination from those specified in
such Section.
Section 4.03. THE DISTRIBUTION
On the Distribution Date, subject to the conditions and rights of
termination set forth in this Agreement, LTC shall deliver to the Agent a share
certificate representing all of the then outstanding shares of Healthcare Common
Stock owned by LTC and shall instruct the Agent to distribute, on or as soon as
practicable following the Distribution Date, such Healthcare Common Stock to the
Holders. Healthcare agrees to provide all share certificates that the Agent
shall require in order to effect the Distribution.
Section 4.04. CASH IN LIEU OF FRACTIONAL SHARES
No certificate or scrip representing fractional shares of Healthcare
Common Stock shall be issued as part of the Distribution and in lieu thereof,
each holder of LTC Common Stock who would otherwise be entitled to receive a
fractional share of Healthcare Common Stock will receive cash for such
fractional share. LTC shall instruct the Agent to determine the number of whole
shares and fractional shares of Healthcare Common Stock allocable to each holder
of record of LTC Common Stock as of the Distribution Record Date. LTC shall
instruct the Agent to aggregate all such fractional shares into whole shares and
sell the whole shares obtained thereby in the open market as soon as practicable
following the Distribution Date at then prevailing prices on behalf of Holders
who otherwise would be entitled to receive fractional share interests and to
distribute to each such Holder such Holder's ratable share of the proceeds of
such sale as soon as practicable after the Distribution Date. LTC shall bear
the costs of commissions incurred in connection with such sales.
ARTICLE V.
INDEMNIFICATION
Section 5.01. INDEMNIFICATION BY LTC
Except as otherwise expressly set forth in a Related Agreement, LTC
shall indemnify, defend and hold harmless Healthcare and its directors,
officers, employees, agents and Affiliates and each of the heirs, executors,
successors and assigns of any of the foregoing (the "Healthcare Indemnitees")
from and against the LTC Retained Liabilities and any and all losses,
Liabilities, damages, including, without limitation, the costs and expenses of
any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating to the LTC Retained Liabilities and
attorneys' fees and any and all expenses whatsoever
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reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions (collectively, "Healthcare Indemnifiable Losses"
and, individually, a "Healthcare Indemnifiable Loss") of the Healthcare
Indemnitees arising out of or due to the failure or alleged failure of LTC or
any of its Affiliates (i) prior to or after the Distribution Date to pay,
perform or otherwise discharge in due course any of the LTC Retained
Liabilities, or (ii) comply with the provisions of Section 6.04.
Section 5.02. INDEMNIFICATION BY HEALTHCARE
Except as otherwise expressly set forth in a Related Agreement,
Healthcare shall indemnify, defend and hold harmless LTC and each of its
respective directors, officers, employees, agents and Affiliates and each of the
heirs, executors, successors and assigns of any of the foregoing (the "LTC
Indemnitees") from and against the Healthcare Liabilities and any and all
losses, Liabilities, damages, including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating to the Healthcare Liabilities
and attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened
Actions (collectively, "LTC Indemnifiable Losses" and, individually, an "LTC
Indemnifiable Loss") of the LTC Indemnitees arising out of or due to the failure
or alleged failure of Healthcare or any of its Affiliates (i) prior to or after
the Distribution Date to pay, perform or otherwise discharge in due course any
of the Healthcare Liabilities or (ii) comply with the provisions of
Section 6.04. The "Healthcare Indemnifiable Losses," and the "LTC Indemnifiable
Losses" are collectively referred to as the "Indemnifiable Losses."
Section 5.03. INSURANCE PROCEEDS
The amount which any party (an "Indemnifying Party") is or may be
required to pay to any other Person (an "Indemnitee") pursuant to Section 5.01
or Section 5.02 shall be reduced (including, without limitation, retroactively)
by any Insurance Proceeds or other amounts actually recovered by or on behalf of
such Indemnitee in reduction of the related Indemnifiable Loss. If an
Indemnitee shall have received the payment required by this Agreement from an
Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently
actually receive Insurance Proceeds, or other amounts in respect of such
Indemnifiable Loss as specified above, then such Indemnitee shall pay to such
Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other
amounts actually received.
Section 5.04. PROCEDURE FOR INDEMNIFICATION
(a) Except as may be set forth in a Related Agreement, if an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including, without limitation, any governmental entity) who is not a party to
this Agreement or to any of the Related Agreements of any claim or of the
commencement by any such Person of any Action (a "Third-Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; provided that the failure of any Indemnitee to give notice as
required by this Section 5.04 shall not relieve the Indemnifying
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Party of its obligations under this Article V, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the Indemnifiable Loss that has been or
may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must confirm in writing that it agrees that the Indemnitee is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 30 days
of the receipt of notice from an Indemnitee in accordance with Section 5.04(a)
(or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether to assume
responsibility for such Third-Party Claim (provided that if the Indemnifying
Party does not so notify the Indemnitee of its election within 30 days after
receipt of such notice from the Indemnitee, the Indemnifying Party shall be
deemed to have elected not to assume responsibility for such Third-Party Claim),
and such Indemnitee shall cooperate in the defense or settlement or compromise
of such Third-Party Claim. After notice from an Indemnifying Party to an
Indemnitee of its election to assume responsibility for a Third-Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article V for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; provided that if the defendants in any such
claim include both the Indemnifying Party and one or more Indemnitees and in
such Indemnitees' reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of such claim, such
Indemnitees shall have the right to employ separate counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for a Third-Party Claim (which election may be made only in the
event of a good faith dispute that a claim was inappropriately tendered under
Section 5.01 or 5.02, as the case may be) such Indemnitee may defend or (subject
to the following sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding the foregoing, an Indemnitee may not settle or compromise any
claim without prior written notice to the Indemnifying Party, which shall have
the option within ten days following the receipt of such notice (i) to
disapprove the settlement and assume all past and future responsibility for the
claim, including reimbursing the Indemnitee for prior expenditures in connection
with the claim, or (ii) to disapprove the settlement and continue to refrain
from participation in the defense of the claim, in which event the Indemnifying
Party shall have no further right to contest the amount or reasonableness of the
settlement if the Indemnitee elects to proceed therewith, or (iii) to approve
the amount of the settlement, reserving the Indemnifying Party's right to
contest the Indemnitee's right to indemnity, or (iv) to approve and agree to pay
the settlement. In the event the Indemnifying Party makes no response to such
written notice from the Indemnitee, the Indemnifying Party shall be deemed to
have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to
compromise any Third-Party Claim, the Indemnitee shall make available to such
Indemnifying Party any
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personnel and any books, records or other documents within its control or which
it otherwise has the ability to make available that are necessary or appropriate
for such defense.
(d) Notwithstanding anything else in this Section 5.04 to the
contrary, an Indemnifying Party shall not settle or compromise any Third-Party
Claim unless such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim (and provided
further that such settlement may not provide for any non-monetary relief by
Indemnitee without the written consent of Indemnitee). In the event the
Indemnitee shall notify the Indemnifying Party in writing that such Indemnitee
declines to accept any such settlement or compromise, such Indemnitee may
continue to contest such Third-Party Claim, free of any participation by such
Indemnifying Party, at such Indemnitee's sole expense. In such event, the
obligation of such Indemnifying Party to such Indemnitee with respect to such
Third-Party Claim shall be equal to (i) the costs and expenses of such
Indemnitee prior to the date such Indemnifying Party notifies such Indemnitee of
the offer to settle or compromise (to the extent such costs and expenses are
otherwise indemnifiable hereunder) plus (ii) the lesser of (A) the amount of any
offer of settlement or compromise which such Indemnitee declined to accept and
(B) the actual out-of-pocket amount such Indemnitee is obligated to pay
subsequent to such date as a result of such Indemnitee's continuing to pursue
such Third-Party Claim.
(e) Any claim on account of an Indemnifiable Loss which does not
result from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
(f) In addition to any adjustments required pursuant to Section 5.03,
if the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(h) Notwithstanding anything else in this Section 5.04 to the
contrary, with respect to any Action pending at the time of the Distribution (a
"Pending Action") with respect to
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which an Indemnifying Party may be obligated to provide indemnification pursuant
to this Agreement, LTC or Healthcare shall, at the request of any other party,
cause the employee(s) who were handling the defense, compromise or settlement of
such Pending Action prior to the Distribution to continue to handle such
defense, compromise or settlement following the Distribution (subject to the
last two sentences of subsection (b) above). If such employees are employed by
the Indemnitee, the Indemnitee shall keep the Indemnifying Party reasonably
informed of the progress of, and the Indemnifying Party shall cooperate in, such
defense, compromise or settlement.
Section 5.05. REMEDIES CUMULATIVE
The remedies provided in this Article V shall be cumulative and shall
not preclude assertion by any Indemnitee of any other rights or the seeking of
any and all other remedies against any Indemnifying Party.
Section 5.06. SURVIVAL OF INDEMNITIES
The obligations of each of LTC and Healthcare under this Article V
shall survive the sale or other transfer by it of any assets or businesses or
the assignment by it of any Liabilities with respect to any Indemnifiable Loss
of the others related to such assets, businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. HEALTHCARE BOARD
LTC and Healthcare shall take all actions which may be required to
constitute, effective as of the Distribution Date, the Healthcare Board with the
persons listed on Schedule 1.01(f).
Section 6.02. ARTICLES AND BYLAWS
On or prior to the Distribution Date, Healthcare shall adopt the
Healthcare Articles and the Healthcare Bylaws, and shall file the Healthcare
Articles with the Secretary of State of the State of Nevada.
Section 6.03. CERTAIN POST-DISTRIBUTION TRANSACTIONS
(a) HEALTHCARE. Healthcare shall comply with each representation and
statement made, or to be made, to any taxing authority in connection with any
ruling obtained, or to be obtained, by LTC and Healthcare acting together, from
any such taxing authority with respect to any transaction contemplated by this
Agreement.
(b) LTC. LTC shall comply with each representation and statement
made, or to be made, to any taxing authority in connection with any ruling
obtained, or to be obtained, by
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LTC and Healthcare acting together, from any such taxing authority with respect
to any transaction contemplated by this Agreement.
Section 6.04. NOTICES BY LTC
LTC shall provide notice of the Distribution to all holders of its
securities, or options, rights or warrants convertible into its securities, as
may be required by LTC's Articles of Incorporation or Bylaws or any agreement to
which LTC is a party.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. PROVISION OF CORPORATE RECORDS
(a) Except as may otherwise be provided in a Related Agreement, LTC
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Healthcare's cost) to Healthcare of
the Healthcare Books and Records in its possession, except to the extent such
items are already in the possession of Healthcare. The Healthcare Books and
Records shall be the property of Healthcare, but shall be available to LTC for
review and duplication until LTC shall notify Healthcare in writing that such
records are no longer of use to LTC.
(b) Except as otherwise provided in a Related Agreement, Healthcare
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at LTC's cost) to LTC of the LTC Books
and Records in its possession, except to the extent such items are already in
the possession of LTC. The LTC Books and Records shall be the property of LTC,
but shall be available to Healthcare for review and duplication until Healthcare
shall notify LTC in writing that such records are no longer of use to
Healthcare.
Section 7.02. ACCESS TO INFORMATION
Except as otherwise provided in a Related Agreement, from and after
the Distribution Date, LTC shall afford to Healthcare and its authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information relating to pre-Distribution operations (collectively,
"Information") within LTC's possession insofar as such access is reasonably
required by Healthcare for the conduct of its business, subject to appropriate
restrictions for classified or Privileged Information. Similarly, except as
otherwise provided in a Related Agreement, Healthcare shall afford to LTC and
their authorized accountants, counsel and other designated representatives
reasonable access (including using reasonable efforts to give access to persons
or firms possessing information) and duplicating rights during normal business
hours to Information within Healthcare's possession, insofar as
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such access is reasonably required by LTC for the conduct of its business,
subject to appropriate restrictions for classified or Privileged Information.
Information may be requested under this Article VII for the legitimate business
purposes of either party, including, without limitation, audit, accounting,
claims (including claims for indemnification hereunder), litigation and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the transactions contemplated
hereby.
Section 7.03. PRODUCTION OF WITNESSES
At all times from and after the Distribution Date, each of LTC and
Healthcare shall use reasonable efforts to make available to the others, upon
written request, its and its Subsidiaries' officers, directors, employees and
agents as witnesses to the extent that such persons may reasonably be required
in connection with any Action.
Section 7.04. REIMBURSEMENT
Except to the extent otherwise contemplated in any Related Agreement,
a party providing Information or witness services to another party under this
Article VII shall be entitled to receive from the recipient, upon the
presentation of invoices therefor, payments of such amounts, relating to
supplies, disbursements and other out-of-pocket expenses (at cost) and direct
and indirect expenses of employees who are witnesses or otherwise furnish
assistance (at cost), as may be reasonably incurred in providing such
Information or witness services.
Section 7.05. RETENTION OF RECORDS
Except as otherwise required by law or agreed to in a Related
Agreement or otherwise in writing, each of LTC and Healthcare may destroy or
otherwise dispose of any of the Information, which is material Information and
is not contained in other Information retained by LTC or Healthcare, as the case
may be, at any time after the tenth anniversary of this Agreement, provided
that, prior to such destruction or disposal, (a) it shall provide no less than
90 or more than 120 days prior written notice to the other, specifying in
reasonable detail the Information proposed to be destroyed or disposed of and
(b) if a recipient of such notice shall request in writing prior to the
scheduled date for such destruction or disposal that any of the Information
proposed to be destroyed or disposed of be delivered to such requesting party,
the party proposing the destruction or disposal shall promptly arrange for the
delivery of such of the Information as was requested at the expense of the party
requesting such Information.
Section 7.06. CONFIDENTIALITY
Each of LTC, Healthcare and their respective Subsidiaries shall hold,
and shall cause its consultants and advisors to hold, in strict confidence, all
Information concerning the other parties hereto in its possession or furnished
by the other parties or the other parties' representatives pursuant to this
Agreement (except to the extent that such Information has been (i) in the public
domain through no fault of such party or (ii) later lawfully acquired from other
sources by such party), and subject to Section 7.07, each party shall not
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, rating agencies,
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bankers and other consultants and advisors, unless compelled to disclose by
judicial or administrative process or, as reasonably advised by its counsel or
by other requirements of law, or unless such Information is reasonably required
to be disclosed in connection with (x) any litigation with any third-parties or
litigation between LTC and Healthcare or any of them, (y) any contractual
agreement to which LTC or Healthcare or any of them are currently parties, or
(z) in exercise of any party's rights hereunder.
Section 7.07. PRIVILEGED MATTERS
LTC and Healthcare recognize that legal and other professional
services that have been and will be provided prior to the Distribution Date have
been and will be rendered for the benefit of each of LTC and Healthcare and that
each of LTC and Healthcare should be deemed to be the client for the purposes of
asserting all Privileges. To allocate the interests of each party in the
Privileged Information, the parties agree as follows:
(a) LTC shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the LTC Retained Business, whether or not the Privileged Information
is in the possession of or under the control of LTC or Healthcare. LTC shall
also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
subject matter of any claims constituting LTC Retained Liabilities, now pending
or which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by LTC, whether or not the Privileged Information is in the
possession of or under the control of LTC or Healthcare.
(b) Healthcare shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Healthcare Business, whether or not the Privileged
Information is in the possession of or under the control of LTC or Healthcare.
Healthcare shall also be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the subject matter of any claims constituting Healthcare Liabilities,
now pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by Healthcare, whether or not the Privileged
Information is in the possession of Healthcare or under the control of LTC or
Healthcare.
(c) LTC and Healthcare agree that they shall have a shared Privilege,
with equal right to assert or waive, subject to the restrictions in this Section
7.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 7.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes or other matters which involve each of LTC and Healthcare
in respect of which LTC and Healthcare retain any responsibility or liability
under this Agreement shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted under
any applicable law, and in which any other party has a shared Privilege, without
the consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to
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be granted unless written objection is made within 20 days after notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between LTC and
Healthcare, or any of them, any party may waive a Privilege in which any other
party has a shared Privilege, without obtaining the consent of the other party,
provided that such waiver of a shared Privilege shall be effective only as to
the use of Information with respect to the litigation or dispute between such
parties, and shall not operate as a waiver of the shared Privilege with respect
to third-parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of any party, each
party agrees that it shall negotiate in good faith, shall endeavor to minimize
any prejudice to the rights of the other parties, and shall not unreasonably
withhold consent to any request for waiver by the other parties. Each party
specifically agrees that it will not withhold consent to waiver for any purpose
except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other
request which arguably calls for the production or disclosure of Information
subject to a shared Privilege or as to which any other party has the sole right
hereunder to assert a Privilege, or if any party obtains knowledge that any of
its current or former directors, officers, agents or employees have received any
subpoena, discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 7.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(h) The transfer of the Healthcare Books and Records and the LTC
Books and Records and other Information between LTC, Healthcare and their
respective Subsidiaries is made in reliance on the agreement of LTC and
Healthcare, as set forth in Sections 7.06 and 7.07, to maintain the
confidentiality of Privileged Information and to assert and maintain all
applicable Privileges. The access to information being granted pursuant to
Sections 7.01 and 7.02, the agreement to provide witnesses and individuals
pursuant to Section 7.03 and the transfer of Privileged Information between LTC,
Healthcare and their respective Subsidiaries pursuant to this Agreement shall
not be deemed a waiver of any Privilege that has been or may be asserted under
this Agreement or otherwise.
ARTICLE VIII.
INSURANCE
Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE HEALTHCARE
ASSETS
Without limiting the generality of the definition of the Healthcare
Assets set forth in Section 2.01 or the effect of Section 2.01, the Healthcare
Assets shall include (a) any and all rights of an insured party under each of
the Shared Policies, specifically including rights of
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indemnity and the right to be defended by or at the expense of the insurer, with
respect to all injuries, losses, liabilities, damages and expenses incurred or
claimed to have been incurred on or prior to the Distribution Date by any party
in or in connection with the conduct of the Healthcare Business or, to the
extent any claim is made against Healthcare or any of its Subsidiaries, the LTC
Retained Business, and which injuries, losses, liabilities, damages and expenses
may arise out of insured or insurable occurrences or events under one or more of
the Shared Policies; PROVIDED, HOWEVER, that nothing in this Section 8.01 shall
be deemed to constitute (or to reflect) the assignment of the Shared Policies,
or any of them, to Healthcare, and (b) the Healthcare Policies.
Section 8.02. POST-DISTRIBUTION DATE CLAIMS
If, subsequent to the Distribution Date, any person, corporation, firm
or entity shall assert a claim against Healthcare with respect to any injury,
loss, liability, damage or expense incurred or claimed to have been incurred on
or prior to the Distribution Date in or in connection with the Distribution or
the conduct of the Healthcare Business or, to the extent any claim is made
against Healthcare or any of its Subsidiaries, the LTC Retained Business, and
which injury, loss, liability, damage or expense may arise out of insured or
insurable occurrences or events under one or more of the Shared Policies, LTC
shall at the time such claim is asserted be deemed to assign, without need of
further documentation, to Healthcare any and all rights of an insured party
under the applicable Shared Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer; provided, however, that nothing in this Section 8.02
shall be deemed to constitute (or to reflect) the assignment of the Shared
Policies, or any of them, to Healthcare.
Section 8.03. ADMINISTRATION AND RESERVES
(a) Notwithstanding the provisions of Article III, but subject to any
contrary provisions of any Related Agreement, from and after the Distribution
Date:
(i) Healthcare shall be entitled to any reserves established
by LTC or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Healthcare Liabilities; and
(ii) LTC shall be entitled to any reserves established by LTC
or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the LTC Retained Liabilities.
(b) INSURANCE PREMIUMS. Healthcare shall have the right but not the
obligation to pay the premiums, to the extent that LTC does not pay premiums
with respect to the LTC Retained Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies and the Healthcare Policies, as
required under the terms and conditions of the respective Policies, whereupon
LTC shall forthwith reimburse Healthcare for that portion of such premiums paid
by Healthcare as are attributable to the LTC Retained Liabilities. LTC shall
provide continued coverage under its director and officer liability insurance
policy, if any, for a period of not less than three years for acts which took
place or were alleged to have taken place prior to the
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Distribution Date covering persons who were directors and officers of LTC prior
to the Distribution Date. Fifty percent of the additional premiums, if any, for
such coverage shall be reimbursed by Healthcare within 15 days of the
Distribution Date.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received
with respect to claims, costs and expenses under the Policies shall be paid to
Healthcare with respect to the Healthcare Liabilities and to LTC with respect to
the LTC Retained Liabilities. Payment of the allocable portions of indemnity
costs of Insurance Proceeds resulting from the liability policies will be made
to the appropriate party upon receipt from the insurance carrier. In the event
that the aggregate limits on any Shared Policies are exceeded, the parties agree
to provide an equitable allocation of Insurance Proceeds received after the
Distribution Date based upon their respective bona fide claims. The parties
agree to use their best efforts to cooperate with respect to insurance matters.
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE
In the event that Insured Claims of LTC and Healthcare exist relating
to the same occurrence, such parties agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this Section 8.04 shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. COMPLETE AGREEMENT; CONSTRUCTION
This Agreement, including the Schedules and Exhibits and the Related
Agreements and other agreements and documents referred to herein constitutes the
entire agreement and supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral, between the parties
hereto with respect to the subject matter hereof, so that no such external or
separate agreement relating to the subject matter of this Agreement shall have
any effect or be binding, unless the same is referred to specifically in this
Agreement or is executed by the parties after the date hereof. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Related Agreements, the Related Agreements shall
control.
Section 9.02. EXPENSES
Except as otherwise set forth in this Agreement or any Related
Agreement, all costs and expenses in connection with the preparation, execution,
delivery and implementation of this Agreement, the Distribution and with the
consummation of the transactions contemplated by this Agreement shall be charged
to the party for whose benefit the expenses are incurred, with any expenses
which cannot be allocated on such basis to be split equally between the parties.
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Section 9.03. GOVERNING LAW
This Agreement and the rights and obligations of the parties hereunder
shall be governed by the laws of the State of California, without regard to the
principles of choice of law thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
Section 9.04. NOTICES
Notices shall be sent to the parties at the following addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return
receipt requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery service,
or transmission by facsimile. Any party to this Agreement may change its
address for notice by giving written notice to the other party at the address
and in accordance with the procedures provided above.
Section 9.05. AMENDMENTS; WAIVERS
No termination, cancellation, modification, amendment, deletion,
addition or other change in this Agreement, or any provision hereof, or waiver
of any right or remedy herein provided, shall be effective for any purpose
unless such change or waiver is specifically set forth in a writing signed by
the party or parties to be bound thereby. The waiver of any right or remedy
with respect to any occurrence on one occasion shall not be deemed a waiver of
such right or remedy with respect to such occurrence on any other occasion.
Section 9.06. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
shall not be assigned without the express written consent of each of the parties
hereto.
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Section 9.07. TERMINATION
This Agreement may be terminated and the Distribution abandoned at any
time prior to the Distribution Date by and in the sole discretion of the LTC
Board without the approval of Healthcare or of the stockholders of LTC. In the
event of such termination, no party shall have any liability to any other party
pursuant to this Agreement.
Section 9.08. SUBSIDIARIES
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary of such party which is contemplated to
be a Subsidiary of such party on and after the Distribution Date.
Section 9.09. NO THIRD-PARTY BENEFICIARIES
Except for the provisions of Article V relating to Indemnities, this
Agreement is solely for the benefit of the parties hereto and their respective
Subsidiaries and Affiliates and should not be deemed to confer upon
third-parties any remedy, claim, Liability, reimbursement, claim of action or
other right in excess of those existing without reference to this Agreement.
Section 9.10. TITLES AND HEADINGS
Titles and headings to sections herein are inserted for the
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
Section 9.11. EXHIBITS AND SCHEDULES
The Exhibits and Schedules shall be construed with and as an integral
part of this Agreement to the same extent as if the same had been set forth
verbatim herein.
Section 9.12. LEGAL ENFORCEABILITY
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available
to any party hereto, each party hereto acknowledges that damages would be an
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
Section 9.13. ARBITRATION OF DISPUTES
(a) Any controversy or claim arising out of this Agreement, or any
breach of this Agreement, including any controversy relating to a determination
of whether specific assets
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constitute Healthcare Assets or LTC Retained Assets or whether specific
Liabilities constitute Healthcare Liabilities or LTC Retained Liabilities, shall
be settled by arbitration in accordance with the Rules of the American
Arbitration Association then in effect, as modified by this Section 9.13 or by
the further agreement of the parties.
(b) Such arbitration shall be conducted in Los Angeles, California.
(c) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall have
the authority to award to the prevailing party its attorneys' fees and costs
incurred in such arbitration. The arbitrators shall not, under any
circumstances, have any authority to award punitive, exemplary or similar
damages, and may not, in any event, make any ruling, finding or award that does
not conform to the terms and conditions of this Agreement.
(d) Nothing contained in this Section 9.13 shall limit or restrict in
any way the right or power of a party at any time to seek injunctive relief in
any court and to litigate the issues relevant to such request for injunctive
relief before such court (i) to restrain any other party from breaching this
Agreement or (ii) for specific enforcement of this Section 9.13. The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 9.13 will not be adequate and that, in addition to all other legal
remedies, each party is entitled to an order specifically enforcing this Section
9.13.
(e) The parties hereby consent to the jurisdiction of the federal
courts located in Los Angeles, California for all purposes under this Agreement.
(f) Neither the parties nor the arbitrators may disclose the
existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of the parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
(g) Except as provided in Section 9.13(c), each party shall bear its
own costs incurred in the arbitration. If any party refuses to submit to
arbitration any dispute required to be submitted to arbitration pursuant to this
Section 9.13, and instead commences any other proceeding, including, without
limitation, litigation, then the party who seeks enforcement of the obligation
to arbitrate shall be entitled to its attorneys' fees and costs incurred in any
such proceeding.
Section 9.14. SEVERABILITY
In the event that one or more of the terms or provisions of this
Agreement or the application thereof to any person(s) or in any circumstance(s)
shall, for any reason and to any extent be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such court shall have the
power, and hereby is directed, to substitute for or limit such invalid term(s),
provision(s) or application(s) and to enforce such substituted or limited terms
or provisions, or the application thereof. Subject to the foregoing, the
invalidity, illegality or enforceability of any one or more of the terms or
provisions of this Agreement, as the same may be amended from
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time to time, shall not affect the validity, legality or enforceability of any
other term or provision hereof.
Section 9.15. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which together shall be deemed to be an original and all of which together shall
be deemed to constitute one and the same agreement.
Section 9.16. RELATIONSHIP OF PARTIES
Nothing in this Agreement shall be deemed or construed by the parties
or any third party as creating the relationship of principal and agent,
partnership or joint venture between the parties, it being understood and agreed
that no provision contained herein, and no act of the parties, shall be deemed
to create any relationship between the parties other than the relationship set
forth herein.
Section 9.17. FURTHER ACTION
Healthcare and LTC each shall cooperate in good faith and take such
steps and execute such papers as may be reasonably requested by the other party
to implement the terms and provisions of this Agreement.
Section 9.18. PREDECESSORS AND SUCCESSORS
To the extent necessary to give effect to the purposes of this
Agreement, any reference to any corporation shall also include any predecessor
or successor thereto, by operation of law or otherwise.
{SIGNATURE PAGE FOLLOWS}
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
LTC PROPERTIES, INC.
BY: /s/ ANDRE C. DIMITRIADIS
---------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE, INC.
By: /s/ JAMES J. PIECZYNSKI
---------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
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SCHEDULES
Schedule 1.01(a): LTC Shares
Schedule 1.01(b): LTC Real Estate Assets
Schedule 1.01(c): Healthcare Liabilities
Schedule 1.01(d): Healthcare Board
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SCHEDULE 1.01(a)
LTC SHARES
30,847 shares of common stock of Assisted Living Concepts, Inc.
69,000 shares of common stock of Regent Assisted Living, Inc.
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SCHEDULE 1.01(b)
LTC REAL ESTATE ASSETS
Coronado Care Center
Park Villa Convalescent Center
Casa Maria Nursing Home
Casa Arena Blanca
Sunrise Golden Age Care & Rehabilitation
Sunrise High Plains Care & Rehabilitation
Boulevard Manor
Karrington on the Scioto
Karrington of Bexley
Karrington at Tucker Creek
Karrington Place
Karrington of Rocky River
Karrington of Presque Isle
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SCHEDULE 1.01(c)
HEALTHCARE LIABILITIES
$20 million 10% unsecured revolving note payable to LTC Properties, Inc. due
March 31, 2008
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SCHEDULE 1.01(d)
HEALTHCARE BOARD
Andre C. Dimitriadis
James J. Pieczynski
Steven Stuart
Bary G. Bailey
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EXHIBITS
Exhibit A: Administrative Services Agreement
Exhibit B: Healthcare Bylaws
Exhibit C: Healthcare Articles
Exhibit D: Healthcare Employees
Exhibit E: Tax Sharing Agreement
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EXHIBIT A
FORM OF ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and
entered into as of __________, 1998, by and between LTC PROPERTIES, INC., a
Maryland corporation ("LTC"), and LTC HEALTHCARE, INC., a Nevada corporation
("Healthcare," and collectively with LTC, the "Parties"), effective as of the
Distribution Date (as hereinafter defined).
R E C I T A L S
WHEREAS, subject to certain conditions, LTC intends to spin-off
certain businesses and assets by distributing to LTC common stockholders,
Series C preferred stockholders and debentureholders 1/10 of a share of
common stock, $.01 par value per share, of Healthcare for each share of
common stock, $.01 par value per share ("LTC Common Stock"), of LTC held and
for each share of LTC Common Stock into which shares of Series C preferred
stock and debentures may be converted as of the close of business on the
Record Date (the "Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
entered into a Distribution Agreement of even date herewith (the "Distribution
Agreement");
WHEREAS, after the Distribution, Healthcare will need office space for
its principal corporate office and certain management and administrative
services to be provided by LTC to Healthcare for a period of time from and
after the Distribution Date; and
WHEREAS, in connection with the Distribution, Healthcare has requested
LTC to provide, and LTC has agreed to provide, office space and certain
management and administrative services to Healthcare from and after the
Distribution Date pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, LTC and Healthcare agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings indicated below:
"Affiliate" -- with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of LTC shall not include
Healthcare or any other Person which would be an Affiliate of LTC by reason of
LTC's ownership of the capital stock of Healthcare prior to the Distribution or
the fact that any officer or director of Healthcare shall also serve as an
officer or director of LTC, and (ii) the Affiliates of Healthcare shall not
include LTC or any other Person which would be an Affiliate of Healthcare by
reason of LTC's ownership of the capital stock of
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Healthcare prior to the Distribution or the fact that any officer or director of
Healthcare shall also serve as an officer or director of LTC.
"Agreement" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Change in Control" shall mean a change in ownership or control of a
party effected through either of the following transactions:
(i) any person or related group of persons (other than
such party or a Affiliate of such party) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of such
party's outstanding securities; or
(ii) there is a change in the composition of such party's
board of directors over a period of thirty-six (36) consecutive months
(or less) such that a majority of the board members (rounded up to the
nearest whole number) ceases, by reason of one or more proxy contests for
the election of board members, to be comprised of individuals who either
(A) have been board members continuously since the beginning of such
period or (B) have been elected or nominated for election as board
members during such period by at least a majority of the board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the board; or
(iii) there is a change in the composition of such party's
senior executive management such that both Andre C. Dimitriadis and James
J. Pieczynski cease to be employed by such party.
"Distribution" -- shall have the meaning set forth in the first recital
of this Agreement.
"Distribution Agreement" -- the agreement described in the second
recital of this Agreement.
"Distribution Date" -- the date on which the Distribution occurs, as
defined in the Distribution Agreement.
"Employee Benefit Plan" -- any plan, policy, arrangement, contract or
agreement providing compensation benefits for any group of LTC Employees or
former LTC Employees or individual LTC Employee or former LTC Employee, or the
dependents or beneficiaries of any such LTC Employee or former LTC Employee,
whether formal or informal or written or unwritten, and including, without
limitation, any means, whether or not legally required, pursuant to which any
benefit is provided by LTC to any LTC Employee or former LTC Employee or the
beneficiaries of any such LTC Employee or former LTC Employee, adopted or
entered into by LTC prior to, upon or after the Distribution. The term
"Employee Benefit Plan" as used in this Agreement does not include any contract,
agreement or understanding entered into by LTC relating to settlement of actual
or potential LTC Employee related litigation claims.
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"First Month" -- In the event that the Distribution Date does not fall
on the first day of a month, the month that includes the Distribution Date.
"Full Month" -- A full calendar month during the Term.
"Healthcare" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Healthcare Business" -- any business or operation of Healthcare which
is, pursuant to the Distribution Agreement, to be conducted by Healthcare after
the Distribution.
"Healthcare Employee" -- any individual who (i) is independently hired by
Healthcare after the Distribution Date as an employee of Healthcare, and (ii) is
not an employee or director of LTC.
"Last Month" -- In the event that the Termination Date does not fall on
the last day of a month, the month that includes the Termination Date.
"LTC" -- shall have the meaning set forth in the introductory paragraph
hereof.
"LTC Employee" -- any individual who is an employee or director of LTC
and is not a Healthcare Employee.
"Month" -- a Full Month, First Month or Last Month, as the case may be.
"Monthly Fee" -- The amount payable by Healthcare to LTC under Section
4.1 herein with respect to a particular Full Month or any First Month or Last
Month.
"Parties" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Person" -- any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
"Principal Office" -- shall have the meaning set forth in Section 4.2
hereof.
"Record Date" -- _________, 1998.
"Services" -- shall have the meaning set forth in Section 2 hereof.
"Term" -- shall have the meaning set forth in Section 3 hereof.
"Termination Date" -- shall have the meaning set forth in Section 3
hereof.
2. ENGAGEMENT OF LTC. During the term of this Agreement, LTC shall
provide to Healthcare office space and certain management and administrative
services ("Services"), as more fully described and defined below, as may be
necessary or desirable, or as Healthcare may reasonably request or require,
in connection with the business, operations and affairs of Healthcare.
"Services" means and includes, without limitation, the furnishing of advice,
assistance, guidance, equipment office space and the services of LTC
Employees in connection with, among other things, (i) the Healthcare
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Business and (ii) the use of LTC's management information and accounting
system, the administration of insurance and worker's compensation programs,
legal and employee benefit services and the preparation of payrolls.
3. TERM; TERMINATION. This Agreement shall commence as of the date
hereof for a term of ten years and continue thereafter unless and until
terminated upon the earlier of (a) not less than thirty (30) days' prior
written notice by either Party to the other at any time for any reason or
(b) a Change in Control of LTC (the "Termination Date", with the term of this
Agreement as set forth in this Section 3 being referred to as the "Term").
4. PAYMENTS TO LTC.
4.1. GENERALLY.
(a) FULL MONTH. With respect to each Full Month, in
consideration of the Services provided by LTC hereunder, Healthcare shall pay
to LTC fees equal to 25% of (1) the aggregate amount of all wages, salaries
and bonuses paid to LTC Employees and (2) the aggregate amount of rent paid
by LTC for rental of its principal corporate office located at 300 Esplanade
Drive, Suite 1860, Oxnard, CA 93030 (the "Principal Office") during the Full
Month.
(b) FIRST MONTH AND LAST MONTH. With respect to any First
Month or Last Month, in consideration of the Services provided by LTC
hereunder, Healthcare shall pay to LTC fees equal to the product of:
(i) 25% of (1) the aggregate amount of all wages,
salaries and bonuses paid to LTC Employees and (2) the aggregate amount of
rent paid by LTC for rental of the Principal Office during the First Month or
Last Month, as the case may be; and
(ii) the number of days in the First Month or the Last
Month, as the case may be, which are included in the Term, divided by the
total number of days in the First Month or the Last Month, as the case may be.
4.2. STATEMENT FROM LTC. Promptly and in any event not later than
ten (10) days following the end of each Month, LTC shall provide to
Healthcare a statement setting forth (i) a list of the LTC Employees, (ii)
the aggregate amount of all wages, salaries and bonuses paid to LTC Employees
during the Month and (iii) the aggregate amount of rent paid by LTC for
rental of the Principal Office during the Month.
4.3. PAYMENT BY HEALTHCARE. Promptly and in any event not later
than five (5) days after delivery by LTC of each statement referred to in
Section 4.2, Healthcare shall pay to LTC the Monthly Fee applicable to the
Month to which such statement relates.
5. EMPLOYEE BENEFIT PLANS. From and after the Distribution Date, LTC
shall permit the LTC Employees to continue to participate in the Employee
Benefit Plans on the same basis as such persons participated immediately
prior to the Distribution Date, provided, however, nothing contained in this
Agreement shall prohibit LTC from modifying or terminating any one or more of
the Employee Benefit Plans so long as such modification or termination shall
apply to all participants in such Employee Benefit Plans. LTC shall provide
Healthcare with thirty (30)
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days' prior written notice of its intent to terminate any Employee Benefit Plan
or effect the modification thereof in a manner adverse to Healthcare; provided
that no such notice shall be required for any Employee Benefit Plan which
terminates by its terms without any action by LTC.
6. EMPLOYEES. Nothing in this Agreement shall prohibit Healthcare from
independently hiring one or more Healthcare Employees; provided, however, that
(i) all wages, salaries, payroll taxes, and employee benefits with respect to
Healthcare Employees shall be Healthcare's sole responsibility, and
(ii) Healthcare Employees shall not be subject to this Agreement.
7. GENERAL.
7.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the Parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
Parties, it being understood and agreed that no provision contained herein, and
no act of the Parties, shall be deemed to create any relationship between the
Parties other than the relationship set forth herein.
7.2. ACCESS TO INFORMATION; COOPERATION. LTC and Healthcare and their
authorized agents shall be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other Party,
including any agent, contractor, subcontractor, agent or any other person or
entity under the contract of such Party.
7.3. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the Parties hereto.
7.4. TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
7.5. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
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7.6. NOTICES. Notices shall be sent to the Parties at the following
addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return receipt
requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery service,
or transmission by facsimile. Any Party to this Agreement may change its
address for notice by giving written notice to the other Party at the address
and in accordance with the procedures provided above.
7.7. FURTHER ACTION. Healthcare and LTC each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other Party to implement the terms and provisions of this Agreement.
7.8. AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the Party or Parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
7.9. GOVERNING LAW. This Agreement and the rights and obligations of
the Parties hereunder shall be governed by the laws of the State of California,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a Party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.
7.10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the Parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
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binding, unless the same is referred to specifically in this Agreement or is
executed by the Parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern.
7.11. DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
9.13 of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
7.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
7.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the Parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
7.14. EXPENSES. Except as otherwise set forth in this Agreement, all
costs and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the Party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the Parties.
7.15. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any Party hereto, each Party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the Parties
hereunder shall be specifically enforceable.
7.16. PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation shall
also include any predecessor or successor thereto, by operation of law or
otherwise.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
LTC PROPERTIES, INC., a Maryland corporation
By: ______________________________________
Name: _______________________________
Title: _______________________________
LTC HEALTHCARE, INC., a Nevada corporation
By: _____________________________________
Name: _______________________________
Title: _______________________________
S-1
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EXHIBIT B
FORM OF
AMENDED AND RESTATED BYLAWS
OF
LTC HEALTHCARE, INC.
ARTICLE I
OFFICES
SECTION 1.01 REGISTERED OFFICE. The registered office of the
corporation shall be in the City of Las Vegas, County of Clark, State of Nevada.
The corporation may, from time to time, in the manner provided by law, change
the registered office within the State of Nevada.
SECTION 1.02 OTHER OFFICES. The corporation may also maintain an office
or offices at such other places within or without the State of Nevada as the
Board of Directors may form time to time determine or the business of the
corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 2.01 ANNUAL MEETING. The annual meeting of stockholders shall
be held each year on a date and time designated by the Board of Directors. Any
previously scheduled annual meeting of the stockholders may be postponed by
resolution of the Board of Directors upon public notice given prior to the date
previously scheduled for such annual meeting of the stockholders.
SECTION 2.02 SPECIAL MEETINGS.
(a) Except as otherwise required by law and subject to the rights
of the holders of Preferred Stock, special meetings of stockholders may be
called only by the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors, the chairman of the board, chief
executive officer, or president. Each special meeting shall be held at such
date, time and place either within or without the State of Nevada as shall be
designated by the Board of Directors at least ten (10) days prior to such
meeting.
(b) No business shall be acted upon at a special meeting except
as set forth in the notice calling the meeting, unless one of the conditions for
the holding of a meeting without notice set forth in Section 2.05 shall be
satisfied, in which case any business (except as noted in Section 2.12
immediately below) may be transacted and the meeting shall be valid for all
purposes.
SECTION 2.03 PLACE OF MEETINGS. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the
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United States as the Board of Directors may designate. A waiver of notice
signed by stockholders entitled to vote may designate any place for the holding
of such meeting.
SECTION 2.04 NOTICE OF MEETINGS.
(a) The president, a vice president, the secretary, an
assistant secretary or any other individual designated by the Board of
Directors shall sign and deliver written notice of any meeting at least ten
(10) days, but not more than sixty (60) days, before the date of such meeting
to each stockholder of record entitled to vote at the meeting. In addition, a
copy of such notice shall be delivered to the Pacific Exchange at least ten
(10) days prior to the date of such meeting. The notice shall state the
place, date and time of the meeting and the purpose or purposes for which the
meeting is called.
(b) In the case of an annual meeting, subject to Section 2.12,
any proper business may be presented for action, except that action on any of
the following items shall be taken only if the general nature of the proposal is
stated in the notice:
(1) Action with respect to any contract or transaction
between the corporation and one or more of its directors or officers or between
the corporation and any corporation, firm or association in which one or more of
the corporation's directors or officers is a director or officer or is
financially interested;
(2) Adoption of amendments to the Articles of
Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, partial or complete liquidation, or dissolution of the
corporation.
(c) A copy of the notice shall be personally delivered or
mailed postage prepaid to each stockholder of record entitled to vote at the
meeting at the address appearing on the records of the corporation, and the
notice shall be deemed delivered the date the same is deposited in the United
States mail for transmission to such stockholder. If the address of any
stockholder does not appear upon the records of the corporation, it will be
sufficient to address any notice to such stockholder at the registered office of
the corporation.
(d) The written certificate of the individual signing a notice
of meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
SECTION 2.05 MEETING WITHOUT NOTICE.
(a) Whenever all persons entitled to vote at any meeting
consent, either by:
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(1) A writing on the records of the meeting or filed
with the secretary; or
(2) Presence at such meeting and oral consent entered on
the minutes; or
(3) Taking part in the deliberations at such meeting
without objection; The doings of such meeting shall be as valid as if had at a
meeting regularly called and noticed.
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the proceedings of the
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting.
(d) Such consent or approval may be by proxy or power of
attorney, but all such proxies and powers of attorney must be in writing.
SECTION 2.06 DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) For the purpose of determining the stockholders entitled to
notice of and to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any distribution or the allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held and (ii) for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 2.07 QUORUM; ADJOURNED MEETINGS.
(a) Unless the Articles of Incorporation provide for a
different proportion, stockholders holding at least a majority of the voting
power of the corporation's stock, represented in person or by proxy, are
necessary to constitute a quorum for the transaction of
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business at any meeting. If, on any issue, voting by classes is required by the
laws of the State of Nevada, the Articles of Incorporation or these Bylaws, at
least a majority of the voting power within each such class is necessary to
constitute a quorum of each such class.
(b) If a quorum is not represented, a majority of the voting
power so represented may adjourn the meeting from time to time until holders of
the voting power required to constitute a quorum shall be represented. At any
such adjourned meeting at which a quorum shall be represented, any business may
be transacted which might have been transacted as originally called. When a
stockholders' meeting is adjourned to another time or place hereunder, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum of the voting power.
SECTION 2.08 VOTING.
(a) Unless otherwise provided in the Articles of Incorporation,
or in the resolution providing for the issuance of the stock adopted by the
Board of Directors pursuant to authority expressly vested in it by the
provisions of the Articles of Incorporation, each stockholder of record, or such
stockholder's duly authorized proxy or attorney-in-fact, shall be entitled to
one (1) vote for each share of voting stock standing registered in such
stockholder's name on the record date. No stockholder of the corporation shall
be entitled to cumulative voting for the election of directors.
(b) Except as otherwise provided herein, all votes with respect
to shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided, that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of
a minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the board of directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the chairman of the board of
directors, president or any vice-president of such corporation and (ii) in the
case of a partnership, limited liability company
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or other legal entity, by an individual representing such stockholder upon
presentation to the corporation of satisfactory evidence of his authority to do
so.
(d) Notwithstanding anything to the contrary herein contained,
no votes may be cast for shares owned by this corporation or its subsidiaries,
if any. If shares are held by this corporation or its subsidiaries, if any, in
a fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same binding
instructions on how to vote.
(e) Any holder of shares entitled to vote on any matter may
cast a portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person
binds all.
(2) If more than one person casts votes, the act of the
majority so voting binds all.
(3) If more than one person casts votes, but the vote is
evenly split on a particular matter, the votes shall be deemed cast
proportionately, as split.
(g) If a quorum is present, unless the Articles of
Incorporation provide for a different proportion, the affirmative vote of
holders of at least a majority of the voting power represented at the meeting
and entitled to vote on any matter shall be the act of the stockholders, unless
voting by classes is required for any action of the stockholders by the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, in which
case the affirmative vote of holders of a least a majority of the voting power
of each such class shall be required.
SECTION 2.09 PROXIES. At any meeting of stockholders, any holder of
shares entitled to vote may designate, in a manner permitted by the laws of the
State of Nevada, another person or persons to act as a proxy or proxies. No
proxy is valid after the expiration of six (6) months from the date of its
creation, unless it is coupled with an interest or unless otherwise specified in
the proxy. In no event shall the term of a proxy exceed seven (7) years from
the date of its creation. Every proxy shall continue in full force and effect
until its expiration or revocation in a manner permitted by the laws of the
State of Nevada.
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SECTION 2.10 ORDER OF BUSINESS. At the annual stockholder's meeting,
the regular order of business shall be as follows:
1. Determination of stockholders present and existence of
quorum, in person or by proxy;
2. Reading and approval of the minutes of the previous meeting
or meetings;
3. Reports of the Board of Directors, and, if any, the
president, treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
SECTION 2.11 ABSENTEES' CONSENT TO MEETINGS. Transactions of any
meeting of the stockholders are as valid as though had at a meeting duly held
after regular call and notice if a quorum is represented, either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not represented in person or by proxy (and those who, although present,
either object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not properly included in the notice if
such objection is expressly made at the time any such matters are presented at
the meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any written
waiver of notice or consent, except as otherwise provided in Section 2.04(a) and
(b) or Section 2.12 (if applicable) of these Bylaws.
SECTION 2.12 BUSINESS TO BE CONDUCTED AT MEETING. At an annual or
special meeting of the stockholders, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before a meeting, business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of
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Directors, (b) brought before the meeting by or at the direction of the Board of
Directors, (c) properly brought before an annual meeting by a stockholder, or
(d) if, and only if, the notice of a special meeting provides for business to be
brought before the meeting by stockholders, properly brought before the meeting
by a stockholder who is a stockholder of record at the time of serving of the
notice pursuant to Section 2.04, who shall be entitled to vote at such meeting
and who complies with the notice procedures set forth in this Section 2.12. For
business to be properly brought before a meeting by a stockholder pursuant to
the preceding clauses (c) or (d), the stockholder must have given timely notice
thereof in writing to the secretary of the corporation. To be timely, a
stockholder's notice must be delivered to, or mailed and received by, the
secretary at the principal executive office of the corporation not less than
thirty-five (35) days prior to the meeting; PROVIDED, HOWEVER, that in the event
less than forty-five (45) days notice or public disclosure of the date of the
meeting is given or made to the stockholders, notice by the stockholder to be
timely must be so received not later than the fifth (5th) day following the day
on which such notice of the date of the meeting was mailed or such disclosure
was made. In no event shall the public disclosure of an adjournment of an
annual or special meeting commence a new time period for the giving of
stockholder's notice as described above. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder proposes to bring
before the meeting (a) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(b) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, and the name and address of the beneficial
owner, if any, on whose behalf the proposal is made, (c) the class and number of
shares of the corporation which are owned beneficially and of record by such
stockholder of record and by the beneficial owner, if any, on whose behalf the
proposal is made, and (d) any material interest of such stockholder of record
and the beneficial owner, if any, on whose behalf the proposal is made in such
business. Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at a meeting except in accordance with the procedures set
forth in this Section 2.12. The presiding officer at the meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
brought in accordance with this Section 2.12, and if he should so determine, he
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. Notwithstanding the foregoing
provisions of this Section 2.12, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations therunder with respect to the
matters set forth herein. As used herein, "public disclosure" shall mean
disclosure in a press release reported by the Dow Jones News Association, the
Associated Press, or comparable news service or in a document publicly filed
with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d)
of the Exchange Act.
SECTION 2.13 NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Stockholders may take action only at a regular or special meeting of
stockholders.
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ARTICLE III
DIRECTORS
SECTION 3.01 NUMBER, ELECTION, TENURE, AND QUALIFICATIONS. Except as
otherwise fixed by resolution of the Board of Directors pursuant to the Articles
of Incorporation relating to the authorization of the Board of Directors to
provide by resolution for the issuance of Preferred Stock and to determine the
rights of the holders of such Preferred Stock to elect directors, the Board of
Directors shall consist of at least one (1) individual who shall be elected at
the annual meeting of the stockholders of the corporation and who shall hold
office for one (1) year or until his or her successor is elected and qualify. A
director need not be a stockholder of the corporation.
SECTION 3.02 CHANGE IN NUMBER. Subject to any limitation in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the number
of directors may be changed from time to time by resolution adopted by the Board
of Directors.
SECTION 3.03 REDUCTION IN NUMBER. No reduction in the number of
directors shall have the effect of removing any director prior to the expiration
of his term in office.
SECTION 3.04 NOMINATION OF DIRECTORS. Except as otherwise fixed by
resolution of the Board of Directors pursuant to the Articles of Incorporation
relating to the authorization of the Board of Directors to provide by resolution
for the issuance of Preferred Stock and to determine the rights of the holders
of such Preferred Stock to elect directors, nominations for the election of
directors may be made by the Board of Directors, by a committee appointed by the
board of directors, or by any stockholder of record at the time of giving of
notice provided for herein. However, any stockholder entitled to vote in the
election of directors as provided herein may nominate one or more persons for
election as directors at a meeting only if written notice of such stockholder's
intent to make such nomination or nominations has been delivered to or mailed
and received by the secretary of the corporation not later than, (a) with
respect to an election to be held at an annual meeting of stockholders, 120
calendar days in advance of the first anniversary of the date the corporation's
proxy statement was released to security holders in connection with the
preceding year's annual meeting; PROVIDED, HOWEVER, that in the event that the
date of the annual meeting is changed by more than thirty (30) days from such
anniversary date, notice by the stockholder to be timely must be received not
later than the close of business on the tenth (10th) day following the earlier
of the day on which notice of the date of the meeting was mailed or public
disclosure was made, and (b) with respect to an election to be held at a special
meeting of stockholders for the election of directors, not earlier than the
close of business on the 90th day prior to such special meeting and not later
than the close of business on the later of the 60th day prior to such special
meeting or the tenth (10th) day following the day on which public disclosure is
first made of the date of the special meeting and the nominees proposed by the
board of directors to be elected at such a meeting. Notwithstanding any of the
foregoing to the contrary, in the event that the number of directors to be
elected by the Board of Directors of the corporation is increased and there is
no public disclosure by the corporation naming the nominees for director or
specifying the size of the increased Board of Directors at least seventy (70)
days prior to the first anniversary of the date of the preceding year's annual
meeting, a
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stockholder's notice required hereunder shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the secretary at the principal executive office of the
corporation not later than the close of business on the tenth (10th) day
following the earlier of day on which notice of the meeting is mailed or such
public disclosure is first made by the corporation. In no event shall the
public announcement of an adjournment of an annual or special meeting commence a
new time period for the giving of a stockholder's notice as describe above.
Each such notice shall set forth: (a) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) the class and number of shares of the corporation which are
beneficially owned by such stockholder and also which are owned of record by
such stockholder; (d) as to the beneficial owner, if any, on whose behalf the
nomination is made, (i) the name and address of such person and (ii) the class
and number of shares of the corporation which are beneficially owned by such
person; (e) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (f) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had such
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (g) the written consent of each nominee to being named as nominee in the
proxy statement and to serving as a director of the corporation if so elected.
At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the secretary of the
corporation, that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. The presiding officer of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure. As used herein, "public disclosure"
shall have the meaning set forth in Section 2.12. No person shall be eligible
to serve as a director of the corporation unless nominated in accordance with
the procedures set forth in this Section 3.04. The presiding officer at the
meting shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by this
Section 3.04, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded. Notwithstanding the
foregoing provisions hereof, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth herein.
SECTION 3.05 VACANCIES; NEWLY CREATED DIRECTORSHIPS. Except as
otherwise fixed by resolution of the Board of Directors pursuant to the Articles
of Incorporation relating to the authorization of the Board of Directors to
provide by resolution for the issuance of Preferred Stock and to determine the
rights of the holders of such Preferred Stock to elect directors, any vacancies
on the Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office, or other cause, and newly created
directorships resulting from any increase in the authorized number of directors,
may be filled only by a majority vote of the directors then in office, though
less than a quorum, or by a sole remaining director, and the director(s) so
chosen shall hold office (i) in the case of the replacement of a director,
during the
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remainder of the term of office of the replaced director and (ii) in the case of
an increase in the number of directors, until the next annual meeting of
stockholders at which directors are elected, unless sooner displaced.
SECTION 3.06. REMOVAL OF DIRECTORS. Subject to any rights of the holders
of Preferred Stock, any director may be removed from office by the affirmative
vote of the holders of at least two-thirds (2/3rds) of the voting power of all
shares of the corporation entitled to vote generally in the election of
directors (voting as a single class).
SECTION 3.07 ANNUAL AND REGULAR MEETINGS. Immediately following the
adjournment of, and at the same place as, the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
3.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
SECTION 3.08 SPECIAL MEETINGS. Except as otherwise required by law, and
subject to the rights, if any, of the holders of Preferred Stock, special
meetings of the Board of Directors may be called by the chairman, or if there be
no chairman, by the president or secretary and shall be called by the chairman,
the president or the secretary upon the request of any two (2) directors. If
the chairman, or if there be no chairman both the president and secretary,
refuses or neglects to call such special meeting, a special meeting may be
called by notice signed by any two (2) directors.
SECTION 3.09 PLACE OF MEETINGS. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting, may designate. A waiver of notice signed by directors may designate
any place for the holding of such meeting.
SECTION 3.10 NOTICE OF MEETINGS. Except as otherwise provided in
Section 3.07, there shall be delivered to all directors, at least forty-eight
(48) hours before the time of such meeting, a copy of a written notice of any
meeting by delivery of such notice personally by mailing such notice postage
prepaid or by telegram. Such notice shall be addressed in the manner provided
for notice to stockholders in Section 2.04(c). If mailed, the notice shall be
deemed delivered two (2) business days following the date the same is deposited
in the United States mail, postage prepaid. Any director may waive notice of
any meeting, and the attendance of a director at a meeting and oral consent
entered on the minutes of the meeting or taking part in deliberations of the
meeting without objection shall constitute a waiver of notice of such meeting.
Attendance for the express purpose of objecting to the transaction of business
thereat because the meeting is not properly called or convened shall not
constitute presence nor a waiver of notice for purposes hereof.
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SECTION 3.11 QUORUM; ADJOURNED MEETINGS.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is
not present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
SECTION 3.12 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present is
the act of the Board of Directors.
SECTION 3.13 TELEPHONIC MEETINGS. Members of the Board of Directors or
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or committee by means of a telephone
conference or similar method of communication by which all persons participating
in such meeting can hear each other. Participation in a meeting pursuant to
this Section 3.13 constitutes presence in person at the meeting.
SECTION 3.14 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the Board of Directors or of a committee thereof may
be taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
SECTION 3.15 POWERS AND DUTIES.
(a) Except as otherwise restricted in the laws of the State of
Nevada or the Articles of Incorporation, the Board of Directors has full control
over the affairs of the corporation. The Board of Directors may delegate any of
its authority to manage, control or conduct the business of the corporation to
any standing or special committee, as more fully set forth in Article V of these
Bylaws, or to any officer or agent and to appoint any persons to be agents of
the corporation with such powers, including the power to subdelegate, and upon
such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at
annual meetings of the stockholders, and when called for by a majority vote of
the stockholders at an annual meeting or, subject to Section 2.12, a special
meeting of the stockholders shall so present, a full and clear report of the
condition of the corporation.
(c) The Board of Directors, in its discretion, or the officer
of the corporation presiding at a meeting of stockholders, in his discretion,
may require that any votes cast at such meeting shall be cast by written ballot
and may submit any contract or act for approval or
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ratification at any annual meeting of the stockholders or any special meeting
properly called for the purpose of considering any such contract or act,
provided a quorum is present.
SECTION 3.16. COMPENSATION. The directors shall be paid their expenses of
attendance at each meeting of the board of directors and any applicable
committee and may be paid a fixed fee for attendance at each meeting of the
board of directors and any applicable committee or a stated salary as director
and member of an applicable committee. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 3.17 BOARD OF DIRECTORS' OFFICERS.
(a) At its annual meeting, the Board of Directors shall elect,
from among its members, a chairman who shall preside at meetings of the Board of
Directors and the stockholders. The Board of Directors may also elect such
other officers of the Board of Directors and for such term as it may, from time
to time, determine advisable.
(b) Any vacancy in any office of the Board of Directors because
of death, resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
SECTION 3.18 ORDER OF BUSINESS. The order of business at any meeting of
the Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting
or meetings;
3. Reports of officers and committeemen;
4. Election of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE IV
COMMITTEES
SECTION 4.01 STANDING COMMITTEES. The Board of Directors shall
designate an audit committee and a compensation committee, each committee to
consist of two or more directors to serve at the pleasure of the Board. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or
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members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. The committees shall keep regular minutes of their
proceedings and report the same to the Board when required
(a) AUDIT COMMITTEE. The audit committee will review the
annual audits of the corporation's independent public accountants, review and
evaluate internal accounting controls, recommend the selection of the
corporation's independent public accountants, review and pass upon (or ratify)
related party transactions, and conduct such reviews and examinations as it
deems necessary with respect to the practices and policies of, and the
relationship between, the corporation and its independent public accountants.
(b) COMPENSATION COMMITTEE. The Compensation Committee will
review salaries, bonuses and stock options of senior officers of the corporation
and administer the corporation's executive compensation policies and stock
option plan.
SECTION 4.02 SPECIAL COMMITTEES. In addition to the standing committees
provided in Section 4.01 above, the Board of Directors may, by resolution passed
by a majority of the whole board, designate one or more special committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors. The committees shall keep regular minutes of their
proceedings and report the same to the Board when required. Subject to
applicable law and to the extent provided in the resolution of the Board of
Directors, any committee designated hereunder shall have and may exercise all
the powers of the Board of Directors, except with respect to: (i) the approval
of any action which, under Chapter 78 of the Nevada Revised Statutes, also
requires the approval of the full Board of Directors, or the stockholders of the
outstanding shares; (ii) the filling of vacancies on the Board of Directors or
in any committee; (iii) the amendment or repeal of bylaws or the adoption of
new bylaws; (iv) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable; (v) a
distribution to the stockholders of the corporation, except at a rate or in a
periodic amount or within a price range determined by the Board of Directors; or
(vi) the appointment of any other committees of the Board of Directors or the
members thereof.
SECTION 4.03 MEETINGS AND ACTIONS OF COMMITTEES. Meetings and actions
of committees shall be governed by, and held and taken in accordance with
Sections 3.07 (annual and regular meetings), 3.08 (special meetings), 3.09
(place of meetings). 3.10 (notice of meetings), 3.11 (quorum and adjourned
meetings), 3.13 (telephonic meetings), and 3.13 (action without a meeting) of
these Bylaws, with such changes in the context of those bylaws as are necessary
to substitute the committee and its members for the Board of Directors, and
notice of
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special meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The Board of
Directors may adopt rules for the government of any committee not inconsistent
with the provisions of these Bylaws.
ARTICLE V
OFFICERS
SECTION 5.01 ELECTION. The Board of Directors, at its annual meeting,
shall elect a president, a secretary and a treasurer to hold office for a term
of one (1) year or until their successors are chosen and qualify. Any
individual may hold two or more offices. The Board of Directors may, from time
to time, by resolution, elect one or more vice-presidents, assistant
secretaries, assistant treasurers or other officers, and appoint agents of the
corporation, prescribe their duties and fix their compensation.
SECTION 5.02 REMOVAL; RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
SECTION 5.03 VACANCIES. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
SECTION 5.04 CHAIRMAN OF THE BOARD. The chairman shall be the chief
executive officer of the corporation and shall, subject to the control of the
Board of Directors, have general supervision, direction and control of the
business and affairs of the corporation and shall preside at meetings of the
stockholders and the Board of Directors.
SECTION 5.05 PRESIDENT.
(a) The president shall be the chief operations officer of the
corporation, subject to the supervision and control of the Board of Directors,
and shall direct the corporate affairs, with full power to execute all
resolutions and orders of the Board of Directors not expressly delegated to some
other officer or agent of the corporation. If the chairman of the Board of
Directors elects not to preside or is absent, the president shall preside at
meetings of the stockholders and Board of Directors and perform such other
duties as shall be prescribed by the Board of Directors.
(b) The president shall have full power and authority on behalf
of the corporation to attend and to act and to vote, or designate such other
officer or agent of the corporation to attend and to act and to vote, at any
meetings of the stockholders of any corporation in which the corporation may
hold stock and, at any such meetings, shall possess and may exercise any and all
rights and powers incident to the ownership of such stock. The Board
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of Directors, by resolution from time to time, may confer like powers on any
person or persons in place of the president to exercise such powers for these
purposes.
SECTION 5.06 VICE-PRESIDENTS. The Board of Directors may elect one or
more vice-presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act and
such other duties as shall be prescribed by the Board of Directors or the
president.
SECTION 5.07 SECRETARY. The secretary shall keep, or cause to be kept,
the minutes of proceedings of the stockholders and the Board of Directors in
books provided for that purpose. The secretary shall attend to the giving and
service of all notices of the corporation, may sign with the president in the
name of the corporation all contracts in which the corporation is authorized to
enter, shall have the custody or designate control of the corporate seal, shall
affix the corporate seal to all certificates of stock duly issued by the
corporation, shall have charge or designate control of stock certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
SECTION 5.08 ASSISTANT SECRETARIES. The Board of Directors may appoint
one or more assistant secretaries who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the secretary.
SECTION 5.09 TREASURER. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes, and other obligations, and shall
deposit all moneys to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer may sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities, and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these Bylaws, or by the Board of Directors to be signed by the treasurer.
The treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all moneys received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of treasurer subject to the control of
the Board of Directors.
The treasurer shall, if required by the Board of Directors, give bond to
the corporation in such sum and with such security as shall be approved by the
Board of Directors for the faithful performance of all the duties of treasurer
and for restoration to the corporation, in the event of the treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
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vouchers, money and other property in the treasurer's custody or control and
belonging to the corporation. The expense of such bond shall be borne by the
corporation.
SECTION 5.10 ASSISTANT TREASURERS. The Board of Directors may appoint
one or more assistant treasurers who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the treasurer. The
Board of Directors may require an assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for restoration
to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property in the assistant treasurer's custody or
control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
ARTICLE VI
CAPITAL STOCK
SECTION 6.01 ISSUANCE. Shares of the corporation's authorized stock
shall, subject to any provisions or limitations of the laws of the State of
Nevada, the Articles of Incorporation or any contracts or agreements to which
the corporation may be a party, be issued in such manner, at such times, upon
such conditions and for such consideration as shall be prescribed by the Board
of Directors.
SECTION 6.02 CERTIFICATES. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the corporation
and shall be manually signed by the president or a vice-president and also by
the secretary or an assistant secretary; provided, however, whenever any
certificate is countersigned or otherwise authenticated by a transfer agent or
transfer clerk, and by a registrar, then a facsimile of the signatures of said
officers may be printed or lithographed upon the certificate in lieu of the
actual signatures. If the Corporation uses facsimile signatures of its officers
on its stock certificates, it shall not act as registrar of its own stock, but
its transfer agent and registrar may be identical if the institution acting in
those dual capacities countersigns any stock certificates in both capacities.
Each certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement or
summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement, if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the stockholder,
the name, address and federal tax identification number of the stockholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
SECTION 6.03 SURRENDERED; LOST OR DESTROYED CERTIFICATES. All
certificates surrendered to the corporation, except those representing shares of
treasury stock, shall be canceled and no new certificate shall be issued until
the former certificate for a like number of shares shall have been canceled,
except that in case of a lost, stolen, destroyed or mutilated certificate, a new
one may be issued therefor. However, any stockholder applying for the issuance
of a stock certificate in lieu of one alleged to have been lost, stolen,
destroyed or
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mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require which shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
SECTION 6.04 REPLACEMENT CERTIFICATE. When the Articles of
Incorporation are amended in any way affecting the statements contained in the
certificates for outstanding shares of capital stock of the corporation or it
becomes desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, the merger of the corporation with another
corporation or the reorganization of the corporation, to cancel any outstanding
certificate for shares and issue a new certificate therefor conforming to the
rights of the holder, the Board of Directors may order any holders of
outstanding certificates for shares to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors.
The order may provide that a holder of any certificate(s) ordered to be
surrendered shall not be entitled to vote, receive distributions or exercise any
other rights of stockholders of record until the holder has complied with the
order, but the order operates to suspend such rights only after notice and until
compliance.
SECTION 6.05 TRANSFER OF SHARES. Upon surrender to the corporation, or
the transfer agent of the corporation, of a certificate or shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and the record the
transaction upon its books.
SECTION 6.06 TRANSFER AGENT; REGISTRARS. The Board of Directors may
appoint one or more transfer agents, transfer clerk and registrars of transfer
and may require all certificates for shares of stock to bear the signature of
such transfer agent, transfer clerk and/or registrar of transfer.
SECTION 6.07 STOCK TRANSFER RECORDS. The stock transfer records shall
be closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article VII hereof and during such periods as, from time to time, may be fixed
by the Board of Directors, and, during such periods, no stock shall be
transferable for purposes of Article VII and no voting rights shall be deemed
transferred during such periods. Subject to the forgoing limitations, nothing
contained herein shall cause transfers during such periods to be void or
voidable.
SECTION 6.08 MISCELLANEOUS. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as it
may deem expedient concerning the issue, transfer, and registration of
certificates for shares of the corporation's stock.
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ARTICLE VII
DISTRIBUTIONS
SECTION 7.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of
Directors may fix in advance a record date, as provided in Section 2.06, prior
to the distribution for the purpose of determining stockholders entitled to
receive any distribution. The Board of Directors may close the stock transfer
books for such purpose for a period of not more than ten (10) days prior to the
date of such distribution.
ARTICLE VIII
RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS
SECTION 8.01 RECORDS. All original records of the corporation, shall be
kept by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
SECTION 8.02 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every
director and officer shall have the absolute right at any reasonable time for a
purpose reasonably related to the exercise of such individual's duties to
inspect and copy all of the corporation's books, records, and documents of every
kind and to inspect the physical properties of the corporation and/or its
subsidiary corporations. Such inspection may be made in person or by agent or
attorney.
SECTION 8.03 CORPORATE SEAL. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
SECTION 8.04 FISCAL YEAR-END. The fiscal year-end of the corporation
shall be such date as may be fixed from time to time by resolution of the Board
of Directors.
SECTION 8.05 RESERVES. The Board of Directors may create, by
resolution, such reserves as the directors may, from time to time, in their
discretion, think proper to provide for contingencies, or to equalize
distributions or to repair or maintain any property of the corporation, or for
such other purpose as the Board of Directors may deem beneficial to the
corporation, and the directors may modify or abolish any such reserves in the
manner in which they were created.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.01 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) For purposes of this Article, (A) "Indemnitee" shall
mean each director or officer who was or is a party to, or is threatened to be
made a party to, or is otherwise involved in, any Proceeding (as hereinafter
defined), by reason of the fact that he or she is or was a director or officer
of the corporation or is or was serving in any capacity at the request of the
corporation as a director, officer, employee, agent, partner, or fiduciary of,
or in any other capacity for, another corporation or any partnership, joint
venture, trust, or other enterprise; and (B) "Proceeding" shall mean any
threatened, pending, or completed action, or suit (including without limitation
an action, suit or proceeding by or in the right of the corporation), whether
civil, criminal, administrative, or investigative.
(ii) Each Indemnitee shall be indemnified and held
harmless by the corporation for all actions taken by him or her and for all
omissions (regardless of the date of any such action or omission), to the
fullest extent permitted by Nevada law, against all expense, liability and loss
(including without limitation attorneys' fees, judgments, fines, taxes,
penalties, and amounts paid or to be paid in settlement) reasonably incurred or
suffered by the Indemnitee in connection with any Proceeding.
(iii) Indemnification pursuant to this Section shall
continue as to an Indemnitee who has ceased to be a director or officer and
shall inure to the benefit of his or her heirs, executors and administrators.
(b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS.
The corporation may, by action of its Board of Directors
and to the extent provided in such action, indemnify employees and other persons
as though they were Indemnitees.
(c) NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification provided in this Article
shall not be exclusive of any other rights that any person may have or hereafter
acquire under any statute, provision of the corporation's Articles of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise.
(d) INSURANCE.
The corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director,
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officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise for any liability asserted against him or her and
liability and expenses incurred by him or her in his or her capacity as a
director, officer, employee or agent, or arising out of his or her status as
such, whether or not the corporation has the authority to indemnify him or her
against such liability and expenses.
(e) OTHER FINANCIAL ARRANGEMENTS.
The other financial arrangements which may be made by the
corporation may include the following (i) the creation of a trust fund; (ii) the
establishment of a program of self-insurance; (iii) the securing of its
obligation of indemnification by granting a security interest or other lien on
any assets of the corporation; (iv) the establishment of a letter of credit,
guarantee or surety. No financial arrangement made pursuant to this subsection
may provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable for
intentional misconduct, fraud, or a knowing violation of law, except with
respect to advancement of expenses or indemnification ordered by a court.
(f) OTHER MATTERS RELATING TO INSURANCE OR FINANCIAL
ARRANGEMENTS.
Any insurance or other financial arrangement made on behalf
of a person pursuant to this section may be provided by the corporation or any
other person approved by the Board of Directors, even if all or part of the
other person's stock or other securities is owned by the corporation. In the
absence of fraud:
(i) the decision of the Board of Directors as to the
propriety of the terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the person to
provide the insurance or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(A) is not void or voidable; and
(B) does not subject any director
approving it to personal liability for his
action,
even if a director approving the insurance or other financial arrangement is a
beneficiary of the insurance or other financial arrangement.
SECTION 9.02 AMENDMENT. The provisions of this Article IX relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally (including, without limitation, Article X below), any repeal or
amendment of this Article IX which is adverse to any director or officer shall
apply to such director or officer
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only on a prospective basis, and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article IX so as to limit or reduce the indemnification in any manner
unless adopted by (a) the unanimous vote of the directors of the corporation
then serving, or (b) by the stockholders as set forth in Article X hereof;
provided that no such amendment shall have a retroactive effect inconsistent
with the preceding sentence.
ARTICLE X
AMENDMENT OR REPEAL
SECTION 10.01 AMENDMENT OF BYLAWS. These Bylaws or any provision hereof
may be amended, altered, or repealed (a) by the Board of Directors at an annual
meeting thereof without prior notice or at any special meeting thereof if notice
of such proposed amendment, alteration or repeal is contained in the notice of
such special meeting or (b) by the affirmative vote of at least sixty-six and
two thirds percent (66-2/3%) of the voting power of all the then outstanding
shares of capital stock entitled to vote at any meeting of the stockholders at
which a quorum is present, if notice of such proposed amendment, alteration or
repeal is contained in the notice of such meeting.
SECTION 10.02 ADDITIONAL BYLAWS. Additional bylaws not inconsistent
herewith may be adopted by the Board of Directors. Any bylaws so adopted shall
be subject to alteration, amendment or repeal by the stockholders in accordance
with Section 10.01 of these Bylaws.
ARTICLE XI
CHANGES IN NEVADA LAW
SECTION 11.01 CHANGES IN NEVADA LAW. References in these Bylaws to
Nevada law or to any provision thereof shall be to such law as it existed on the
date these Bylaws were adopted or as such law thereafter may be changed;
provided that (a) in the case of any change which expands the liability of
directors or officers or limits the indemnification rights or the rights to
advancement of expenses which the corporation may provide in Article IX hereof,
the rights to limited liability, to indemnification and to the advancement of
expenses provided in the corporation's Articles of Incorporation and/or these
Bylaws shall continue as theretofore to the extent permitted by law; and (b) if
such change permits the corporation, without the requirement of any further
action by stockholders or directors, to limit further the liability of directors
or officers or to provide broader indemnification rights or rights to the
advancement of expenses than the corporation was permitted to provide prior to
such change, then liability thereupon shall be so limited and the rights to
indemnification and the advancement of expenses shall be so broadened to the
extent permitted by law.
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EXHIBIT C
FORM OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
LTC HEALTHCARE, INC.
Pursuant to the provisions of Nevada Revised Statutes ("NRS") Section
78.403, the Articles of Incorporation of the above-referenced corporation are
hereby amended and restated as follows:
ARTICLE I
NAME
The name of the corporation shall be LTC Healthcare, Inc. (the
"Corporation").
ARTICLE II
CAPITAL STOCK
Section 1. AUTHORIZED SHARES. The total number of shares of
stock which the Corporation shall have authority to issue is fifty million
(50,000,000) shares, consisting of two classes to be designated, respectively,
"Common Stock" and "Preferred Stock," with all of such shares having a par value
of $.01 per share. The total number of shares of Common Stock which the
Corporation shall have authority to issue is forty million (40,000,000) shares.
The total number of shares of Preferred Stock which the Corporation shall have
authority to issue is ten million (10,000,000) shares. The Preferred Stock may
be issued in one or more series, each series to be appropriately designated by a
distinguishing letter or title, prior to the issue of any shares thereof. The
voting powers, designations, preferences, limitations, restrictions, and
relative, participating, optional and other rights, and the qualifications,
limitations, or restrictions thereof, of the Preferred Stock shall hereinafter
be prescribed by resolution of the Board of Directors pursuant to Section 3 of
this Article II.
Section 2. COMMON STOCK.
(a) DIVIDEND RATE. Subject to the rights of holders of
any Preferred Stock having preference as to dividends, the holders of Common
Stock shall be entitled to receive dividends when, as and if declared by the
Board of Directors out of assets legally available therefor.
(b) VOTING RIGHTS. The holders of the issued and
outstanding shares of Common Stock shall be entitled to one vote for each share
of Common Stock.
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(c) LIQUIDATION RIGHTS. In the event of liquidation,
dissolution, or winding up of the affairs of the Corporation, whether voluntary
or involuntary, subject to the prior rights of holders of Preferred Stock to
share ratably in the Corporation's assets, the Common Stock and any shares of
Preferred Stock which are not entitled to any preference in liquidation shall
share equally and ratably in the Corporation's assets available for distribution
after giving effect to any liquidation preference of any shares of Preferred
Stock.
(d) NO CUMULATIVE VOTING, CONVERSION, REDEMPTION, OR
PREEMPTIVE RIGHTS. The holders of Common Stock shall not have any cumulative
voting, conversion, redemption, or preemptive rights.
(e) CONSIDERATION FOR SHARES. The Common Stock
authorized by this Article shall be issued for such consideration as shall be
fixed, from time to time, by the Board of Directors.
Section 3. PREFERRED STOCK.
(a) CONSIDERATION. The Board of Directors is hereby
vested with the authority from time to time to provide by resolution for the
issuance of shares of Preferred Stock in one or more series not exceeding the
aggregate number of shares of Preferred Stock authorized by these Amended and
Restated Articles of Incorporation, as amended from time to time (hereinafter,
the "Articles"), and to determine with respect to each such series the voting
powers, if any (which voting powers if granted may be full or limited),
designations, preferences, and relative, participating, optional, or other
special rights, and the qualifications, limitations, or restrictions relating
thereto, including without limiting the generality of the foregoing, the voting
rights relating to shares of Preferred Stock of any series (which may vary over
time and which may be applicable generally only upon the happening and
continuance of stated facts or events or ascertained outside the Articles), the
rate of dividend to which holders of Preferred Stock of any series may be
entitled (which may be cumulative or noncumulative), the rights of holders of
Preferred Stock of any series in the event of liquidation, dissolution, or
winding up of the affairs of the Corporation, the rights, if any, of holders of
Preferred Stock of any series to convert or exchange such shares of Preferred
Stock of such series for shares of any other class or series of capital stock or
for any other securities, property, or assets of the Corporation or any
subsidiary (including the determination of the price or prices or the rate or
rates applicable to such rights to convert or exchange and the adjustment
thereof, the time or times during which the right to convert or exchange shall
be applicable, and the time or times during which a particular price or rate
shall be applicable).
(b) CERTIFICATE. Before the Corporation shall issue any
shares of Preferred Stock of any series, a certificate setting forth a copy of
the resolution or resolutions of the Board of Directors, fixing the voting
powers, designations, preferences, the relative, participating, optional, or
other rights, if any, and the qualifications, limitations, and restrictions, if
any, relating to the shares of Preferred Stock of such series, and the number of
shares of Preferred Stock of such series authorized by the Board of Directors to
be issued shall be made and signed by, acknowledged and filed in the manner
prescribed by the NRS. The Board of
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Directors is further authorized to increase or decrease (but not below the
number of such shares of such series then outstanding) the number of shares of
any series subsequent to the issuance of shares of that series.
Section 4. NON-ASSESSMENT OF STOCK. The capital stock of the
Corporation, after the amount of the subscription price has been paid in money,
property or services, as the directors shall determine, shall not be subject to
assessment to pay the debts of the Corporation, nor for any other purpose, and
no stock issued as fully paid shall ever be assessable or assessed, and the
Articles shall not be amended in this particular. No stockholder of the
Corporation is individually liable for the debts or liabilities of the
Corporation.
ARTICLE III
STOCKHOLDERS
Section 1. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings
of stockholders of the Corporation for any purpose or purposes may be called
only in the manner provided in the Bylaws.
Section 2. ACTION OF STOCKHOLDERS. No action shall be taken by
the stockholders except at a duly called annual or special meeting of
stockholders. The stockholders may not take action by written consent.
ARTICLE IV
DIRECTORS AND OFFICERS
Section 1. NUMBER OF DIRECTORS. The members of the governing
board of the Corporation are styled as directors. The Board of Directors of the
Corporation shall consist of at least one (1) individual who shall be elected in
such manner as shall be provided in the Bylaws of the Corporation. The number
of directors may be changed from time to time in such manner as shall be
provided in the Bylaws of the Corporation.
Section 2. CURRENT DIRECTORS. The names and post office boxes
or street addresses of each of the four (4) directors constituting the current
Board of Directors are:
NAME ADDRESS
Andre C. Dimitriadis 300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
James J. Pieczynski 300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Steven Stuart 31 West 52nd Street
New York, NY 10019
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Bary G. Bailey 12225 El Camino Real
San Diego, CA 92130
Section 3. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES.
Advance notice of nominations for the election of directors, other than by the
Board of Directors or a duly authorized committee thereof or any authorized
officer of the Corporation to whom the Board of Directors or such committee
shall have delegated such authority, and information concerning nominees, shall
be given in the manner provided in the Bylaws.
Section 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except
as otherwise fixed pursuant to the provisions of Article II hereof relating to
the rights of the holders of Preferred Stock, newly created directorships
resulting from any increase in the authorized number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by a majority vote of the directors then in office, and directors so chosen
shall hold office for a term expiring at the next annual meeting of stockholders
at which the term of the class to which they have been elected expires. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 5. LIMITATION OF PERSONAL LIABILITY. No director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer;
PROVIDED, HOWEVER, that the foregoing provision does not eliminate or limit the
liability of a director or officer of the Corporation for:
(a) Acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or
(b) The payment of distributions in violation of NRS
78.300.
Section 6. PAYMENT OF EXPENSES. In addition to any other
rights of indemnification permitted by the laws of the State of Nevada as may be
provided for by the Corporation in its Bylaws or by agreement, the expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding, involving alleged acts or omissions of such officer or director in
his or her capacity as an officer or director of the Corporation, must be paid
by the Corporation or through insurance purchased and maintained by the
Corporation or through other financial arrangements made by the Corporation, as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
Corporation.
Section 7. REPEAL AND CONFLICTS. Any repeal or modification of
Sections 5 or 6 above approved by the stockholders of the Corporation shall be
prospective only. In the event of any conflict between Sections 5 or 6 of this
Article and any other Article of the Articles, the terms and provisions of
Sections 5 or 6 of this Article shall control.
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ARTICLE V
VOTING ON CERTAIN TRANSACTIONS
Section 1. MERGER, SALE. The affirmative vote of the holders
of sixty-six and two-thirds percent (66-2/3%) of the outstanding stock of the
Corporation entitled to vote shall be required for:
(a) Any merger, exchange or consolidation to which the
Corporation is a party and which requires stockholder approval under the NRS;
and
(b) Any sale or other disposition by the Corporation of
all or substantially all of its assets.
Section 2. AMENDMENT OF ARTICLES. The Corporation reserves the
right to amend, alter, change or repeal any provision contained in the Articles,
in the manner now or hereafter prescribed by the NRS, and all rights conferred
on stockholders herein are granted subject to this reservation; PROVIDED,
HOWEVER, that no amendment, alteration, change or repeal may be made to: (i)
Section 2 of Article III or (ii) this Article V without the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
outstanding voting stock of the Corporation, voting together as a single class.
Section 3. AMENDMENT OF BYLAWS.
(a) BOARD OF DIRECTORS. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to adopt, repeal, alter, amend and rescind the Bylaws of
the Corporation.
(b) STOCKHOLDERS. Notwithstanding Section 3(a) of this
Article V, the Bylaws may be rescinded, altered, amended or repealed in any
respect by the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding voting stock of the Corporation,
voting together as a single class.
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EXHIBIT D
HEALTHCARE EMPLOYEES
None.
<PAGE>
EXHIBIT E
FORM OF TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Agreement"), dated as of _______ __,
1998, between LTC Properties, Inc., a Maryland corporation ("LTC"), and LTC
Healthcare, Inc., a Nevada corporation ("Healthcare").
WHEREAS, LTC is the parent corporation of an affiliated group of
corporations that join in filing consolidated federal Income Tax Returns and
certain consolidated, combined or unitary state Income Tax Returns;
WHEREAS, pursuant to the Distribution Agreement (as hereinafter
defined), LTC presently intends to distribute all of the common stock, $.01
par value per share, of Healthcare to its common stockholders, Series C
preferred stockholders and debentureholders (the "Distribution"); and
WHEREAS, LTC and Healthcare desire on behalf of themselves, their
subsidiaries and their successors to set forth their respective rights and
obligations with respect to Taxes (as hereinafter defined).
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS.
When used herein the following terms shall have the following
meanings:
"AGREEMENT" -- shall have the meaning set forth in the introductory
paragraph hereof.
"CLOSING DATE" -- the date the Distribution is consummated pursuant to
the terms of the Distribution Agreement.
"CODE" -- the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.
"DISTRIBUTION" -- shall have the meaning set forth in the recitals
hereof.
"DISTRIBUTION AGREEMENT" -- the Distribution Agreement dated as of
_______ __, 1998 between LTC and Healthcare.
"HEALTHCARE" -- shall have the meaning set forth in the introductory
paragraph hereof.
<PAGE>
"HEALTHCARE ASSETS" -- the retail properties and other assets
(together with any related liabilities) distributed to Healthcare pursuant to
the Distribution Agreement.
"HEALTHCARE GROUP" -- Healthcare and each corporation filing a
consolidated federal Income Tax Return with Healthcare as the parent
corporation.
"INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise tax"
or otherwise), imposed by any Taxing Authority, together with any related
interest, penalties or other additions thereto.
"IRS" -- the U.S. Internal Revenue Service.
"LTC" -- shall have the meaning set forth in the introductory
paragraph hereof.
"LTC ASSETS" -- the properties and other assets (together with any
related liabilities) retained by LTC pursuant to the Distribution Agreement.
"LTC GROUP" -- for any taxable year or period, LTC and each
corporation filing a consolidated federal Income Tax Return with LTC as the
parent corporation.
"OTHER TAXES" -- Taxes other than Income Taxes.
"OVERDUE RATE" -- a rate of interest per annum that fluctuates with
the federal short-term rate established from time to time pursuant to Code
Section 6621(b).
"TAX(ES)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
"TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
"TAX RETURN(S)" -- all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES
a. LTC shall prepare and timely file, or cause to be prepared
and timely filed, with the appropriate Taxing Authorities (i) all federal and
state Income and Other Tax Returns of the LTC Group and any member or members
thereof for all taxable years and
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periods ending on or before the Closing Date; and (ii) all federal and state
Income and Other Tax Returns of LTC for all taxable years and periods beginning
after the Closing Date. LTC shall pay, or cause to be paid, all Taxes due with
respect to Tax Returns described in this subsection (a). LTC shall be entitled
to all Tax refunds received or receivable with respect to any and all Income and
Other Taxes attributable to the LTC Assets for all taxable years and periods.
b. Healthcare shall prepare and timely file, or cause to be
prepared and timely filed, with the appropriate Taxing Authorities, all federal
and state Income and Other Tax Returns of the Healthcare Group and any member or
members thereof for taxable years and periods beginning after the Closing Date.
Healthcare shall pay, or cause to be paid, all Taxes due with respect to Tax
Returns described in this subsection (b). Healthcare shall be entitled to all
Tax refunds received or receivable with respect to any and all Income and Other
Taxes attributable to the Healthcare Assets for all taxable years and periods.
3. PAYMENTS.
a. METHOD. Unless the parties otherwise agree, all payments
made by a party pursuant to this Agreement shall be made by wire transfer to a
bank account designated from time to time by the other party. The paying party
shall also provide a notice of payment to the recipient.
b. INTEREST. If any payment is not timely paid, interest shall
accrue on the unpaid amount at the Overdue Rate. A payment will be deemed to be
timely paid only if actually received by the payee within seven (7) days of the
receipt of notice from the other party that such payment is due.
c. CHARACTERIZATION. Any payment (other than interest thereon)
made hereunder shall be treated by all parties for all purposes as a nontaxable
intercompany settlement of liabilities existing immediately before the
Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.
4. CONTESTS AND AUDITS; INDEMNIFICATION.
a. NOTICE. Upon the receipt by LTC or Healthcare, as the case
may be, of notice of any pending or threatened Tax audit or assessment which may
affect the liability for Taxes that are subject to indemnification hereunder,
LTC or Healthcare, as the case may be, shall promptly notify the other in
writing of the receipt of such notice.
b. CONTROL AND SETTLEMENT. From and after the Closing Date,
LTC shall have full control over, and the right to represent the interests of,
LTC and all other corporations involved in or affected by any Tax audit or
administrative, judicial or other proceeding relating, in whole or in part, to
Taxes that are subject to indemnification by LTC hereunder. LTC shall have the
right to employ counsel of its choice at its expense, and shall have the
ultimate control of the contest and any settlement or other resolution thereof.
Any
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liability for Taxes established pursuant to such proceeding shall be allocated
and paid in accordance with Section 2 of this Agreement.
c. AMENDMENT OF TAX RETURNS. LTC shall have sole control over
the preparation and filing of any and all amendments to Tax Returns described in
Section 2(a).
d. INDEMNIFICATION. LTC shall indemnify and hold harmless
Healthcare and the Healthcare Group against any and all Income and Other Taxes
specifically attributable to the LTC Assets for all taxable years and periods.
Healthcare shall indemnify and hold harmless LTC against any and all Income and
Other Taxes specifically attributable to the Healthcare Assets for all taxable
years and periods.
5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
a. COOPERATION. Upon reasonable request, LTC and Healthcare
shall promptly provide (and shall cause their respective affiliates to provide)
the requesting party with such cooperation and assistance, documents, and other
information, without charge, as may be necessary or reasonably helpful in
connection with (i) the preparation and filing of any original or amended Tax
Return, (ii) the conduct of any audit, appeal, protest or other examination or
any judicial or administrative proceeding involving to any extent Taxes or Tax
Returns within the scope of this Agreement, or (iii) the verification by a party
of an amount payable hereunder to, or receivable hereunder from, another party.
Such cooperation and assistance shall include, without limitation: (a) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (b) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return, or in connection with any audit, appeal, protest,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; (c) the prompt and timely
filing of appropriate claims for refund; and (d) the use of reasonable best
efforts to obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the foregoing. Each
party shall make its employees and facilities available on a mutually convenient
basis to facilitate such cooperation.
b. RETENTION. LTC and Healthcare shall retain or cause to be
retained all Tax Returns, and all books, records, schedules, workpapers, and
other documents relating thereto, which Tax Returns and other materials are
within the scope of this Agreement, until the expiration of the later of (i) all
applicable statutes of limitations (including any waivers or extensions
thereof), and (ii) any retention period required by law or pursuant to any
record retention agreement. The parties hereto shall notify each other in
writing of any waivers, extensions or expirations of applicable statutes of
limitations, and shall provide at least thirty (30) days prior written notice of
any intended destruction of the documents referred to in the preceding sentence.
A party giving such a notification shall not dispose of any of the foregoing
materials without first allowing the other party a reasonable opportunity to
copy them at such other party's expense.
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c. CONFIDENTIALITY. Except as required by law or with the
prior written consent of the other party, all Tax Returns, documents, schedules,
work papers and similar items and all information contained therein, which Tax
Returns and other materials are within the scope of this Agreement, shall be
kept confidential by the parties hereto and their representatives, shall not be
disclosed to any other person or entity and shall be used only for the purposes
provided herein.
6. MISCELLANEOUS.
a. EFFECTIVENESS. This Agreement shall be effective from and
after the Closing Date and shall survive until the expiration of all applicable
statutes of limitations with respect to taxable years and periods ending on or
before or including the Closing Date.
b. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
binding, unless the same is referred to specifically in this Agreement or is
executed by the parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern. This Agreement cancels and supersedes, as of the
Closing Date, any and all other agreements with respect to Taxes between LTC and
Healthcare.
c. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
d. AMENDMENTS; WAIVERS. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence on any other occasion.
e. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by the laws of the State of
California, without regard to
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the principles of choice of law thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
f. NOTICES. All notices, requests, demands, statements, bills
and other communications under this Agreement shall be delivered in accordance
with Section 9.04 of the Distribution Agreement.
g. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto.
h. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
i. TITLES AND HEADINGS. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
j. PREDECESSORS AND SUCCESSORS. To the extent necessary to
give effect to the purposes of this Agreement, any reference to any corporation
shall also include any predecessor or successor thereto, by operation of law or
otherwise.
k. TAX ELECTIONS. Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of the
LTC Group, and LTC shall have sole discretion to make or change any and all
elections affecting the LTC Group or any member or members thereof for all
taxable years and periods ending on or before the Closing Date.
l. EXPENSES. Except as otherwise set forth in this Agreement,
all costs and expenses in connection with the preparation, execution, delivery
and implementation of this Agreement and with the consummation of the
transactions contemplated by this Agreement shall be charged to the party for
whose benefit the expenses are incurred, with any expenses which cannot be
allocated on such basis to be split equally between the parties.
m. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.13 of the Distribution Agreement, including the attorneys fees
provisions referred to therein.
n. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
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o. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
p. FURTHER ACTION. Healthcare and LTC each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
q. LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LTC PROPERTIES, INC., A MARYLAND CORPORATION.
By: _____________________________________________
Name: ___________________________________________
Title: __________________________________________
LTC HEALTHCARE INC., A NEVADA CORPORATION
By: _____________________________________________
Name: ___________________________________________
Title: __________________________________________
S-1
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EXHIBIT 2
ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and
entered into as of September 30, 1998, by and between LTC PROPERTIES, INC., a
Maryland corporation ("LTC"), and LTC HEALTHCARE, INC., a Nevada corporation
("Healthcare," and collectively with LTC, the "Parties"), effective as of the
Distribution Date (as hereinafter defined).
R E C I T A L S
WHEREAS, subject to certain conditions, LTC intends to spin-off
certain businesses and assets by distributing to LTC common stockholders,
Series C preferred stockholders and debentureholders 1/10 of a share of
common stock, $.01 par value per share, of Healthcare for each share of
common stock, $.01 par value per share ("LTC Common Stock"), of LTC held and
for each share of LTC Common Stock into which shares of Series C preferred
stock and debentures may be converted as of the close of business on the
Record Date (the "Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
entered into a Distribution Agreement of even date herewith (the "Distribution
Agreement");
WHEREAS, after the Distribution, Healthcare will need office space for
its principal corporate office and certain management and administrative
services to be provided by LTC to Healthcare for a period of time from and
after the Distribution Date; and
WHEREAS, in connection with the Distribution, Healthcare has requested
LTC to provide, and LTC has agreed to provide, office space and certain
management and administrative services to Healthcare from and after the
Distribution Date pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, LTC and Healthcare agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings indicated below:
"Affiliate" -- with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of LTC shall not include
Healthcare or any other Person which would be an Affiliate of LTC by reason of
LTC's ownership of the capital stock of Healthcare prior to the Distribution or
the fact that any officer or director of Healthcare shall also serve as an
officer or director of LTC, and (ii) the Affiliates of Healthcare shall not
include LTC or any other Person which would be an Affiliate of Healthcare by
reason of LTC's ownership of the capital stock of
<PAGE>
Healthcare prior to the Distribution or the fact that any officer or director of
Healthcare shall also serve as an officer or director of LTC.
"Agreement" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Change in Control" shall mean a change in ownership or control of a
party effected through either of the following transactions:
(i) any person or related group of persons (other than
such party or a Affiliate of such party) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of such
party's outstanding securities; or
(ii) there is a change in the composition of such party's
board of directors over a period of thirty-six (36) consecutive months
(or less) such that a majority of the board members (rounded up to the
nearest whole number) ceases, by reason of one or more proxy contests for
the election of board members, to be comprised of individuals who either
(A) have been board members continuously since the beginning of such
period or (B) have been elected or nominated for election as board
members during such period by at least a majority of the board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the board; or
(iii) there is a change in the composition of such party's
senior executive management such that both Andre C. Dimitriadis and James
J. Pieczynski cease to be employed by such party.
"Distribution" -- shall have the meaning set forth in the first recital
of this Agreement.
"Distribution Agreement" -- the agreement described in the second
recital of this Agreement.
"Distribution Date" -- the date on which the Distribution occurs, as
defined in the Distribution Agreement.
"Employee Benefit Plan" -- any plan, policy, arrangement, contract or
agreement providing compensation benefits for any group of LTC Employees or
former LTC Employees or individual LTC Employee or former LTC Employee, or the
dependents or beneficiaries of any such LTC Employee or former LTC Employee,
whether formal or informal or written or unwritten, and including, without
limitation, any means, whether or not legally required, pursuant to which any
benefit is provided by LTC to any LTC Employee or former LTC Employee or the
beneficiaries of any such LTC Employee or former LTC Employee, adopted or
entered into by LTC prior to, upon or after the Distribution. The term
"Employee Benefit Plan" as used in this Agreement does not include any contract,
agreement or understanding entered into by LTC relating to settlement of actual
or potential LTC Employee related litigation claims.
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"First Month" -- In the event that the Distribution Date does not fall
on the first day of a month, the month that includes the Distribution Date.
"Full Month" -- A full calendar month during the Term.
"Healthcare" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Healthcare Business" -- any business or operation of Healthcare which
is, pursuant to the Distribution Agreement, to be conducted by Healthcare after
the Distribution.
"Healthcare Employee" -- any individual who (i) is independently hired by
Healthcare after the Distribution Date as an employee of Healthcare, and (ii) is
not an employee or director of LTC.
"Last Month" -- In the event that the Termination Date does not fall on
the last day of a month, the month that includes the Termination Date.
"LTC" -- shall have the meaning set forth in the introductory paragraph
hereof.
"LTC Employee" -- any individual who is an employee or director of LTC
and is not a Healthcare Employee.
"Month" -- a Full Month, First Month or Last Month, as the case may be.
"Monthly Fee" -- The amount payable by Healthcare to LTC under Section
4.1 herein with respect to a particular Full Month or any First Month or Last
Month.
"Parties" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Person" -- any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
"Principal Office" -- shall have the meaning set forth in Section 4.2
hereof.
"Record Date" -- September 15, 1998.
"Services" -- shall have the meaning set forth in Section 2 hereof.
"Term" -- shall have the meaning set forth in Section 3 hereof.
"Termination Date" -- shall have the meaning set forth in Section 3
hereof.
2. ENGAGEMENT OF LTC. During the term of this Agreement, LTC shall
provide to Healthcare office space and certain management and administrative
services ("Services"), as more fully described and defined below, as may be
necessary or desirable, or as Healthcare may reasonably request or require,
in connection with the business, operations and affairs of Healthcare.
"Services" means and includes, without limitation, the furnishing of advice,
assistance, guidance, equipment office space and the services of LTC
Employees in connection with, among other things, (i) the Healthcare
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Business and (ii) the use of LTC's management information and accounting
system, the administration of insurance and worker's compensation programs,
legal and employee benefit services and the preparation of payrolls.
3. TERM; TERMINATION. This Agreement shall commence as of the date
hereof for a term of ten years and continue thereafter unless and until
terminated upon the earlier of (a) not less than thirty (30) days' prior
written notice by either Party to the other at any time for any reason or
(b) a Change in Control of LTC (the "Termination Date", with the term of this
Agreement as set forth in this Section 3 being referred to as the "Term").
4. PAYMENTS TO LTC.
4.1. GENERALLY.
(a) FULL MONTH. With respect to each Full Month, in
consideration of the Services provided by LTC hereunder, Healthcare shall pay
to LTC fees equal to 25% of (1) the aggregate amount of all wages, salaries
and bonuses paid to LTC Employees and (2) the aggregate amount of rent paid
by LTC for rental of its principal corporate office located at 300 Esplanade
Drive, Suite 1860, Oxnard, CA 93030 (the "Principal Office") during the Full
Month.
(b) FIRST MONTH AND LAST MONTH. With respect to any First
Month or Last Month, in consideration of the Services provided by LTC
hereunder, Healthcare shall pay to LTC fees equal to the product of:
(i) 25% of (1) the aggregate amount of all wages,
salaries and bonuses paid to LTC Employees and (2) the aggregate amount of
rent paid by LTC for rental of the Principal Office during the First Month or
Last Month, as the case may be; and
(ii) the number of days in the First Month or the Last
Month, as the case may be, which are included in the Term, divided by the
total number of days in the First Month or the Last Month, as the case may be.
4.2. STATEMENT FROM LTC. Promptly and in any event not later than
ten (10) days following the end of each Month, LTC shall provide to
Healthcare a statement setting forth (i) a list of the LTC Employees, (ii)
the aggregate amount of all wages, salaries and bonuses paid to LTC Employees
during the Month and (iii) the aggregate amount of rent paid by LTC for
rental of the Principal Office during the Month.
4.3. PAYMENT BY HEALTHCARE. Promptly and in any event not later
than five (5) days after delivery by LTC of each statement referred to in
Section 4.2, Healthcare shall pay to LTC the Monthly Fee applicable to the
Month to which such statement relates.
5. EMPLOYEE BENEFIT PLANS. From and after the Distribution Date, LTC
shall permit the LTC Employees to continue to participate in the Employee
Benefit Plans on the same basis as such persons participated immediately
prior to the Distribution Date, provided, however, nothing contained in this
Agreement shall prohibit LTC from modifying or terminating any one or more of
the Employee Benefit Plans so long as such modification or termination shall
apply to all participants in such Employee Benefit Plans. LTC shall provide
Healthcare with thirty (30)
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days' prior written notice of its intent to terminate any Employee Benefit Plan
or effect the modification thereof in a manner adverse to Healthcare; provided
that no such notice shall be required for any Employee Benefit Plan which
terminates by its terms without any action by LTC.
6. EMPLOYEES. Nothing in this Agreement shall prohibit Healthcare from
independently hiring one or more Healthcare Employees; provided, however, that
(i) all wages, salaries, payroll taxes, and employee benefits with respect to
Healthcare Employees shall be Healthcare's sole responsibility, and
(ii) Healthcare Employees shall not be subject to this Agreement.
7. GENERAL.
7.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the Parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
Parties, it being understood and agreed that no provision contained herein, and
no act of the Parties, shall be deemed to create any relationship between the
Parties other than the relationship set forth herein.
7.2. ACCESS TO INFORMATION; COOPERATION. LTC and Healthcare and their
authorized agents shall be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other Party,
including any agent, contractor, subcontractor, agent or any other person or
entity under the contract of such Party.
7.3. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the Parties hereto.
7.4. TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
7.5. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
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7.6. NOTICES. Notices shall be sent to the Parties at the following
addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return receipt
requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery service,
or transmission by facsimile. Any Party to this Agreement may change its
address for notice by giving written notice to the other Party at the address
and in accordance with the procedures provided above.
7.7. FURTHER ACTION. Healthcare and LTC each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other Party to implement the terms and provisions of this Agreement.
7.8. AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the Party or Parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
7.9. GOVERNING LAW. This Agreement and the rights and obligations of
the Parties hereunder shall be governed by the laws of the State of California,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a Party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.
7.10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the Parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
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binding, unless the same is referred to specifically in this Agreement or is
executed by the Parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern.
7.11. DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
9.13 of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
7.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
7.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the Parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
7.14. EXPENSES. Except as otherwise set forth in this Agreement, all
costs and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the Party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the Parties.
7.15. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any Party hereto, each Party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the Parties
hereunder shall be specifically enforceable.
7.16. PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation shall
also include any predecessor or successor thereto, by operation of law or
otherwise.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
LTC PROPERTIES, INC., a Maryland corporation
BY: /s/ ANDRE C. DIMITRIADIS
-------------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE, INC., a Nevada corporation
By: /s/ JAMES J. PIECZYNSKI
-------------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
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EXHIBIT 3
INTERCOMPANY AGREEMENT
This INTERCOMPANY AGREEMENT (the "Agreement") is made and entered into
as of the 30th day of September, 1998, by and between LTC Properties, Inc., a
Maryland corporation ("LTC"), and LTC Healthcare, Inc., a Nevada corporation
("Healthcare").
W I T N E S E T H:
WHEREAS, subject to certain conditions, LTC intends to spin-off certain
businesses and assets by distributing to LTC common stockholders, Series C
preferred stockholders and debentureholders 1/10 of a share of common stock,
$.01 par value per share, of Healthcare for each share of common stock, $.01
par value per share ("LTC Common Stock") of LTC held and for each share of
LTC Common Stock into which shares of Series C preferred stock and debentures
may be converted as of the close of business on the Record Date (the
"Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
entered into a Distribution Agreement of even date herewith (the "Distribution
Agreement");
WHEREAS, LTC may in certain circumstances determine that it is precluded
from pursuing, or is limited in the manner in which it pursues, various business
opportunities due to its status as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, Healthcare is a newly-formed corporation which was organized by
LTC for the purpose of identifying and making opportunistic real estate
investments that are not generally available to REITs; and
WHEREAS, in light of the purpose for which Healthcare was formed, LTC and
Healthcare desire to enter into this Agreement in order to provide to each other
a right of first opportunity and notification right with respect to certain
investment opportunities.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
1. Definitions. Except as otherwise may be expressly provided herein,
the following terms shall have the meanings set forth below:
(a) "Affiliate" with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct
or indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings correlative
to the foregoing. Notwithstanding the foregoing, (i) the Affiliates of LTC
shall not include Healthcare or any other Person which would be an Affiliate
of LTC by reason of LTC's ownership of the capital stock of Healthcare prior
to the Distribution or the fact that any officer or director of Healthcare
shall also serve as an officer or director of LTC, and (ii) the Affiliates of
Healthcare shall not include LTC or any other Person which would be an
Affiliate of Healthcare by reason of LTC's ownership of
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the capital stock of Healthcare prior to the Distribution or the fact that any
officer or director of Healthcare shall also serve as an officer or director of
LTC.
(b) "Agreement" shall have the meaning set forth in the introductory
paragraph hereof.
(c) "Change in Control" shall mean a change in ownership or control
of a party effected through either of the following transactions:
(i) any person or related group of persons (other than such
party or a Affiliate of such party) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent (50%) of the
total combined voting power of such party's outstanding securities; or
(ii) there is a change in the composition of such party's board
of directors over a period of thirty-six (36) consecutive months (or less) such
that a majority of the board members (rounded up to the nearest whole number)
ceases, by reason of one or more proxy contests for the election of board
members, to be comprised of individuals who either (A) have been board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as board members during such period by at least a
majority of the board members described in clause (A) who were still in office
at the time such election or nomination was approved by the board; or
(iii) there is a change in the composition of such party's
senior executive management such that both Andre C. Dimitriadis and James J.
Pieczynski cease to be employed by such party.
(d) "Code" shall have the meaning set forth in the recitals hereof.
(e) "Distribution" shall have the meaning set forth in the first
recital of this Agreement.
(f) "Distribution Agreement" -- the agreement described in the
second recital of this Agreement.
(g) "Healthcare" shall have the meaning set forth in the introductory
paragraph hereof.
(h) "LTC" shall have the meaning set forth in the introductory
paragraph hereof.
(i) "Notice" shall have the meaning set forth in Section 2(a)(i)
hereof.
(j) "Person" shall mean any individual, corporation, partnership,
association, trust, estate or other entity or organization, including any
governmental entity or authority.
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(k) "REIT" shall have the meaning set forth in the recitals hereof.
(l) "REIT Opportunity" shall mean a direct or indirect opportunity
to invest in real estate through mortgage loans, facility lease transactions
and other investments. LTC shall have the right from time to time to provide
written notice to Healthcare specifying certain criteria for a REIT
Opportunity in addition to the criteria specified above in this definition of
REIT Opportunity. Any such written notice from LTC may be modified or
canceled by written notice given by LTC at any time. This definition of REIT
Opportunity shall be modified as appropriate from time to time in accordance
with any such written notices sent by LTC.
(m) "Ten-Day Period" shall have the meaning set forth in Section
2(a)(i) hereof.
(n) "Withdrawal Date" shall have the meaning set forth in Section
2(a)(ii) hereof.
2. RIGHT OF FIRST OPPORTUNITY; NOTIFICATION RIGHT.
(a) RIGHT OF FIRST OPPORTUNITY.
(i) During the term of this Agreement, if Healthcare develops
a REIT Opportunity, or if any REIT Opportunity otherwise becomes available to
Healthcare, Healthcare shall first offer such REIT Opportunity to LTC. The
offer shall be made by written notice (the "Notice") from Healthcare to LTC,
which Notice shall contain a detailed description of the material terms and
conditions of the REIT Opportunity. LTC shall have ten days (the "Ten-Day
Period") from the date of receipt of the Notice to notify Healthcare in writing
that it has accepted or rejected the REIT Opportunity. If LTC does not respond
by the end of the Ten-Day Period, LTC shall be deemed to have rejected the REIT
Opportunity. If LTC accepts a REIT Opportunity, but subsequently decides not to
pursue such opportunity or for any other reason fails to consummate such
opportunity, LTC shall immediately provide written notice that it is no longer
pursuing such REIT Opportunity to Healthcare.
(ii) If LTC rejects a REIT Opportunity, or accepts such REIT
Opportunity but thereafter provides, or is required by the provisions hereof to
provide, written notice to Healthcare that it is no longer pursuing such REIT
Opportunity, Healthcare shall, for a period of one year after the Withdrawal
Date (as hereinafter defined), be entitled to acquire the REIT Opportunity (A)
at a price, and on terms and conditions, that are not more favorable to
Healthcare in any material respect than the price and terms and conditions set
forth in the Notice relating to such REIT Opportunity or (B) if LTC, at any time
after the Notice, negotiated a different price, terms or conditions with the
party providing such REIT Opportunity, then at a price, and on terms and
conditions, that are not more favorable to Healthcare in any material respect
than the price and terms and conditions negotiated by LTC with such party. If
Healthcare does not enter into a binding agreement to acquire the REIT
Opportunity within such one-year period, or if the price and terms and
conditions are more favorable to Healthcare in any material respect than the
price and terms and conditions set forth in the Notice (or, if applicable, than
the
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<PAGE>
price and terms and conditions negotiated by LTC with the seller subsequent to
the Notice), Healthcare shall again be required to comply with the procedures
set forth above in Section 2(a)(i) if it desires to acquire such REIT
Opportunity. The "Withdrawal Date" means any one of the following dates, as
applicable: (A) the date that LTC notifies Healthcare that it has rejected the
REIT Opportunity, (B) if LTC does not respond to Healthcare regarding the REIT
Opportunity, the expiration date of the Ten-Day Period, or (C) if LTC accepts
the REIT Opportunity but subsequently ceases to pursue the opportunity, the
earlier of (1) thirty (30) days after the date on which LTC ceases to pursue the
REIT Opportunity or (2) the date of receipt by Healthcare of written notice from
LTC that it is no longer pursuing the REIT Opportunity.
(b) NOTIFICATION RIGHT. In the event that either party hereto
develops or becomes aware of any investment opportunity during the term of this
Agreement (other than a REIT Opportunity), and such party is not interested in
pursuing such opportunity, or the opportunity is otherwise unavailable to such
party, such party shall immediately notify the other party of such opportunity
and provide to the other party a copy of all written information, and a
description of all material terms not set forth in writing, available to such
party concerning such opportunity.
3. GENERAL TERMS AND CONDITIONS FOR FIRST OPPORTUNITY/NOTIFICATION
RIGHTS.
(a) Unless waived or unless agreed to as part of an investment, each
party hereto shall bear its own expenses with respect to any opportunity to
which this Agreement is applicable, and each party agrees that it shall not be
entitled to any compensation from the other party with respect to any such
opportunity.
(b) A party shall not be required to comply with the right of first
opportunity and notification requirements set forth in this Agreement during any
period in which the other party or any Affiliate of such other party is in
default of this Agreement or any other agreement entered into by the parties
hereto or any of their Affiliates, if such default is material and remains
uncured for fifteen (15) days after receipt of notice thereof.
(c) Any opportunity which is offered to and accepted by LTC under
this Agreement may be entered into by or on behalf of LTC or by any designee
which is a Affiliate of LTC. Any opportunity which is offered to and accepted
by Healthcare under this Agreement may be entered into by or on behalf of
Healthcare or by any designee which is a Affiliate of Healthcare.
(d) All first opportunity and notification rights set forth in this
Agreement shall be subordinated to any consent and confidentiality requirements
of any party providing a REIT Opportunity; no party shall be required to comply
with the first opportunity and notification rights set forth in this Agreement
to the extent such compliance would violate any consent or confidentiality
requirements of the party providing such a REIT Opportunity.
(e) While it is the intention of the parties to align their
businesses in accordance with the terms of this Agreement, each party shall act
independently in its own best
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<PAGE>
interests, and neither party shall be considered a partner or agent of the other
party or owe any fiduciary or other common law duties to the other party.
4. NO PREPAYMENTS. Healthcare hereby agrees that it shall not prepay
or cause to be prepaid any of its mortgage loans provided by LTC which are
securitized in REMIC transactions.
5. SPECIFIC PERFORMANCE. Each party hereto hereby acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
other party would likely have no adequate remedy at law if such party shall fail
to perform its obligations hereunder, and such party therefore confirms that the
other party's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the other party. Accordingly,
in addition to any other remedies that a party hereto may have at law or in
equity, such party shall have the right to have all obligations, covenants,
agreements and other provisions of this Agreement specifically performed by the
other party hereto and the right to obtain a temporary restraining order or a
temporary or permanent injunction to secure specific performance and to prevent
a breach or threatened breach of this Agreement by the other party.
6. TERM. The term of this Agreement shall commence as of the date of
this Agreement and shall terminate upon the earlier of (a) the tenth (10th)
anniversary of the date of this Agreement, or (b) a Change in Control of LTC.
Notwithstanding the foregoing, a party hereto may terminate this Agreement if
the other party or any Affiliate of such other party is in default of this
Agreement or any other agreement entered into by the parties hereto or any of
their Affiliates, if such default is material and remains uncured for fifteen
(15) days after receipt of notice thereof.
7. MISCELLANEOUS.
(a) NOTICES. Notices shall be sent to the parties at the following
addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return
receipt requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery
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<PAGE>
service, or transmission by facsimile. Any party to this Agreement may change
its address for notice by giving written notice to the other party at the
address and in accordance with the procedures provided above.
(b) REASONABLE AND NECESSARY RESTRICTIONS. Each of the parties
hereto hereby acknowledges and agrees that the restrictions, prohibitions and
other provisions of this Agreement are reasonable, fair and equitable in scope,
term and duration, and are necessary to protect the legitimate business
interests of the parties hereto. Each party covenants that it will not sue to
challenge the enforceability of this Agreement or raise any equitable defense to
its enforcement.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto.
(d) AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
(e) GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the laws of the State of California,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.
(f) SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
(g) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(i) constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to
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<PAGE>
specifically in this Agreement or is executed by the parties after the date
hereof; and (ii) is solely for the benefit of the parties hereto and shall not
be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without this Agreement.
(h) TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
(j) DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
9.13 of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
(k) EXPENSES. Except as otherwise set forth in this Agreement, all
costs and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the parties.
(l) RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
(m) FURTHER ACTION. Healthcare and LTC each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
(n) LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
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(o) PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation shall
also include any predecessor or successor thereto, by operation of law or
otherwise.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by one of its duly authorized officers, as of the date
first written above.
LTC PROPERTIES, INC.
BY: /s/ ANDRE C. DIMITRIADIS
-------------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE, INC.
By: /s/ JAMES J. PIECZYNSKI
-------------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
<PAGE>
EXHIBIT 4
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Agreement"), dated as of September 30,
1998, between LTC Properties, Inc., a Maryland corporation ("LTC"), and LTC
Healthcare, Inc., a Nevada corporation ("Healthcare").
WHEREAS, LTC is the parent corporation of an affiliated group of
corporations that join in filing consolidated federal Income Tax Returns and
certain consolidated, combined or unitary state Income Tax Returns;
WHEREAS, pursuant to the Distribution Agreement (as hereinafter
defined), LTC presently intends to distribute all of the common stock, $.01
par value per share, of Healthcare to its common stockholders, Series C
preferred stockholders and debentureholders (the "Distribution"); and
WHEREAS, LTC and Healthcare desire on behalf of themselves, their
subsidiaries and their successors to set forth their respective rights and
obligations with respect to Taxes (as hereinafter defined).
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS.
When used herein the following terms shall have the following
meanings:
"AGREEMENT" -- shall have the meaning set forth in the introductory
paragraph hereof.
"CLOSING DATE" -- the date the Distribution is consummated pursuant to
the terms of the Distribution Agreement.
"CODE" -- the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.
"DISTRIBUTION" -- shall have the meaning set forth in the recitals
hereof.
"DISTRIBUTION AGREEMENT" -- the Distribution Agreement dated as of
September 30, 1998 between LTC and Healthcare.
"HEALTHCARE" -- shall have the meaning set forth in the introductory
paragraph hereof.
<PAGE>
"HEALTHCARE ASSETS" -- the retail properties and other assets
(together with any related liabilities) distributed to Healthcare pursuant to
the Distribution Agreement.
"HEALTHCARE GROUP" -- Healthcare and each corporation filing a
consolidated federal Income Tax Return with Healthcare as the parent
corporation.
"INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise tax"
or otherwise), imposed by any Taxing Authority, together with any related
interest, penalties or other additions thereto.
"IRS" -- the U.S. Internal Revenue Service.
"LTC" -- shall have the meaning set forth in the introductory
paragraph hereof.
"LTC ASSETS" -- the properties and other assets (together with any
related liabilities) retained by LTC pursuant to the Distribution Agreement.
"LTC GROUP" -- for any taxable year or period, LTC and each
corporation filing a consolidated federal Income Tax Return with LTC as the
parent corporation.
"OTHER TAXES" -- Taxes other than Income Taxes.
"OVERDUE RATE" -- a rate of interest per annum that fluctuates with
the federal short-term rate established from time to time pursuant to Code
Section 6621(b).
"TAX(ES)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
"TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
"TAX RETURN(S)" -- all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES
a. LTC shall prepare and timely file, or cause to be prepared
and timely filed, with the appropriate Taxing Authorities (i) all federal and
state Income and Other Tax Returns of the LTC Group and any member or members
thereof for all taxable years and
<PAGE>
periods ending on or before the Closing Date; and (ii) all federal and state
Income and Other Tax Returns of LTC for all taxable years and periods beginning
after the Closing Date. LTC shall pay, or cause to be paid, all Taxes due with
respect to Tax Returns described in this subsection (a). LTC shall be entitled
to all Tax refunds received or receivable with respect to any and all Income and
Other Taxes attributable to the LTC Assets for all taxable years and periods.
b. Healthcare shall prepare and timely file, or cause to be
prepared and timely filed, with the appropriate Taxing Authorities, all federal
and state Income and Other Tax Returns of the Healthcare Group and any member or
members thereof for taxable years and periods beginning after the Closing Date.
Healthcare shall pay, or cause to be paid, all Taxes due with respect to Tax
Returns described in this subsection (b). Healthcare shall be entitled to all
Tax refunds received or receivable with respect to any and all Income and Other
Taxes attributable to the Healthcare Assets for all taxable years and periods.
3. PAYMENTS.
a. METHOD. Unless the parties otherwise agree, all payments
made by a party pursuant to this Agreement shall be made by wire transfer to a
bank account designated from time to time by the other party. The paying party
shall also provide a notice of payment to the recipient.
b. INTEREST. If any payment is not timely paid, interest shall
accrue on the unpaid amount at the Overdue Rate. A payment will be deemed to be
timely paid only if actually received by the payee within seven (7) days of the
receipt of notice from the other party that such payment is due.
c. CHARACTERIZATION. Any payment (other than interest thereon)
made hereunder shall be treated by all parties for all purposes as a nontaxable
intercompany settlement of liabilities existing immediately before the
Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.
4. CONTESTS AND AUDITS; INDEMNIFICATION.
a. NOTICE. Upon the receipt by LTC or Healthcare, as the case
may be, of notice of any pending or threatened Tax audit or assessment which may
affect the liability for Taxes that are subject to indemnification hereunder,
LTC or Healthcare, as the case may be, shall promptly notify the other in
writing of the receipt of such notice.
b. CONTROL AND SETTLEMENT. From and after the Closing Date,
LTC shall have full control over, and the right to represent the interests of,
LTC and all other corporations involved in or affected by any Tax audit or
administrative, judicial or other proceeding relating, in whole or in part, to
Taxes that are subject to indemnification by LTC hereunder. LTC shall have the
right to employ counsel of its choice at its expense, and shall have the
ultimate control of the contest and any settlement or other resolution thereof.
Any
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liability for Taxes established pursuant to such proceeding shall be allocated
and paid in accordance with Section 2 of this Agreement.
c. AMENDMENT OF TAX RETURNS. LTC shall have sole control over
the preparation and filing of any and all amendments to Tax Returns described in
Section 2(a).
d. INDEMNIFICATION. LTC shall indemnify and hold harmless
Healthcare and the Healthcare Group against any and all Income and Other Taxes
specifically attributable to the LTC Assets for all taxable years and periods.
Healthcare shall indemnify and hold harmless LTC against any and all Income and
Other Taxes specifically attributable to the Healthcare Assets for all taxable
years and periods.
5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
a. COOPERATION. Upon reasonable request, LTC and Healthcare
shall promptly provide (and shall cause their respective affiliates to provide)
the requesting party with such cooperation and assistance, documents, and other
information, without charge, as may be necessary or reasonably helpful in
connection with (i) the preparation and filing of any original or amended Tax
Return, (ii) the conduct of any audit, appeal, protest or other examination or
any judicial or administrative proceeding involving to any extent Taxes or Tax
Returns within the scope of this Agreement, or (iii) the verification by a party
of an amount payable hereunder to, or receivable hereunder from, another party.
Such cooperation and assistance shall include, without limitation: (a) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (b) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return, or in connection with any audit, appeal, protest,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; (c) the prompt and timely
filing of appropriate claims for refund; and (d) the use of reasonable best
efforts to obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the foregoing. Each
party shall make its employees and facilities available on a mutually convenient
basis to facilitate such cooperation.
b. RETENTION. LTC and Healthcare shall retain or cause to be
retained all Tax Returns, and all books, records, schedules, workpapers, and
other documents relating thereto, which Tax Returns and other materials are
within the scope of this Agreement, until the expiration of the later of (i) all
applicable statutes of limitations (including any waivers or extensions
thereof), and (ii) any retention period required by law or pursuant to any
record retention agreement. The parties hereto shall notify each other in
writing of any waivers, extensions or expirations of applicable statutes of
limitations, and shall provide at least thirty (30) days prior written notice of
any intended destruction of the documents referred to in the preceding sentence.
A party giving such a notification shall not dispose of any of the foregoing
materials without first allowing the other party a reasonable opportunity to
copy them at such other party's expense.
<PAGE>
c. CONFIDENTIALITY. Except as required by law or with the
prior written consent of the other party, all Tax Returns, documents, schedules,
work papers and similar items and all information contained therein, which Tax
Returns and other materials are within the scope of this Agreement, shall be
kept confidential by the parties hereto and their representatives, shall not be
disclosed to any other person or entity and shall be used only for the purposes
provided herein.
6. MISCELLANEOUS.
a. EFFECTIVENESS. This Agreement shall be effective from and
after the Closing Date and shall survive until the expiration of all applicable
statutes of limitations with respect to taxable years and periods ending on or
before or including the Closing Date.
b. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
binding, unless the same is referred to specifically in this Agreement or is
executed by the parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern. This Agreement cancels and supersedes, as of the
Closing Date, any and all other agreements with respect to Taxes between LTC and
Healthcare.
c. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
d. AMENDMENTS; WAIVERS. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence on any other occasion.
e. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by the laws of the State of
California, without regard to
<PAGE>
the principles of choice of law thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
f. NOTICES. All notices, requests, demands, statements, bills
and other communications under this Agreement shall be delivered in accordance
with Section 9.04 of the Distribution Agreement.
g. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto.
h. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
i. TITLES AND HEADINGS. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
j. PREDECESSORS AND SUCCESSORS. To the extent necessary to
give effect to the purposes of this Agreement, any reference to any corporation
shall also include any predecessor or successor thereto, by operation of law or
otherwise.
k. TAX ELECTIONS. Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of the
LTC Group, and LTC shall have sole discretion to make or change any and all
elections affecting the LTC Group or any member or members thereof for all
taxable years and periods ending on or before the Closing Date.
l. EXPENSES. Except as otherwise set forth in this Agreement,
all costs and expenses in connection with the preparation, execution, delivery
and implementation of this Agreement and with the consummation of the
transactions contemplated by this Agreement shall be charged to the party for
whose benefit the expenses are incurred, with any expenses which cannot be
allocated on such basis to be split equally between the parties.
m. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.13 of the Distribution Agreement, including the attorneys fees
provisions referred to therein.
n. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
<PAGE>
o. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
p. FURTHER ACTION. Healthcare and LTC each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
q. LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LTC PROPERTIES, INC., A MARYLAND CORPORATION.
BY: /s/ ANDRE C. DIMITRIADIS
----------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE INC., A NEVADA CORPORATION
By: /s/ JAMES J. PIECZYNSKI
----------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
<PAGE>
EXHIBIT 5
AMENDED AND RESTATED PROMISSORY NOTE
$20,000,000.00 Date: May 19, 1998
Oxnard, California
THIS AMENDED AND RESTATED PROMISSORY NOTE (THIS "NOTE") SUPERSEDES AND
REPLACES THAT CERTAIN PROMISSORY NOTE DATED MARCH 30, 1998 MADE BY LTC
HEALTHCARE, INC. (FORMERLY KNOWN AS LTC EQUITY HOLDING COMPANY, INC.), AS MAKER,
IN FAVOR OF LTC PROPERTIES, INC., AS PAYEE, IN THE MAXIMUM PRINCIPAL AMOUNT OF
EIGHT MILLION DOLLARS ($8,000,000.00) (THE "ORIGINAL NOTE").
In installments as herein stated, for value received, LTC HEALTHCARE, INC.,
a Nevada corporation (formerly known as LTC Equity Holding Company, Inc.)
("Maker"), hereby promises to pay to the order of LTC PROPERTIES, INC., a
Maryland corporation ("Payee"), at Payee's principal place of business in
Oxnard, California, or such other place as Payee may from time to time
designate, the principal sum of Twenty Million Dollars ($20,000,000.00), or so
much thereof as may have been advanced, with interest accruing on the principal
amount from time to time outstanding from the date hereof to and including the
Maturity Date (as defined below) at a rate equal to the lesser of (i) Ten
Percent (10%) per annum, or (ii) the Highest Lawful Rate (defined in Section 11,
below). Principal and interest shall be payable as more particularly set forth
below. All principal and accrued but unpaid interest shall be due on or before
April 1, 2008 (the "Maturity Date"). Principal, interest and all other sums due
hereunder shall be payable in lawful money of the United States.
Maker desires to obtain an unsecured line of credit from Payee to enable
Maker to borrow, from time to time, sums up to, but not exceeding, in the
aggregate the principal sum of Twenty Million Dollars ($20,000,000.00).
Accordingly, this Note represents funds that will be advanced to Maker in a
series of disbursements that will be made, from time to time, up to, but not
exceeding, in the aggregate the principal amount of Twenty Million Dollars
($20,000,000.00). As a condition to Payee's obligation to make each and every
disbursement hereunder, Payee shall receive a request for advance setting forth
the desired amount of the advance and specifying the wiring instructions to
which the advance should be sent (or other method of delivery) not later than
two (2) business days prior to the date on which Maker wishes to receive the
funds. No request for any such advance shall be for an amount less than One
Hundred Thousand Dollars ($100,000.00).
1. PAYMENTS.
(a) PAYMENTS OF INTEREST. Payments of interest only under this Note
shall be made in arrears in bi-annual installments, without set-off, deduction,
demand or notice of any kind or nature whatsoever, on the 1st day of April and
the 1st day of October of each and every calendar year (each a "Payment Date")
in an amount equal to the accrued but unpaid interest for
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<PAGE>
the immediately preceding six-month period on the principal amount
outstanding from time to time. Notwithstanding the foregoing, Maker
acknowledges and agrees that Maker shall pay to Payee on the first (1st)
Payment Date (I.E., October 1, 1998) the accrued but unpaid interest on
advances made from and including March 30, 1998 to and including September
30, 1998, including, but not limited to, accrued but unpaid interest on
advances made under the Original Note.
(b) PAYMENTS ON MATURITY DATE. Assuming no acceleration by Payee and
no prepayment in full of the Loan by Maker, on the Maturity Date, Maker shall
pay to Payee the entire outstanding principal balance, accrued and unpaid
interest and any and all other outstanding charges, fees or amounts owing to
Payee by Maker under this Note. Maker acknowledges and agrees that the
outstanding principal balance under this Note includes, without limitation, the
principal sum of Four Million Nine Hundred Thirty-Nine Thousand Dollars
($4,939,000.00) advanced by Payee to Maker between March 30, 1998 and May 18,
1998 under the Original Note.
2. PREPAYMENTS. Maker shall have the right to prepay all or any part of
the principal balance of this Note at any time without premium, penalty, or
charge of any kind whatsoever; provided, however, there shall be no discount of
any kind for any prepayment.
3. LATE PAYMENT CHARGE; NO WAIVER. MAKER ACKNOWLEDGES THAT LATE PAYMENT
TO PAYEE OF ANY SUMS DUE HEREUNDER WILL CAUSE PAYEE TO INCUR COSTS NOT
CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF WHICH WILL BE IMPRACTICABLE OR
EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS INCLUDE, BUT ARE NOT LIMITED TO,
PROCESSING AND ACCOUNTING CHARGES. ACCORDINGLY, IF ANY INSTALLMENT IS NOT
RECEIVED BY PAYEE WHEN DUE, OR IF ANY REMAINING PRINCIPAL AND ACCRUED BUT UNPAID
INTEREST OWING UNDER THIS NOTE IS NOT PAID IN FULL ON THE MATURITY DATE, MAKER
SHALL THEN PAY TO PAYEE AN ADDITIONAL SUM OF FIVE PERCENT (5%) OF THE OVERDUE
AMOUNT AS A LATE CHARGE. THE PARTIES HEREBY AGREE THAT LATE CHARGE REPRESENTS A
FAIR AND REASONABLE ESTIMATE OF THE COSTS PAYEE WILL INCUR BY REASON OF LATE
PAYMENT. THIS PROVISION SHALL NOT, HOWEVER, BE CONSTRUED AS EXTENDING THE TIME
FOR PAYMENT OF ANY AMOUNT HEREUNDER, AND ACCEPTANCE OF SUCH LATE CHARGE BY PAYEE
SHALL IN NO EVENT CONSTITUTE A WAIVER OF MAKER'S DEFAULT WITH RESPECT TO SUCH
OVERDUE AMOUNT NOR PREVENT PAYEE FROM EXERCISING ANY OF ITS OTHER RIGHTS AND
REMEDIES WITH RESPECT TO SUCH DEFAULT.
INITIAL: JJP
-------
MAKER
4. DEFAULT. The occurrence of any of the following shall constitute an
event of default ("Event of Default") under this Note:
2
<PAGE>
(a) failure to make any payment of principal, interest, or any
other sums due hereunder within five (5) business days of the date due;
(b) the occurrence of any breach or default of any other
obligation of Maker, monetary or otherwise, hereunder, which breach or default
shall continue for more than sixty (60) calendar days after Maker has received
written notice thereof from Payee.
5. ACCELERATION RIGHTS. Upon the occurrence of an Event of Default
hereunder, Payee may, in its sole discretion, declare the entire balance of
principal and interest hereon immediately due and payable, together with all
costs of collection, including reasonable attorneys' fees and all other costs
and expenses incurred.
6. ATTORNEYS' FEES AND COSTS. In the event it becomes necessary for
Payee to utilize legal counsel for the enforcement of this Note or any of its
terms, if Payee is successful in such enforcement by legal proceedings or
otherwise, Payee shall be reimbursed immediately by Maker for all reasonable
attorneys' fees and other costs and expenses.
7. WAIVERS. Maker of this Note hereby waives diligence, demand,
presentment for payment, exhibition of this Note, notice of non-payment or
dishonor, protest and notice of protest, notice of demand, notice of election of
any right of holder hereof, any and all exemption rights against this
indebtedness, and expressly agrees that, at Payee's election, the time for
performance of any obligation under this Note may be extended from time to time,
without notice and that no such extension, renewal, or partial release shall
release Maker from its obligation of payment of this Note or any installment
hereof, and consents to offset of any sums owed to Maker by the holder hereof at
any time.
8. ASSIGNMENT/TRANSFER BY PAYEE. Payee, in Payee's sole and absolute
discretion, and without notice to Maker, shall have the absolute right to sell,
assign, gift, transfer, convey, encumber or otherwise dispose of all or a
portion of the holder's rights in this Note or any other agreement related
thereto. Maker may not assign, gift, transfer, convey, encumber or otherwise
dispose of all or a portion of its rights, nor delegate its duties or
obligations under this Note or any other agreement related thereto.
9. GOVERNING LAW. This Note shall in all respects be interpreted,
enforced, and governed by and under the internal laws of the State of California
without resort to choice of law principles.
10. SEVERABILITY. Every provision hereof is intended to be several. If
any provision of this Note is determined by a court of competent jurisdiction to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the other provisions hereof, which shall
remain binding and enforceable.
11. COMPLIANCE WITH USURY LAWS. It is the intention of the parties
hereto to conform strictly to applicable usury laws regarding the use,
forbearance or detention of the
3
<PAGE>
indebtedness evidenced by this Note, whether such laws are now or hereafter
in effect, including the laws of the United States of America or any other
jurisdiction whose laws are applicable, and including subsequent revisions to
or judicial interpretations of those laws, in each case to the extent they
are applicable to this Note (the "Applicable Usury Laws"); provided, however,
if such laws shall hereafter permit higher rates of interest, then the
Applicable Usury Laws shall be the laws allowing the higher rate of interest.
Accordingly, the following shall apply:
(a) if any acceleration of the Maturity Date of this Note or any
payment by Maker or any other person or entity results in the amount of interest
contracted for, charged, taken, reserved, received by or paid by Maker or such
other person or entity on the principal amount outstanding, from time to time,
on the Note being deemed to have been in excess of the Maximum Amount, as
hereinafter defined, or if any transaction contemplated hereby would otherwise
be usurious under any Applicable Usury Laws, then, in that event,
notwithstanding anything to the contrary in this Note, it is agreed as follows:
(i) the provisions of this Section 11 shall govern and control; (ii) the
aggregate of all interest under Applicable Usury Laws that is contracted for,
charged, taken, reserved or received under this Note, or under any of the other
aforesaid agreements or instruments or otherwise shall under no circumstances
exceed the Maximum Amount, and any excess shall either be refunded to Maker or
applied in reduction of principal, if permitted by California law, in the sole
discretion of Payee; (iii) neither Maker nor any other person or entity shall
obligated to pay the amount of such interest to the extent it is in excess of
the Maximum Amount; (iv) any interest contracted for, charged, reserved, taken
or received in excess of the Maximum Amount shall be deemed an accidental or
bona fide error and canceled automatically to the extent of such excess; and (v)
the effective rate of interest on the Loan shall be IPSO FACTO reduced to the
Highest Lawful Rate (defined below), and the provision of this Note shall be
deemed reformed, without the necessity of the execution of any new document, so
as to comply with all Applicable Usury Laws. All sums paid, or agreed to be
paid, to Payee for the use, forbearance, or the detention of the indebtedness of
Maker to Payee evidenced by this Note shall, to the fullest extent permitted by
the Applicable Usury Laws, be amortized, pro-rated, allocated and spread
throughout the full term of the indebtedness evidenced by this Note so that the
actual rate of interest does not exceed the Highest Lawful Rate in effect at any
particular time during the full term thereof. As used herein, the term "Maximum
Amount" means the maximum non-usurious amount of interest which may be lawfully
contracted for, charged, reserved, taken or received by Payee in connection with
the indebtedness evidenced by this Note under all applicable Usury Laws.
(b) If at any time interest on the Loan, together with any fees
and additional amounts payable hereunder or under any other agreements or
instruments that are deemed to constitute interest under Applicable Usury
Laws (the "Additional Interest"), exceeds the Highest Lawful Rate, then the
amount of interest to accrue pursuant to this Note shall be limited,
notwithstanding anything to the contrary in this Note, or any other agreement
or instrument, to the amount of interest that would accrue at the Highest
Lawful Rate; provided, however, that to the fullest extent permitted by
Applicable Usury Laws, any subsequent reductions in the interest rate shall
not reduce the interest to accrue pursuant to this Note below the Highest
Lawful Rate until the aggregate amount of interest actually accrued pursuant
to this Note, together with all Additional Interest, equals the amount of
interest which would have accrued if the Highest
4
<PAGE>
Lawful Rate had at all times been in effect and such Additional Interest, if
any, had been paid in full.
For purposes of this Note, the term "Highest Lawful Rate" means the
maximum rate of interest and other charges (if any such maximum exists) for
the forbearance of the payment of monies, if any that may be charged,
contracted for, reserved, taken or received under all Applicable Usury Laws
on the principal balance of this Note from time to time outstanding.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed as of
the date first above written.
MAKER:
LTC HEALTHCARE, INC.,
A NEVADA CORPORATION
By: /s/ James J. Pieczynski
-------------------------------------
Name: JAMES J. PIECZYNSKI
-------------------------------------
Its: President and Chief Financial Officer
-------------------------------------
5
